Even the most experienced business owner can sometimes be swung off course by market volatility, economic shifts and global events that impact the bottom line. Today, businesses are facing several unique and cascading headwinds that make forecasting, budgeting and planning difficult. Below, we review some of those challenges and provide steps for approaching your business budget with them in mind.

Inflation

According to the U.S. Chamber of Commerce‡, 58% of small business owners note inflation as a top concern in 2025 – up 4% from last year and the highest it’s been on record. When considering inflation in your business budget, conduct a spending and expense review to see how much you are paying for goods and services. Are there sensible ways to reduce costs? If yes, plan to implement those cost reductions throughout the year, and factor those into your expense projections. Be sure to keep an eye on shipping and material costs and closely analyze every non-essential dollar coming out of your bottom line.

Now is also a great time to ensure you are optimizing processes and embracing technology to further reduce costs without losing the value of your good or service. Review your accounts receivable and payable processes and plan to transition to digital wherever possible.

Inflation also lowers the value of the dollar as it simultaneously increases the value of assets, so if you have high debt, inflation can make it worthwhile to pay it back faster. For instance, your real estate loan payment may remain the same, but the value of your property may have increased, so you gain from inflation. Similarly, inflation can open up opportunities to evaluate your pricing structures – as the economy collectively raises prices, you can, too.

Revenue

With costs on the rise and many consumers opting out of discretionary spending, small business owners’ concerns surrounding revenue have jumped 10%‡ from 2024 – with 35% noting it as their biggest challenge for this year. When consumers feel the pinch of economic uncertainty, they tend to hold on to their money a little tighter. For your business to weather a dip in revenue, you must keep a pulse on the factors impacting consumers’ spending habits and ensure your budget is consistently up to date with real time revenue streams to see exactly where you stand.

With production costs continuing to rise, inflation persisting and trade uncertainty growing, now is the time to assess your business budget and identify expenses you can cut to widen your margin on return. When cutting costs, be sure your employee benefits are not one of the cuts made, as maintaining a strong workplace culture and building loyalty with your employees is important in overall business longevity and health. Times like these can feel overwhelming, so check in with your business banker to walk through opportunities and forecasts.

Global market unpredictability

The volatility surrounding global market regulations and policies is creating significant hurdles for small businesses. With more than 1.3 million U.S. small businesses‡ being involved with global exports, the implications are dire. The continued unpredictability makes your business more vulnerable to dramatic fluctuations in production costs, supply chain disruptions, difficulty in sticking to long-term investment plans, securing loans and building a financial cushion. However, there are actions you can take to regain control.   

As you build your budget, keep these challenges in mind and implement a budget amount range with contingency plans baked in. Outline your variable and fixed costs and set some “red flag” moments that cue you to perform a budget check throughout the year. For instance, if you can’t access the materials you need or you lose a big client, return to your budget and course correct.

Before setting your budget, brainstorm cost-cutting measures that can be quickly implemented if business growth doesn’t match expectations. This exercise can help you manage headwinds as they come, whether its logistics, materials or something else impacting your bottom line.

Talk with your financial professional to consider financing or working capital solutions in the event market volatility affects your business further.

Wavering interest rates

Interest rates were in decline for a while, but now a wait-and-see approach is being implemented by many when it comes to what 2025 has in store. In March 2025, interest rates held steady at 4.3%‡ but over the next few months this could change.  

If you need business financing, it may be smart to consult with your financial team to find creative solutions to restructure or consolidate debt and seek lower-cost financing options. You can also consult with your financial institution to determine the cost/benefit of taking out business loans now or waiting a few months to see how rates are impacted.

Additionally, it will be imperative to find ways to improve cash flow, so consider accepting numerous payment methods from your customers to allow for more money to come in and streamline your collection process to reduce time overall.

Consumer confidence can take a hit when interest rates rise, so businesses that rely on direct sales or services should include contingencies in their business budget while rates continue to fluctuate. Use this uncertain time to strengthen your relationship with your customers by building loyalty through open and transparent communication.    

Talent retention and recruitment

Whether you’re looking to grow or need talent to keep your lights on, the shifting labor market can impact your bottom line. Here are some financial considerations when it comes to maintaining your workforce:

  • Invest in and strengthen your current team – Talent development, wage reviews, internal promotions and hires can all help retain your current workforce. Keeping your current team in place can build stability in your budget.
  • Recognize that hiring costs have increased – Average wages for new hires have increased, so be sure to anticipate not only more expensive new hires, but questions about raises and promotions from your current team. Focus on benefits to make up any difference in salary or hourly pay that they may be seeing in market, which can mitigate some of the impacts on your budget.
  • Flexible work environments – Gone are the days of in-person work being expected. Now, many candidates expect flexible work environments, whether through working from home or a hybrid home-office schedule. Embrace the change and consider how the work from home shift can help you cut costs if your industry allows for virtual or asynchronous work.
  • Evaluate your workforce like any other budget contingency – Your workforce budget is not one you can control and can have major impact on revenue. Be shrewd in your resourcing forecasts knowing you may not have the upper hand in resignations and new hire negotiations.

Building your business budget is a nuanced undertaking in the best of times. In a season of headwinds, it can be much more difficult to forecast income, expenses and the impacts of the market. The good news? You don’t have to do this alone. Find a bank you trust to work with you on your financial plan.

If you are interested in learning more about how UMB can help your business, visit our website.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.