There’s good news for the transportation and logistics industry heading into 2025: the Bank of America Shippers’ Diffusion Index has been ticking upwards for four consecutive surveys, reaching its highest level since June 2022. It looks like the over-supply problem will start to settle down and rates will increase to allow for more comfortable margins.
In other positive news, after months of speculation, we can expect the tax situation to stabilize; although details are still being worked out, experts believe that congress will extend the 2017 tax cuts that are set to expire in 2025.
These two positives provide a strong foundation that may help businesses weather some potential uncertainty. Three major question marks include:
- Tariffs: How will tariffs impact the transportation and logistics industry? Depending on the scope and extent, we may see a lower volume of goods being shipped. We may see an impact on the cost of equipment if tariffs hit trailer parts. We may see a boom in domestic production. Simply put, it’s too soon to tell.
- Environmental regulations: The transportation industry is in a lot of flux right now, with questions surrounding the future of regulations meant to curb emissions. These changes would add a significant cost per tractor, leading some businesses to consider getting out ahead of any changes by buying tractors as soon as possible. This strategy should be evaluated against the high cost of purchasing and maintaining a tractor, especially if the business is unable to fully utilize them at present.
- Interest rates: When considering a line of credit or a loan, should you get a variable or fixed rate? Without a crystal ball, it’s always a bit of a gamble. But we always recommend looking at your cash flow forecast (and the size of your cash reserve) to help determine how much risk you can take. Is it worth it to go for a variable rate in the hopes that you’ll save in future years – but may get hit with an increase that would hurt your operating budget?
Amidst all these questions there are a lot of reasons for optimism. But when faced with so many questions, the best way to keep moving forward is to create a budget and a forecast, and then use that information to assess various scenarios: best case, worst case and average. It’s like drawing lines on lanes: You might have to change lanes, but at least you know you’re moving forward with the best possible information to guide you.
Do you need help planning for 2025? Schedule a free virtual CFO consultation below to learn how our services could help.
