Brad Beard and Tom Loffredio
From the residual effects of the global pandemic to tariffs, inflation and interest rate uncertainties, the business operating environment has been exceptionally challenging in recent years. But after the first Federal Reserve rate cut in four years, an improving supply chain, and growing residential real estate values and equity markets, companies are optimistic about the potential for sustainable growth.
As we close out the year, now is an ideal time to take a step back and assess business growth trajectory and overall business strategy. Ask questions like: “What’s working?,” “What’s not?,” and “Where should I make adjustments to production, operations, marketing and distribution?”
While no two organizations are exactly alike, there are general business growth strategies worth considering in 2025 and beyond.
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Thoughtfully manage business risk.
How well business leaders assess and respond to external threats will be a key factor in the long-term health of the organization. While no one can predict the future, one thing is certain: Increased complexity in global business and the economy necessitates thorough risk management for growth-minded enterprises. Risk areas that deserve special consideration in coming months include wages, the supply chain and geopolitics.
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Wage inflation
The Federal Reserve is expected to bring inflation down to 2% over the next two years but, while consumer prices may come down, wages may not. Wage inflation became a prominent issue several years ago, when pandemic-related disruptions to the labor pool resulted in heavy competition for talent in understaffed industries like travel, retail and hospitality. Those disruptions spread to other areas of the economy and resulted in higher worker compensation. In 2025, business owners are likely to see pressure to stabilize prices while continuing to pay employee wages at current or higher levels. Managers should plan carefully to minimize the impact of higher payrolls and labor costs.
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Supply chains and geopolitics
Geopolitical concerns persist in several parts of the world. If the tensions worsen, they could result in further supply chain disruptions and other issues. For example, continued fighting in the Middle East could raise oil prices. These price increases will eventually trickle down to businesses. Similarly, a global trade war could spark higher tariffs on goods and services to and from the U.S. Business leaders must plan for such scenarios to avoid negative business impact, particularly as it relates to energy and other commodity price risks or the value of the U.S. dollar in overseas transactions.
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U.S. presidential election
The U.S. election will have a lasting impact on the future business environment. Whatever the outcome, corporate leaders will need to pay close attention to tax changes, regulatory shifts and tariff levels — all hot-button issues at the intersection of politics and business. Business leaders should be prepared to navigate fluctuating costs to comply with the realities of a new presidential administration.
Even after the U.S. election, geopolitical uncertainties could continue to weigh on the global trade and shipping landscape.
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Plan for interest rate adjustments.
When the Fed cut interest rates by 50 basis points in September 2024, there was a positive psychological impact on consumers and businesses alike. The size of the cut was probably less important to the American psyche than the fact that it finally happened. For many, the move signaled a tangible commitment by the Fed to restimulate the consumer economy, unlock housing markets, and encourage borrowing and investment activity among businesses. This is perhaps the biggest driver of the recent optimism we have seen.
While it may be difficult for borrowers to hear that a zero-interest rate environment is not normal, it is the truth. The Fed is committed to return to more neutral, historic norms between 3% and 6% for the Federal Funds rate and the 10-year US Treasury yield.
Interest rates are very powerful and have a big impact on how companies budget, plan, operate and make acquisition decisions. For example, if residential mortgages or commercial financing come down, the housing market could improve further. With this change, businesses should be willing to spend on new projects. At end of year, companies should map out capital expenditures and other major transactions, with consideration to the current interest rate environment.
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Reassess exit strategies.
Year end is also a good time to reevaluate exit strategies. Considerations such as lower interest rates, changing tax rules and shifting business valuations should all factor into the decision of how and when to exit the business. For example, aging business owners — many of them baby boomers — are now leaving their businesses in droves, whether through sales, transfers or simply passing them along to the next generation.
Given improving business conditions, private equity and sponsor-backed finance activity, as well as succession-related mergers and acquisitions, will pick up over the next two years as more companies look to sell to sponsored and strategic investors. Working alongside an experienced commercial banker with wealth management expertise can help make succession planning easier.
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Capitalize on emerging technologies.
Technology that uses sophisticated data and analytics tools to help business leaders anticipate and plan are becoming increasingly popular. AI-enabled platforms are now valuable resources for mining predictive business data, such as sales records and client purchasing history. Such tools can help businesses target the right markets and grow smartly and profitably.
Running a business is challenging, even in good times. So, it is important to choose an experienced banking partner that can help manage current and potential future risks. To learn more about how we can help meet your financial needs, contact a Synovus Commercial Banker for assistance or stop by one of our local branches for more details.
Brad Beard is Senior Director of Middle Market Banking at Synovus Bank
Tom Loffredio is Managing Director and Head of Capital Markets – Derivatives at Synovus Bank
