Are You Budgeting with a Magic 8 Ball?

As we get ready for this budget season, business leaders are approaching 2025 with a wide range of perceptions and potential actions. Regardless of political affiliation, it stands to reason that many potential investors are waiting to see a) who ends up winning the election; and b) what policies he or she will implement in the upcoming year.?

Yet, our team recognizes some business trends and patterns which may guide our plans right now:

1. Interest Rates: For some time, rising interest rates have dampened the demand for financing through conventional lending. Last month, the Federal Reserve cut its prime lending rate for the first time in over two years — and most experts believe that we will see similar cuts, both in the US and worldwide, in 2025. This is generally a positive outlook for the SMB community as it will allow more business owners to borrow from banks and similar institutions and maintain cash flow for operations.
2. Unemployment Rates: Over the past year, rates have trended a little bit higher but still remain on the low end, relatively speaking. This will bode well for many in the SMB community who are trying to fill open positions on both the junior and senior levels. And although the hybrid work schedule will remain in some shape or form, most prospective employees are accepting a greater amount of days of work on site than in the previous two to three years.?
3. M&A Environment: The ability to sell your business will improve in 2025 in large part due to the inverse correlation between lower interest rates and a company’s valuation. As long as the venture capital and private equity funds have liquidity available to them, many experts anticipate a greater M&A volume this year as compared to the past three years. For the startup community, the outlook is a little more ambiguous as the risk for investing in these types of companies will likely remain unchanged for the foreseeable future.

Budget time is always a fun time for us (yes, we said fun!) because we play out a number of scenarios that will assist our clients in planning for the next 12-36 months. Although it’s difficult to predict the future, our strict budgeting and forecasting regimen provides our clients the ability to plan for various scenarios — both good and bad — and allows for on-the-fly adjustments as needed.?

It all goes back to a very basic premise that we always emphasize with our clients: when you fail to plan, you plan to fail.?

Take-away: If you need a partner to get you ready for your 2025 budget season and the challenges that it brings, reach out to Brian at [email protected] .