The show must Go On

Behind the Curtain: Preparing for 2025 With Eyes Wide Open

As we close the curtain on 2024, it’s tempting to look back and describe the year as theater. A big-budget production filled with conflicting narratives, rapid scene changes, and just enough spectacle to keep everyone watching.

But this isn’t a stage, and there’s no script. While some leaders have leaned into optimism, others are sounding alarms. The truth, as usual, lives somewhere in between—and it’s our job to navigate the difference.

As we prepare for the coming year, we’re taking a pragmatic look at what’s happening beneath the surface: debt dynamics, commercial credit stress, and growing imbalances. For those of us building real businesses—especially in professional services—understanding what’s real vs. what’s rhetoric is essential.

Debt Normalization and the Cost of Waiting

By the end of 2024, the U.S. national debt had climbed to a record $36 trillion, up $13 trillion since 2020. Interest costs alone are projected to exceed $3.8 billion per day next year, consuming nearly a third of all government revenue. That level of debt servicing would have been unthinkable just a decade ago.

It’s not just government debt. Consumer credit stress is back in focus, with over 11% of U.S. credit card balances delinquent for 90+ days—the highest rate since 2011.

In November, we saw 22 large bankruptcies (valued at $50M+), a tally not seen since the post-pandemic economic shock. Commercial real estate continues its slow unravel, with a growing number of properties defaulting for a second time.

For many professional services firms—particularly those in architecture, construction, legal, or consulting tied to CRE—the ripple effect is already here. Delays, defaults, and contract volatility are weighing down pipelines and forecasting accuracy.

Services Firms: Lessons from the Frontline

According to Service Performance Insight (SPI) Research, the top-performing services firms are actively investing in better forecasting tools and capital efficiency. The firms growing fastest in late 2024 are those with the greatest visibility into:

• Real-time resource utilization
• Cash flow vs. deferred revenue
• Client payment behavior and risk scoring

What sets these firms apart isn’t access to more clients—it’s access to better data and financing strategies. SPI’s research shows that high-performing firms are more likely to:

• Use advanced PSA (Professional Services Automation) tools
• Finance receivables proactively, not reactively
• Avoid overexposure to high-risk clients or sectors

As we approach 2025, these aren’t luxuries. They’re survival tools.

Economic Indicators to Watch Closely

Here’s a look at what’s driving concern—and opportunity—as we head into Q1:

• Residential units under construction dropped more than 17%, the steepest decline in 13 years. This could lead to layoffs across construction and engineering fields.
• U.S. home sales are projected to finish the year at their lowest since 1995.
• CPI is 22% higher than it was in early 2020, with auto insurance up 52%. While inflation may be slowing, the cumulative cost-of-living burden remains very real.
• The Conference Board’s Leading Economic Index (LEI) declined again in October—its 32nd straight month without an uptick, surpassing even the 1970s and 2008-era recessions.

In short: the headlines may tout stability, but the underlying data signals prolonged strain.

Staying Grounded, Staying Nimble

In an environment this unpredictable, the worst move is inaction. Rate cuts, credit spreads, and the illusion of control may lull some into complacency—but not us.

For firms that deliver on contracts and bill for hours, delays in collections can create massive cash gaps. Add in deferred payments from government or enterprise clients, and even profitable firms can find themselves in a squeeze.

The solution isn’t to shrink—it’s to restructure how you finance your growth. That’s where CapitalPSA comes in.

Build with Confidence, Without Extra Expense

Through CapitalPSA, we equip services firms with:

• Capital access aligned to your receivables and growth, not rigid covenants
• PSA software giving you enterprise-grade insight into billing, utilization, and forecasting

The heroes of 2025 won’t be those with the flashiest branding or the most aggressive bets. They’ll be the ones who took a sober look at the road ahead—and made the right moves early.

Want to learn how CapitalPSA can help you lead with clarity and capital? Let’s talk.

If this message helped you think differently, pass it along to someone else navigating these same waters.

Until next time,
– The CapitalPSA Team