Ways to Stay Informed About Industry Delays and Challenges to Stay on Track in 2025.
When I first set out to write this article, my goal was to explore the downturn in the auto industry and examine how contractors could leverage these changing conditions to their advantage. However, as circumstances continue to evolve, so must our perspective.
The initial spark for this discussion came from an article about CarMax, which revealed that the company was selling vehicles at lower prices than the previous year while simultaneously increasing its profits. How is that possible? Lower prices but higher profits—it’s a concept many business owners wish they could apply to their own operations.
A deeper dive into the situation revealed that CarMax was paying less for the vehicles it acquired from dealers. This allowed them to resell cars at reduced prices while still achieving a higher profit margin compared to the prior year. The reason behind this? Dealers are struggling to clear out lingering 2023 and 2024 models to make room for the incoming 2025 inventory. Vehicles are sitting on lots, and dealers are being forced to offload them at lower prices.
My initial takeaway was that this situation could present some valuable opportunities for contractors in need of new work vehicles. Right now, it might be possible to secure a solid deal on a new or lightly used truck—still under warranty—at a price lower than expected. Even once the warranty expires, many recent truck models are capable of lasting 200,000 to 300,000 miles with proper maintenance and regular servicing.
However, this conversation took an unexpected turn with the devastating Southern California wildfires in January 2025. The widespread destruction has significantly altered economic conditions, with effects that could ripple through not only the state but the entire country.
These fires will likely lead to supply chain disruptions, increased material costs, extended delivery timelines, inflation spikes, shifting interest rates, equipment shortages, insurance premium hikes, financing challenges, and labor shortages. Every one of these issues has the potential to affect your business in both the short and long term. In other words, the road ahead will be anything but smooth, and financial instability could be a very real threat.
To navigate these challenges, you need to anticipate potential disruptions, even those that aren’t immediately obvious, and develop a set of proactive solutions to mitigate their impact.
Preparing for Financial Challenges
Once you’ve identified the key pain points your business may face, it’s crucial to recognize how every operational change—whether it affects revenue or costs—will directly impact your cash flow, profitability, and financial health. These shifts must be accounted for in your business planning to ensure you can implement strategic changes and track their effects on performance.
Sticking to an outdated 2025 budget without adapting to new risks could leave you cash-strapped and unable to operate effectively. Why let that happen? Addressing financial hurdles becomes far more manageable when you proactively weigh the pros and cons of potential adjustments.
Strategies for Mitigating Risks
Material Costs and Delivery Delays
There’s little doubt that the California wildfires will cause material shortages and shipping delays, driving up costs. To minimize risk, stay in close contact with your key vendors to understand how these disruptions may affect their service levels. If price increases seem inevitable, consider meeting with your bank to discuss securing a working capital loan under favorable terms before interest rates rise further.
Rising Insurance Costs
Expect insurance premiums to climb in response to increased risks. Take time to review your current policies to identify opportunities for cost savings. One effective strategy is eliminating unnecessary coverage on underutilized assets. Understanding how your premiums are structured could reveal additional areas where you can cut costs without compromising essential coverage.
Equipment Availability
As contractors in the western U.S. scramble to replace lost equipment, availability could become a concern nationwide. Check in with your rental providers to ensure they have what you need when you need it. If necessary, work out agreements in advance to guarantee access to essential machinery.
Labor Retention
Employee retention could become a pressing issue if you’re unable to keep your workforce engaged and financially secure. Consider offering performance-based bonuses, profit-sharing incentives, or other benefits to encourage workers to remain for the full season. While unionized shops may be less affected, non-union companies face a higher risk of workforce instability. This is the year to prioritize employee satisfaction and invest in productivity-enhancing strategies.
The Path Forward
Now is the time to take a proactive approach to financial planning. Finalize your 2024 results as soon as possible to establish a starting point for 2025. Create quarterly forecasts that include projected cash flow and revenue expectations. Meet with company leadership to identify potential challenges, discuss their timing and impact, and develop strategies to mitigate risks.
By staying ahead of these financial and operational threats, you can position your business for resilience and long-term success, even in the face of an unpredictable economic landscape.
