What are the business strategies that will drive success in 2025? To answer that important question, Pepper Group recently hosted an exclusive breakfast event in partnership with The Entrepreneurship Institute. Our expert speakers delved into critical topics shaping the business landscape in the year ahead. In case you missed it, here’s a recap:

The Panel:    

• Nick Withrow, CFA, CAIA, CFP, Forvis Mazars Private Client, Managing Director / Lead NW Region Portfolio Manager. Economic Overview: Emerging trends and forecasts to inform your strategic decisions 

• Tom Goldblatt, Managing Partner, Ravinia Capital LLC. Mergers & Acquisitions Landscape: Latest developments, opportunities and their impact on your organization

• Tony Alberico, Senior Vice President & Practice Leader | Employee Health & Benefits, Marsh & McLennan Agency. Employee Engagement and Benefits Trends: Innovative strategies to enhance workplace culture and boost productivity

• Donald F. Larsen IV, CFP ^®, Director | Retirement Plan Consulting Practice Leader, Forvis Mazars Private Client. Estate Planning: Proactive planning for business continuity and personal legacy

Here are some takeaways from the event.

• 2025 looks promising from an economic standpoint. Real GDP trend growth is 2.1%, supported by solid consumer spending on durable goods, non-durable goods and services. These represent 70% of all U.S. economic activity.

• The consumer balance sheet has $185 trillion of assets (homes, deposits, pensions, etc.) and $20.7 trillion of liabilities (tow-thirds of which are mortgages). While credit card debt has increased recently, total consumer debt payments as a percentage of disposable income are still generally low compared to historical averages.

• Unemployment and wage growth levels are also sound. The current unemployment rate of 4.2% is well below the 50-year average of 6.2%. Average wage growth is currently 4.1%. This is slightly above the historical average of 3.9%.

• Inflation is down significantly, but at roughly 2.6%, it’s still above the Fed’s target core rate of 2%. One driver of inflation has been auto insurance, but rate increases are finally slowing. With core goods and energy expected to moderate as well, the expectation is for an inflation rate of around 2% this time next year. Potential tariffs could push this higher temporarily, but the trend is towards a more normalized level.

• Regarding interest rates, the Fed is in a reduction phase, but given the strength of the economy, it’s unlikely that rates will decline as much as previously expected. The Fed’s neutral rate is 3%, but don’t plan for rates to achieve that level in 2025.

• Capital markets look good, the stock market is high and corporate credit spread (the rate difference between investment-grade bonds and treasury bonds) is at a near all-time low, signaling confidence. Deregulation could help stoke animal spirits and open up the M&A market. However, long-term deficits are a threat. The U.S. has benefitted from being the reserve currency, but without spending reductions or tax increases, the national debt may increase to unsustainable levels.

• M&A activity was robust during the pandemic but softened significantly with the interest rate increases in 2022. Private Equity has money to invest, but average hold periods have been increasing, and the 2024 deal flow was lower than expected. Multiples have held up, but that could be due to a lack of supply. There is a general expectation that 2025 will be a very strong year for M&A due to a combination of many factors, including interest rate reductions, pent-up demand and investors getting anxious to recover their money. In addition, deregulation, less anti-trust activity, the expectation of lower capital gains taxes and possibly a limited window for action all reinforce the expectation of stronger activity.

• In the world of employee retention and benefits, the continued increase in the cost of healthcare is a major issue, and more employees are seeking whole-person healthcare, which includes mental as well as physical health.

• HR departments have been very focused on meeting different generational desires regarding benefits and communication preferences. Boomers seek benefits around retirement and prefer phone or face-to-face communication. Gen Xers want the flexibility to allow for caregiving and prefer a more informal communication approach. Millennials are often paying off student debt and prefer text or chat communications. Gen Z is interested in mitigating work-related burnout and, interestingly, are more like Boomers in the way they like to communicate.

• In addition to matching benefits and communication preferences to generational needs, there is a trend toward companies sharing total compensation statements or benchmarking their benefits against the market. This helps demonstrate the value of the benefits offered and helps employees understand how much they are truly earning.

• On the estate planning front, the 2017 Tax Cuts and Jobs Act reduced estate taxes, but it is set to sunset at the end of 2025. Whether it will or not is anyone’s guess, so stay tuned. If it does, however, estate tax bills on businesses, property and investments will increase significantly. Regardless of this uncertainty, the important thing is to start your estate planning process sooner vs. later. It can take a long time to get estate planning documents in place, so don’t delay.

• Finally, for those thinking about selling their company, the most important thing to consider is not interest rates, deal flow or multiples, but personal decisions and goals. If these are aligned, you should plan to run a competitive process and expect about two years to get it done. Be well prepared going in. Have your accounting organized, clean up any litigations and minimize uncertainty and risk for the buyer. Make sure you’re replaceable, and most importantly, be ready and have a plan for your life after the sale.

For over 45 years, The Entrepreneurship Institute has fostered a community of industry leaders, providing unique opportunities to learn, network and share ideas. If you’re a C-Suite Executive, President or Entrepreneur, don’t miss our upcoming, invitation-only 2025 events. To be added to our invite list, email us at pepper@peppergroup.com.