Some closely held business owners turn uncertainty to advantage by implementing strategies that make their enterprise resilient and adaptable to changing circumstances. Rarely has there been a more pressing need to plan for an uncertain future than today.

The best time to bulletproof your business was yesterday. The second best time is today. Here are 15 ways to make your business more resilient.tarting today.

1. Diversify Your Supply Chain

Relying on a single supplier—or even a single region—can be a recipe for disaster.

• Identify backup vendors across multiple geographies.
• Renegotiate contracts to include flexibility for delays or force majeure events.
• Explore nearshoring or reshoring to bring critical inputs closer to home.

Why it matters: In 2024, businesses overly reliant on Chinese suppliers have been blindsided by sudden, deep tariff hikes. Many are unlikely to recover.

2. Secure Critical Inventory or Inputs

If your business depends on specific raw materials or components, lock them in now.

• Use forward contracts or bulk buys to hedge against future price spikes.
• Stock up ahead of predictable risk events (like trade sanctions or policy shifts).

Pro Tip: Work with your CPA to model the carrying cost versus the cost of disruption.

3. Strengthen Contractual Protections

When disruptions hit, the fine print matters.

• Add or revise force majeure and change-of-law clauses.
• Clarify pricing adjustments, delivery terms, and jurisdiction.
• Review agreements annually—especially with key customers and suppliers.

I am a lawyer, a certified valuation analyst, and a certified exit and succession planner.  I have worked with closely held business owners throughout my career. Contact me with questions about valuing your business, developing an exit plan, or the legal bulletproofing necessary to protect your investment.

4. Assess and Address Insurance Gaps

Most business owners are underinsured—and they don’t realize it until it’s too late.

• Evaluate your coverage for business interruption, cyberattacks, key-person losses, and supply chain issues.
• Know your exclusions.
• Work with a broker who specializes in your industry.

5. Develop and Update a Continuity Plan

Think of this as your business’s “fire drill.”

• Create playbooks for disaster recovery, leadership transitions, and cyberattacks.
• Conduct annual drills with your executive team or key personnel.

Bonus: Lenders and investors love seeing a continuity plan. It builds trust.

6. Enhance Digital Infrastructure Security

Cyber risk is not just an IT problem—it’s a boardroom issue.

• Use multi-factor authentication.
• Keep software up to date.
• Back up your data offsite, and test restoration procedures quarterly.
• Train every employee on phishing and ransomware protocols.

7. Bolster Financial Resilience

Cash is the oxygen of any business—especially in a downturn.

• Maintain a 3–6 month cash reserve.
• Secure credit while you don’t need it.
• Run stress tests on your P&L to understand how various shocks might hit your bottom line.

8. Formalize Governance Structures

Verbal understandings aren’t enough. Structure brings stability.

• Adopt written operating agreements or shareholder agreements.
• Define roles, voting rights, and conflict resolution mechanisms.
• Record all major business decisions.

This is especially critical in multi-owner or family businesses.

9. Plan for Succession and Exit

No one leads forever. Start planning for what happens when you’re gone.

• Identify and groom future leaders.
• Get a current valuation.
• Structure the business to be transferable—especially if you’re the rainmaker or technical expert.

Want help? See: What Makes a Business Truly Transferable?

10. Evaluate Key Person Risk.

What happens if your top sales executive quits? Or your technical lead gets sick?

• Identify key individuals.
• Cross-train your team.
• Consider retention bonuses or long-term incentive plans.

11. Ensure Legal Compliance

Regulatory exposure can be catastrophic—and it’s entirely preventable.

• Review compliance with labor, tax, privacy, trade, and industry-specific laws.
• Stay ahead of pending legislation that may affect your operations.
• Consider an annual legal audit with your outside counsel.

12. Analyze Pricing Power

Not all businesses can pass rising costs to customers. Can yours?

• Review historical pricing data and customer response.
• Develop a plan to preserve margins—whether through price increases, product mix, or operational efficiencies.

A Final Thought

The best time to bulletproof your business was yesterday. The second-best time is today. Every business faces risk. What separates long-term winners is preparation.

• New 2025 tariffs – including a 10% across-the-board import tax and a 145% tariff on Chinese goods – are sharply raising input costs for small businesses. Supply chain instability and uncertainty around U.S.–China trade policy are disrupting planning, pricing, and inventory management for Main Street firms.
• Operating costs are spiking: Over 60% of small businesses report rising expenses, while nearly one-third have raised prices to preserve margins.
• Labor conditions remain tight, even as hiring slows. Some businesses are laying off staff or freezing headcount while still struggling to fill key roles.
• Risk mitigation is essential: Businesses should proactively strengthen supply chains, reassess pricing power, and explore legal, financial, and operational “bulletproofing” strategies.

Main Street businesses – those with fewer than 500 employees whose owners run day-to-day operations – are feeling the squeeze from 2025’s challenging economic climate. The combination of rising inflation, increasing interest rates, and ongoing trade tensions seems to be generating a perfect storm for these small businesses.

I am a lawyer, a certified valuation analyst, and a certified exit and succession planner.  I have worked with closely held business owners throughout my career. Contact me with questions about valuing your business, developing an exit plan, or the legal bulletproofing necessary to protect your investment.

These small and midsize firms are deeply entwined with global trade, accounting for over 41% of U.S. imports from China as of 2021​. The result: ongoing tariff threats and the U.S.–China trade war are going to directly hit their bottom lines.

In 2025, a mix of newly threatened tariffs, lingering supply chain issues, and shifting consumer demand are fueling anxiety among small business owners.

Let’s take a look at how these policies may play out in the coming year and what strategy shifts the SME (small and medium enterprise) can consider to better bulletproof the business.

Recent 2025 Policy Developments Affecting SMEs

Escalating Tariff Measures

Trade tensions with China escalated in early 2025. The U.S. implemented sweeping new tariffs, including a 10% across-the-board import tariff on most countries and a staggering 145% tariff on all Chinese imports​. These moves – part of a renewed trade offensive – represent a significant ramp-up of the trade war and have alarmed businesses reliant on imported goods.

Trade Policy Whiplash

The tariff policy has been in flux, with some duties imposed and later paused. For example, a set of “reciprocal” tariffs was announced and then put on a 90-day hold, even as the broad 10% and China-specific tariffs remained in effect​.

The “on today/off tomorrow/back on in 90 days” tariff roller-coaster makes it more difficult for businesses to plan out their supply chain ordering and pricing​, some business owners say Such uncertainty, as one owner noted, “only adds to destabilizing business operations” and even threatens the wider U.S. economy​.

Widespread Concern

SME business advocates report high levels of worry over these trade policies. In a February 2025 Voice of Main Street survey, 53% of small-business owners said they are concerned that new tariffs will negatively impact their own business, and 77% are concerned about broader economic fallout from the trade conflict​. Many entrepreneurs view tariffs as essentially an added tax on their operations, one that policymakers claim will help industry but that owners fear will hurt competitiveness and diminish profitability.

Rising Costs and Supply Chain Strains

One of the clearest impacts of the trade war on Main Street is rising input costs. Tariffs on imported materials and goods effectively increase the cost of those items, pressuring small firms that often operate on thin margins. Business owners and economists alike note that tariffs act like a direct cost increase that somebody must absorb – and smaller companies have limited cushion:

• Surging Operating Costs: A majority of small businesses are reporting higher expenses. In one recent survey, 62% of small firms said their operating costs rose in the past quarter​Owners cite spikes in prices for inventory, raw materials, and shipping. Tariff hikes in particular have been described as an “overnight gutting of the profit profile of small businesses, forcing difficult choices to maintain profitability.
• Price Increases and Margin Squeeze: Many Main Street businesses have had to pass along some of these costs to customers. As of early 2025, a net 32% of small businesses reported raising their average selling prices – one of the highest rates on record​. More price hikes are on the horizon (net 29% plan further increases​, reflecting the intense cost pressure. Even so, small firms often cannot raise prices enough to fully cover tariff-related costs without losing customers. As a result, owners see profit margins shrinking. An economist notes that whenever costs spike, small businesses “will have to pass that cost to their customers,” which ultimately “decreases their competitiveness” relative to larger companies with more cushion​.
• Supply Chain Disruptions: Tariffs and trade uncertainty are also disrupting supply chains for SMEs. Many small businesses rely on global suppliers for specialized products or affordable inventory. Now they face tough decisions: absorb the extra tariff costs, scramble for new suppliers, or drop certain product lines. For example, a Texas eco-friendly retailer that sources some goods from Canada reported in a recent news article that tariffs are directly “impacting our ability to purchase and price some items”, to the point that “they will be completely eliminated from our stores” if costs become prohibitive​.
• Alternatives to China: Diversifying away from Chinese manufacturing isn’t easy for smaller companies. One entrepreneur who imports all her product components from China told Fox Business News that she spent years searching for U.S. manufacturers but “has never been able to find” a domestic producer that can meet her scale and cost needs​.
• Even if she moved final assembly to the U.S., she notes she would still need to import materials from 14 other foreign suppliers to make her product​. This illustrates the bind many SMEs are in – they cannot quickly “buy American” or shift to new countries without prohibitive cost, so they remain exposed to import tariffs. The result is often delayed shipments, hurried reengineering of supply chains, or increased inventory hoarding as firms try to navigate the trade turmoil.

Softening Demand and Business Sentiment

Beyond raising costs, the current economic conditions are also affecting customer demand and business optimism on Main Street. As inflation and tariffs drive prices up, consumers have become more price-sensitive, which in turn hits small business sales. Meanwhile, business owners’ confidence in the economy has deteriorated amid the uncertainty:

• Consumer Belt-Tightening: Many small businesses report that their customers are pulling back on spending or seeking cheaper alternatives. High prices and economic jitters have made consumers more frugal, especially for non-essentials. For instance, a Fort Worth apparel business that prides itself on sustainable, ethically made fashion saw its costs jump almost 37% overnight due to new tariffs​. Its owner told the Dallas Morning News that even a smaller 10% across-the-board tariff will deal a financial hit. Meanwhile, her customers are “tightening their belts” and avoiding discretionary purchases like boutique clothing​. As a result, demand is shifting toward cheaper “fast fashion” alternatives​. This story is echoed across many Main Street shops and makers: when costs force them to raise prices, some customers defer or downgrade their purchases, denting small business revenues.
• Slower Sales for Many Small Firms: Data shows that a significant share of SMEs are experiencing stagnant or falling sales. A survey by the Small Business Majority found that over the past few months, 42% of small businesses saw their revenues decrease, while only 24% saw revenue growth in that period​. In other words, more than two out of five small business owners are facing year-over-year declines in sales. This softening demand is partly due to customers pulling back in an uncertain economy and partly due to the businesses’ own pricing adjustments (some owners have opted to sell less or delay orders rather than raise prices too sharply).
• Deteriorating Optimism: With these headwinds, small business sentiment has turned distinctly pessimistic in 2025. The National Federation of Independent Businesses (FNIB) Small Business Optimism Index has been falling and recently dipped below its 51-year average​. In fact, the net percentage of owners expecting the overall economy to improve plunged to –37% (meaning far more owners expect conditions to worsen than improve)​ This represented a 10-point drop in optimism in one month alone. Similarly, only 12% of owners say now is a good time to expand their business – a figure that dropped sharply and is near the lows last seen in the early pandemic lockdowns​ Uncertainty among small businesses is at record-high levels​, driven by not only trade policy confusion but also lingering inflation and labor shortages. In short, many entrepreneurs are bracing for tougher times ahead.
• Rising Anxiety and Pessimism: Qualitative reports underscore the mood on Main Street: anxious and frustrated. “I’m so angry… I just sort of feel like I’m throwing things at the wall and hoping they stick,” said one Texas small-business owner told the Dallas Morning News after struggling to navigate the sudden tariff changes​. Another said the past weeks have been “a nightmare” of trying to budget for uncertain costs – caught between possibly 10% or 37% tariffs that could kick in after 90 days. Such stories reflect a growing pessimism. Many small-business owners fear they’re at the mercy of geopolitics and macroeconomics far beyond their control. Most of these entrepreneurs rank the current tariff conflict as a top concern, even after enduring a pandemic and supply-chain chaos in recent years. In sum, confidence on Main Street has been shaken.W

Employment and Investment Decisions

With higher costs, uncertain sales, and an unpredictable policy environment, many Main Street businesses are cutting back hiring and investment plans. The data suggests small firms are cutting ew expenditures and, in some cases, eliminating staff or freezing hiring.

• Hiring Freezes and Layoffs: Unlike larger corporations, small businesses don’t have deep buffers and often must react quickly to revenue shortfalls or rising costs. Recent surveys indicate that more small businesses have been reducing headcount than adding. In late 2024 and early 2025, about 18% of small businesses reported laying off workers, while only 12% reported hiring new employees. This net contraction in employment is a stark reversal from the growth mindset many had a year prior. Some Main Street employers who expanded staffing during the post-pandemic recovery are now trimming back to control expenses. Additionally, many others have imposed hiring freezes, choosing not to fill open positions unless absolutely necessary. This pullback is one clear sign of pessimism, as business owners hunker down and try to ride out the uncertainty.
• Persistent Labor Challenges: Ironically, even as overall hiring slows, labor shortages remain an issue for small businesses in certain roles. As of February 2025, 38% of owners reported having job openings they could not fill – the highest share in over six months. Skilled trades and experienced technical positions are particularly hard to hire for. This labor crunch, which started during the pandemic recovery, continues to vex many small employers. Owners are caught in a bind. They are hesitant to expand payrolls given the economy, but may need more hard-to-find workers to meet demand or replace turnover. Existing may be asked to do more, and wage pressures persist (about one-third of small firms raised compensation recently to attract or retain workers​.) In short, Main Street businesses face a dual challenge – an external pressure to cut costs (leading to fewer jobs overall) coupled with internal pressure to raise pay for certain key workers.
• Delayed Investments and Expansion: Uncertainty is also causing small businesses to scale back or delay capital investments. For example, a Dallas-area entrepreneur who had hoped to grow two eco-friendly startups admitted, “because of these tariffs and an anticipated ‘domino effect’ on other sectors of the U.S. economy, we’re rethinking our expansion and investment plans for 2025 and beyond.”​ This sentiment is common – companies that might have opened a new location, purchased new equipment, or launched a new product line are putting those plans on hold until conditions stabilize. Big expenditures are hard to justify when tariffs or regulations could change next quarter and when the cost of borrowing has risen (interest rates are at their highest in years, making business loans more expensive). Instead, owners are conserving cash and focusing on maintaining current operations. Notably, the NFIB reports that only 12% of small businesses think now is a good time to expand, and actual capital outlay plans have softened in recent months​. The prevailing strategy is caution: postpone growth initiatives, avoid new debt, and wait for clearer signals on the economy.

Conclusion

In short, flare-up of the long-standing trade war with China and economic headwinds of 2025 are weighing heavily on America’s Main Street enterprises. Tariff threats are driving up costs, snarling supply chains, and forcing small businesses to raise prices or drop products – an existential challenge for firms with tight margins.

These increased costs and persistent supply disruptions are, in turn, dampening customer demand and confidence. Owners see their customers becoming more price-conscious and their sales trending flat or downward, which has eroded optimism to its lowest point in years.

Many small-business owners are responding by tightening their belts: cutting back on hiring, hunkering down on investments, and bracing for a potentially rough economic ride.

Key Takeaways:

• Informed Decision-Making: A formal valuation equips owners with precise data, facilitating strategic planning and growth initiatives.
• Financial Transparency: Uncovers the true earnings and financial health of the business, distinguishing between operational profits and discretionary expenses.
• Strategic Planning: Identifies strengths and weaknesses, guiding resource allocation and operational improvements.
• Succession and Exit Planning: Provides a clear valuation, essential for ownership transitions, buy-sell agreements, and estate planning.
• Risk Management: Highlights potential vulnerabilities, enabling proactive risk mitigation.
• Market Positioning: Offers insights into competitive standing, aiding in strategic market decisions.

Introduction

As a closely held business owner, you are intimately involved in every facet of your company’s operations. Understanding the precise value of your business requires more. Many owners rely on their intuition and industry knowledge, which as likely as not does not provide an accurate picture.

A formal business valuation, conducted by a Certified Valuation Analyst (CVA) or a qualified professional, provides an objective assessment of your company’s worth. This process not only assigns a monetary value but also offers critical insights into various aspects of your business, from financial performance to market positioning.

I am a lawyer, a certified valuation analyst, and a certified exit and succession planner.  I have worked with closely held business owners throughout my career. Contact me with questions about valuing your business, developing an exit plan, or the legal bulletproofing necessary to protect your investment.

The Importance of Formal Business Valuation

1. Informed Decision-Making

A formal valuation serves as a foundational tool for strategic decision-making. By providing a clear picture of your company’s financial standing, it enables you to make informed choices regarding expansions, investments, and operational changes. Understanding your business’s value helps in setting realistic goals and benchmarks, ensuring that your strategic plans are grounded in financial reality.

2. Financial Transparency

Closely held businesses often have intertwined personal and business finances. A formal valuation disentangles these elements, revealing the true earnings and financial health of the company. This transparency is crucial for identifying areas where profitability can be enhanced and expenses can be managed more effectively. It also aids in presenting a clear financial picture to potential investors or buyers.

3. Strategic Planning

Through comprehensive analysis, a valuation identifies the strengths and weaknesses of your business. This knowledge allows you to allocate resources more effectively, focus on areas with the highest return on investment, and implement operational improvements. If the valuation reveals that your business’s gross profit margin is below industry standards, you can investigate the causes and take corrective actions, such as renegotiating supplier contracts or adjusting pricing strategies.

4. Succession and Exit Planning

Whether you’re planning to transfer ownership to a family member, sell the business, or bring in new partners, knowing the accurate value of your company is essential. A formal valuation ensures that all parties have a clear understanding of the business’s worth, facilitating smoother negotiations and transitions. It also helps in structuring buy-sell agreements and estate planning, ensuring that your interests and those of your successors are protected.

5. Risk Management

A valuation highlights potential vulnerabilities within your business, such as over-reliance on a single customer or supplier, cash flow inconsistencies, or operational inefficiencies. By identifying these risks, you can develop strategies to mitigate them, thereby enhancing the stability and resilience of your business. If the valuation reveals a heavy dependence on one client for a significant portion of revenue, you might prioritize diversifying your customer base to reduce risk.

6. Market Positioning

Understanding where your business stands in relation to competitors is vital for strategic positioning. A formal valuation provides insights into your market share, competitive advantages, and areas where you may be lagging behind. This information is invaluable for making strategic decisions about marketing, product development, and expansion.

Valuation Methods: Understanding the Approach

Business valuations can be conducted using different methodologies, depending on the nature of the company and its industry. The three primary approaches include:

1. Income Approach

This method determines value based on the business’s ability to generate future income. Analysts use discounted cash flow (DCF) models to assess the present value of expected future earnings. This approach is particularly useful for businesses with stable and predictable cash flows.

2. Market Approach

The market approach determines value by comparing the business to similar companies that have been sold recently. It relies on industry benchmarks and multiples, making it an effective valuation method for businesses operating in competitive markets.

3. Asset-Based Approach

This method calculates the value of a business based on its net assets (total assets minus liabilities). It is commonly used for asset-heavy businesses, such as manufacturing companies, or when a business is being liquidated.

Common Pitfalls in Business Valuation

1. Overlooking Hidden Liabilities

Many business owners focus on revenue and profit but fail to account for hidden liabilities, such as pending lawsuits or deferred taxes. A proper valuation must take these into account.

2. Ignoring Market Trends

External factors, such as economic downturns, regulatory changes, and industry shifts, can significantly impact business value. An effective valuation considers these trends.

3. Misrepresenting Financials

Inflated revenue projections or underreported expenses can lead to inaccurate valuations, potentially harming future negotiations and transactions.

Case Studies

Case Study 1: A Family-Owned Business Prepares for Succession

A manufacturing company in which two generations were involved underwent a formal valuation as part of its succession planning. The valuation process identified inefficiencies in cost management, excessive overhead, and an over-reliance on a single supplier.

With these insights, the leadership team initiated cost-cutting measures, diversified suppliers, and optimized their production processes. Within a year, these changes improved profitability and enhanced the company’s valuation. When the business transitioned to the next generation, the streamlined operations ensured continued financial stability and long-term growth.

The valuation also empowered the owners to take a realistic look at their own future. With the bulk of their personal net worth tied up in the business, the founding owners were able to make a realistic examination of the resources available for a succession plan. That process provide dfor the withdrawal of the founders and the continuation of the business and avoided conflict within the family.

Case Study 2: An Entrepreneur Negotiates a Buyout

An entrepreneur looking to sell a stake in a technology startup to raise capital used a formal valuation to determine a fair market price in negotiations to raise capital through the sale of an interest in the business to strategic investors. The valuation highlighted the company’s strong intellectual property assets and its growth trajectory, allowing the entrepreneur to negotiate from a position of strength.

The valuation report gave the owner the ability to confidently counter lower offer from potential buyers by providing concrete financial data and revenue forecasts, together with market insights that supported the future growth of the buswiness.

With with these insights, the entrepreneur was successful in negotiating a more attractive sale price, securing a much needed investment at an attractive price and giving his company the ability to reach its full potential.

Steps to Take After Receiving a Valuation

1. Review the Findings: Work with financial and legal advisors to interpret the results and understand the valuation’s implications.
2. Address Identified Weaknesses: Implement operational changes to strengthen financial performance and mitigate risks.
3. Use the Valuation for Planning: Leverage the valuation in buy-sell agreements, tax planning, and long-term business strategy.
4. Regularly Update Valuations: Business conditions change over time. Conducting periodic valuations ensures you always have an accurate assessment of your company’s worth.

Conclusion

A formal business valuation is more than a number—it’s a roadmap to better decision-making, risk management, and long-term success. Closely held business owners who invest in understanding their company’s true worth are better positioned to seize opportunities, mitigate risks, and maximize value.