The uncertainty around tariffs and escalating trade wars has sparked anxiety across the small-to-medium business landscape. But some businesses are creating best practices to seize the moment despite these challenges—keeping in mind that flexibility is key when changes keep coming fast.
Operators can react well to maintain their strong fundamentals—clean balance sheets, flexible and diversified supply chains, leverage to negotiate long-term pricing—and emerge relatively stronger than their competitors.
Investors are noticing, too. As one M&A attorney put it, “There’s a flight to quality. The good businesses will still find capital, and possibly at better valuations if others are struggling.”
What we advise
Forward-thinking businesses can start making moves to help them stay upright in the turbulence. Here are some of our recommendations, informed by strategic modeling work with clients and what we’re hearing from investors.
Say goodbye to China
- Diversify geographically. What was a relative trickle of companies shifting operations from China to Southeast Asia is becoming a flood. No matter the destination, it’s time to re-platform manufacturing away from China. This can be costly, complex, and slow, but it’s worth gaming out—even if the current trade war ends soon with all tariffs lifted, political tensions with China are likely to remain for a long time.
- Localize when it makes sense. You might explore reshoring options, but the economics are still tough. In many cases, bringing operations back to the U.S. is still more expensive than tariff-adjusted imports. Companies sourcing from Mexico may be in a stronger position, because USMCA status could mean certain goods are excluded from new tariff regimes.
Keep an eye on supply
- Negotiate with stakeholders. Many businesses are asking manufacturers and suppliers to share in the sacrifice by taking 5–10% cost reductions where possible. The U.S. is still the world’s biggest market, so brands that do well here have some leverage over their partners.
- Use freight as a buffer. Shipping rates are down—ironically, in part because of cancelled orders. You might lock in favorable rates now to help offset tariff costs.
Mind the money
- Refresh your cash flow model. Every business should be updating its 13-week cash flow and stress testing it through 2025. Tariffs may be the headline, but the second-order effects (like weaker consumer demand) could be even more impactful.
- Embrace price elasticity nuance. Not all products respond equally to tariffs. A $25 action figure might only go up $0.50. But a $500 game console might jump to $548 overnight, putting it out of reach for many households. Understand where your brand has pricing power and where you need to stay competitive.
Get creative
- Optimize your channels. Companies are reviewing where they sell high-margin inventory first. If you own goods landed at pre-tariff rates, you want to make sure they move through your most profitable outlets before new, higher cost inventory arrives.
- Think like a portfolio manager. One product might not work anymore at current landed costs, but that doesn’t mean the whole line fails. Rationalize aggressively: discontinue, redesign, or replace what doesn’t pencil out, then double down on winners.
- Watch your customer’s customer. Second- and third-order effects matter: even if your business doesn’t import directly, your customers might. One software provider we know has no tariff exposure but is seeing indirect churn because its retail-brand customers are in trouble.
Bottom line: it’s not just about the tariff
Yes, the percentage rate matters. But we’re seeing smart SMBs treat this moment as a systems problem—not just a cost problem. The winners might need to pull every lever: pricing, sourcing, freight, cash flow, and customer strategy.
None of this will be easy, but owners who ride this wave skillfully could come out on top. Your life’s work is worth the effort.