While by some metrics, many would say that 2024 was a great year to be a business owner. In general, American’s both spent and earned more, inflation and interest rates both came down, and unemployment remained low. Nevertheless, small businesses continue to struggle with keeping up with their larger counterparts. A lot of the national data points are heavily influenced by Fortune 500 or 1000 companies and mask issues that most smaller businesses are encountering.
As an outsourced CFO, I can tell you that most of my small business clients had mixed results in 2024. Many are viewing conflicting trends for the future and how to move forward in 2025.
The US Chamber of Commerce put out its’ Small Business Outlook Guide in November. It found the following:
- 36% of small businesses reported job openings they could not fill in November
- Year-over-year (YoY) sales at small businesses rose 4.8% compared to November 2023. While this seems positive, considering inflation, sales were up less than 2.5% YoY. Meanwhile, Fortune 500 companies grew by 9.5%.
- An equal amount of small business owners say the economy has improved and gotten worse.
- Small businesses are taking steps to prepare for a slowdown with 41% cutting spending, 41% setting aside emergency funds, 37% are implementing a hiring freeze, 31% are cutting marketing and advertising, 27% pausing expansion, and 27% pausing loan plans.
However, small business owners are forever an optimist group. The majority (81%) have a favorable view of the economy. With the election in the rearview mirror, more stability is taking hold and we can begin to shape our view and strategy for 2025.
Below are three strategies small business owners should be contemplating. These come straight from the CFO suite and deal with dollars and cents of small business ownership.
Reconfiguring Debt for Cash Flow
Many small businesses are still grappling with the long-term effects of debt accumulated during COVID-19. While some have made progress paying off high-interest portions of their debt, others are still burdened by EIDL loans. These loans, while offering some of the best terms in recent history, come with strings attached.
For example, businesses with outstanding EIDL debt are more likely to face credit application rejections. Recent data shows that 50% of small businesses were denied credit due to carrying too much debt—a significant hurdle for companies looking to access funds for growth or stability.
The Current Debt Landscape for Small Businesses:
- 70% of small businesses carry some level of debt.
- In 2023, 43% of businesses applied for loans.
- While some businesses have stabilized their debt levels since 2021, very few have made meaningful progress in paying it down.
The Outlook for 2025
Looking ahead to 2025, there are signs of improvement in the small business credit market:
- With interest rates expected to fall, lenders and investors will likely become more active, seeking opportunities for elevated returns.
- This environment could make credit more accessible for small businesses that struggled in recent years.
However, the “dirty secret” of small business financing remains: a significant portion of debt is sitting on credit cards with interest rates exceeding 25%. This type of debt eats into profits and cash flow, limiting a business’s ability to grow.
A Key Strategy: “Term Out” High-Interest Debt
As an outsourced CFO, I often recommend that small business owners explore options to “term out” their credit card debt. This means restructuring short-term, high-interest obligations into longer-term loans with more favorable rates. The goal is to reduce the net interest rate and stabilize monthly payments.
When Does a Higher Interest Rate Make Sense?
Here’s something that may sound counterintuitive: refinancing debt to a slightly higher interest rate can sometimes be a smart move.
For example, many businesses took on 36-48 month loans at 10-12% interest in 2022. These short-term loans require aggressive repayment, which puts pressure on monthly cash flow. In some cases, refinancing into a longer-term loan—even at a slightly higher rate—frees up valuable cash flow.
While this may cost a few thousand dollars more over the life of the loan, the ability to improve current cash flow can significantly benefit the business. With extra cash flow, owners can:
- Reinvest in growth opportunities
- Build up reserves for emergencies
- Cover operating expenses without relying on credit cards
The Importance of a Debt Plan in 2025
The key takeaway for small business owners is this: Debt shouldn’t be managed reactively. In 2025, work with your outsourced CFO to develop a clear, proactive plan for addressing your debt. This plan should include:
- Consolidating or refinancing high-interest debt to reduce costs and stabilize payments.
- Improving cash flow by balancing short-term obligations with long-term goals.
- Exploring new credit opportunities as rates become more favorable.
Debt is not inherently bad—but mismanaged debt can strangle a business’s growth. Whether it’s consolidating credit card debt, refinancing short-term loans, or finding ways to free up cash flow, a strategic approach to debt management is critical for success in 2025.
An outsourced CFO can provide the expertise and objectivity needed to analyze your current debt situation, identify opportunities, and develop a plan that aligns with your business goals.
Start planning now to ensure your debt works for you—not against you—in the coming year.
Pricing Strategies
Small business owners often struggle with pricing their services and products effectively. This is not a reflection of their abilities but rather a common psychological hurdle that many entrepreneurs face—though that’s a topic for another day.
During the inflationary spikes of 2021 and 2022, small business owners were among the last to increase their prices. The hesitation to act quickly resulted in thinner margins and a significant hit to their personal income. Many are still feeling the effects, as they haven’t been able to restore the percentage of revenue they were once taking home.
Fast forward to 2025, and inflation appears to have stabilized. While it remains a top concern for many, the likelihood of returning to the extreme levels seen in recent years is low. At first glance, this may lead small business owners to think about holding prices steady or even scaling back on increases. However, that would be a critical mistake.
Here’s why:
1. Pricing Reviews Should Be an Annual Practice
Adjusting prices annually isn’t just good practice—it’s essential. Even with inflation predicted to hover around 2.5% in 2025, some level of price adjustment is necessary to keep pace with rising costs of goods, labor, and overhead. A failure to adapt could result in quietly eroding margins and stagnant profits.
2. A Unique Opportunity to Rebuild Lost Profit Margins
The next year represents a rare chance for small business owners to regain some of the profitability they sacrificed during the recent inflation surge. Most economists project moderate inflation, which means increasing prices by 3-4% (slightly above inflation) is a reasonable and strategic move. For many businesses, this incremental increase could have a disproportionately positive impact on bottom-line profits without being a burden on customers.
3. Market Perception Allows for Adjustments
Consumer behavior has shifted in recent years. Customers are more understanding of modest price increases, particularly when they paired with continued value. Small business owners should take this opportunity to articulate why an increase is occurring—citing factors like improved service, higher costs, or reinvestments in quality. This not only builds trust but also reinforces the value of your offering.
4. Small Increases Compound Over Time
While a 3-4% increase may not seem significant, it compounds year over year. A small business that skipped price increases in recent years would now need a substantial jump to make up for lost ground. Instead of playing catch-up later, implementing modest, annual adjustments will help your business remain competitive and financially resilient.
Taking Action
To make this process seamless, small business owners should:
- Analyze their costs: Understand your input costs and any recent increases.
- Review competitors: Ensure your prices remain in line with market expectations while still reflecting your unique value.
- Communicate clearly: Don’t shy away from explaining price changes. Customers respect transparency.
By taking a strategic, proactive approach to pricing, small business owners can weather economic changes, protect their margins, and reinvest in growth. The key is to view price adjustments not as a burden on customers but as a necessary practice for ensuring long-term sustainability and profitability.
Reducing Costs Through Outsourcing and Technology: Focus on Recurring Work
One of the biggest challenges small business owners face is how much time they spend on recurring, low-value tasks. Whether it’s invoicing, payroll, scheduling, or answering customer inquiries, these repetitive activities often consume hours each week that could be better spent growing the business.
Research consistently shows the impact: small business owners spend an average of 16 hours per week on administrative tasks alone—the equivalent of two full workdays. That’s time not spent on strategy, sales, or client relationships, the very activities that drive growth and profitability.
To reduce costs and reclaim valuable time, small business owners need to proactively identify recurring tasks in their business and explore two key solutions: outsourcing and technology automation.
The Problem: Time Spent on Non-Value-Adding Work
Consider this: a study by Deloitte found that businesses that automate repetitive tasks can reduce operational costs by up to 25% while freeing up time for high-value work. That’s a significant boost for small businesses that operate on tight margins and resources.
The Solution: Identify, Outsource, and Automate
1. Audit Your Recurring Tasks
Create a list of all the repetitive activities you or your team complete daily, weekly, or monthly. These could include:
- Bookkeeping and payroll processing
- Data entry and report generation
- Managing emails, calendars, and appointments
- Responding to basic customer inquiries
- Updating social media or websites
2. Look for Outsourcing Opportunities
Outsourcing has become an essential strategy for small business owners. By delegating tasks to skilled professionals, you can access expertise without the cost of hiring full-time staff. Common areas for outsourcing include:
- Accounting and bookkeeping: Many small businesses benefit from outsourcing financial management to an outsourced CFO or bookkeeping service. Not only does this ensure accuracy, but it also provides insights to improve cash flow and profitability.
- Administrative support: Virtual assistants can handle scheduling, emails, and customer service, freeing up hours for the owner.
- Marketing and social media: Specialists can create content, manage social media channels, and improve online visibility, allowing owners to focus on operations.
Outsourcing may feel like an added cost, but it often saves money in the long run by improving efficiency, reducing errors, and allowing the owner to focus on driving revenue. While most small business owners don’t know this, outsourcing tasks overseas is now more accessible than ever – no matter the size of the business.
3. Leverage Technology for Automation
The rise of affordable automation tools has made it easier than ever for small businesses to streamline operations. A couple of real life examples:
- Tools like QuickBooks and Xero automate invoicing, payment reminders, and expense tracking.
- Platforms like HubSpot or Zoho automate follow-ups and nurture leads with minimal manual effort.
- Apps like Asana, Trello, or Monday.com help automate workflows and ensure recurring tasks are completed on schedule.
- Automate customer inquiries and support using chatbots, freeing up team members to focus on complex issues.
Implementing the right technology can save small businesses hundreds of hours annually, allowing owners to focus on work that truly adds value.
The Result: More Time and Better Margins
When small business owners commit to reducing time spent on recurring work, the benefits are significant.
- Outsourcing and automation reduce costs tied to inefficiencies.
- Owners and staff can focus on strategic, revenue-generating activities.
- Delegating low-value tasks leads to better work-life balance.
A Roadmap for Success in 2025
By making recurring work more efficient, small business owners can create space to innovate, grow, and improve profitability. Working with an outsourced CFO can help identify which tasks to outsource or automate while ensuring these changes align with your financial goals.
While 2024 may have been a “good year” for many businesses on the surface, small businesses continue to face unique challenges that are often overshadowed by national data. Navigating inflation, debt management, pricing adjustments, employee shortages and operational inefficiencies requires thoughtful planning and execution.
As we look toward 2025, the focus should be on building financial resilience and operational efficiency. Whether it’s restructuring high-interest debt to improve cash flow, implementing strategic pricing adjustments to rebuild margins, or leveraging outsourcing and automation to reclaim time and reduce costs, these strategies are critical to remaining competitive in an ever-changing economy.
Outsourcing your accounting and CFO functions to a trusted partner like Krieger Analytics allows you to focus on what you do best: building your business, serving your customers, and achieving your vision. With the right expertise and tools in place, financial clarity is not only attainable but can also become a driving force behind your business’s growth and success. Embrace the opportunity to elevate your financial management strategy and watch your business thrive with newfound confidence and precision.