Tips for small businesses in a changing economy

Those of you who know me know I move at the speed of light and that I like to keep things short and sweet! However, this is going to be a longer post than usual for me, and there’s a good reason for that. With half of 2025 already in the rearview mirror, businesses continue to face a dynamic and shifting landscape—one filled with challenges and opportunities. Rising interest rates, ongoing talent shortages and economic uncertainty make it critical for small businesses to evaluate their position and plan for ending the year strong. These are big topics that require a deep dive, so I’m going all in!

In a recent conversation with my colleague Gus Hernandez, Associated Bank Director of Business Banking, we discussed the key concerns of small business owners and how they can best navigate today’s climate while setting themselves up for success.

These challenges, though significant, also present unique opportunities for those who are prepared. Preparation is key!

Here’s what we found:

1. Attracting and Retaining Talent: A Balancing Act

Hiring continues to be a major challenge for small businesses, but there's a bit of good news: the pressure to offer eye-popping wages has started to ease. As Gus put it, “it’s always hard to find really good people, but businesses don’t seem to have to pay up quite as much as they were before.”

Still, attrition remains a costly issue. Replacing staff not only drives up wages but can disrupt productivity in the short term. Gus emphasized, “The biggest concern is how much wage increase is driven when they lose a person and find a replacement.”

Looking ahead, shift the focus to retaining existing employees and making strategic hires rather than overpaying for new talent.

2. Navigating the Interest Rate Rollercoaster

With interest rates remaining a key concern, business owners are faced with tough decisions: “Should we invest in new equipment now or wait? Should we expand our building, or hold off?” Gus noted that while short-term rates are down from the fall of 2024, five year rates rose in January then declined. They currently sit at approximately the same levels as they did in December of 2022 and 2023 - Though they have certainly ridden the rollercoaster! This leaves many uncertain about the best time to move forward.

From my perspective, I’m a firm believer in the fact that the math doesn’t lie. If the numbers work at today’s rate, then it’s time to move. You can refinance later, but don’t let interest rate fears hold you back from smart expansion. It's all about aligning expansion with the overall business strategy for long-term success.

The key takeaway: “Date the rate, marry the expansion,” I always say. If the numbers work with current rates, now may be the time to act. If not, wait for a better opportunity, but ensure the decision to expand is based on your business needs, not solely on the cost of borrowing.

3. Focus on Profitability: Rethinking Customer Relationships

Gus shared an interesting shift happening among small business owners: a move away from growth for growth's sake toward prioritizing profitability.

"They’re really starting to look not just at suppliers but at their customers, too. Are they better off cutting low-margin customers instead of reducing staff?" he explained. This idea of "firing your worst customers" allows businesses to focus on high-value clients, ultimately driving stronger profits without needing to grow the team.

As we hit the halfway point of 2025, it's a good time to reassess whether certain customer relationships are draining resources rather than adding value. In today's environment, focus on the bottom line, not just top-line revenue.

4. The Months Ahead: Be Ready for the Changing Landscape

With uncertainty around the current administration and sustaining economic shifts, 2025 will undoubtedly continue to present both challenges and opportunities. The key to navigating these changes is preparation. Whether you’re considering expansion, reassessing talent strategies or focusing on profitability, now is the time to lay the groundwork for the remaining months ahead.

As Gus succinctly put it: “Focus on the bottom line, not the skyline.” By homing in on what matters most—profitability, strategic growth and operational efficiency—small businesses can successfully navigate 2025 and beyond.

As you reflect on your business’ year so far, what steps are you taking to end the year strong? Let’s continue the conversation in the comments and let me know if you liked the longer content – I love talking about this stuff so it’s easy for me to get carried away!

The views expressed in this article are solely those of the author and do not necessarily reflect the views of Associated Bank, N.A., its affiliates, or any other entity.

Associated Bank, N.A. Member FDIC. Equal Opportunity Lender.