2025 is just around the corner and business owners are busy planning for a new year, again facing unknowns – politically, economically, and globally. Here are three critical elements of your business that deserve your focus.

STRATEGY

As you plan for the new year, take time to reflect upon what is at the foundation of your business, what motivates you to keep moving forward and succeed. Review WHY you are in business. Although this concept is not tangible, it drives everything that is. Take time to consider and write down your thoughts and responses around the following over-arching concepts:

• WHY you do what you do.
• What you intend to accomplish through your business (vision).
• What need(s) you are meeting or problems you are solving (mission).
• How your values and culture reflect these defining principles of your business.

Once you’ve clearly stated these points, you’re ready to move forward with your strategic plan, ensuring that it’s in sync with these foundational elements of your business. Various organizations recommend strategic planning processes that involve as few as four steps. Breaking it down in a little more detail, I recommend the following ten steps:

Define your organizational goals – both long-term goals and short-term objectives for the year and identify your priorities.

1. Assess where you are in relation to those objectives, including the effectiveness of your existing business strategy.
2. Do an environmental scan to determine external factors you should be aware of that may affect your business in the coming year.
3. Perform an internal analysis including a SWOT assessment – strengths, weaknesses, opportunities, and threats.
4. Develop a plan of action, tactics, and approaches needed to achieve your goals.
5. Define key roles and who will be responsible for out the components of your plan of action.
6. Manage, measure, and evaluate.
7. Define metrics and set timelines that will establish a method for tracking your progress.
8. Implement and share/publish your strategic plan so that your people understand their roles in carrying it out.
9. Revise and make adjustments as needed along the way.

As you develop or update your strategic plan, take some time to plan for the unexpected and maintain flexibility – both in your written plan and your company’s realistic ability to respond to change.

If you have an exit strategy, you’re ahead of the game since some of the most successful companies use it just like a strategic plan to help them guide their decisions. If you don’t have one, you can begin formulating it through some of these same strategic planning processes.

BUDGET

A well-prepared budget is an essential element of business that demonstrates where you stand financially, where you need to be to meet your objectives, and identifies the gap between the two points. A data-based, dynamic, working budget can mean the difference in whether you succeed in your business, or just stay afloat.

Begin the process by reviewing what you experienced and learned from the past year. With the benefit of hindsight, we know that circumstances and the business climate can change quickly due to external influences that are beyond our control. You should therefore have contingency plans in place, including options for pivoting. Project for the entire year but factor in the near term, maintaining the flexibility to adjust as circumstances change.

As you prepare your budget, ask these questions:

• Do you have sufficient cash flow to implement your plan?
• How will you address product costing and supply chain issues?
• What steps have been taken to recession-proof your business?
• Have you completed a data-based budget?
• What will impact your budget differently next year based on the current state of the economy and its fluctuations?
• What is your revenue growth projection?
• What are your salary projections?
• What do you expect to return to equity investors?
• Do you have accurate income data for the current year?
• Have you worked with a tax preparer to do an income tax projection?
• What are your true overhead costs for direct labor? A good rule of thumb is that labor burden equates to about 25% of the hourly rate of pay.
• What percent of your current year income taxes have been paid?
• Tip: If you are going to owe more than $10,000, pay half on January 15 and half on April 15.

Like your business activities, your budget is dynamic. Therefore, timely financial reporting is essential for maintaining its accuracy and relevance. Schedule receipt of your financial statements at the same time each month to maintain consistency as you compare the current month to previous ones, and to produce precise projections. If you lack confidence in the accuracy of the reporting, review your accounting processes and work with your CPA to identify data you may be missing.

TAXES

The Tax Cut and Jobs Act was President Elect Trump’s first attempt at tax reform and made major changes to both individual and business income taxation. Initially touted as simplifying tax code, it actually added more than five hundred pages. Generally affecting tax years beginning after December 31, 2017, some provisions are intended to be permanent and some temporary, phasing out on December 31, 2025.

Here are some tax planning options I initially suggested, related to the Tax Cut and Jobs Act:

• Have your accountant model your taxes for the tax year.
• Revisit your choice of entity.
• Reduce or eliminate guaranteed payments.
• Move from accrual to cash method of accounting if gross receipts are less than $25 million.
• Consider restructuring business debt if your interest deduction will be limited.

Here are helpful checklists, prepared by Block Advisors, you can use to compile the information you need to prepare for filing your taxes. Once you have all your records and receipts, don’t go it alone! Every business owner wants to pay the minimum legal tax. Be sure to get advice from your CPA to ensure you don’t miss any deductions or leave out any information that could result in penalties.

I would welcome the opportunity to help you prep for 2025, from the perspective of both a CPA and business/exit planning strategist. Contact me for a complimentary consultation.

Bob Zarlengo is a certified exit strategist and CPA. More than four decades of experience in public accounting, expertise in financial reporting, income and estate planning, and tax compliance makes him a valued and trusted advisor to his clients.