Small Businesses in 2025: Cautious Optimism Amid Economic Headwinds#

Small businesses, which drive nearly half of US jobs, are a bellwether for the economy. Despite facing Trump’s tariffs, persistent inflation, labor shortages, and rising financing costs, recent surveys reveal a mixed outlook for 2025: not exuberant, but far from despair. Small businesses are holding steady, with cautious optimism prevailing over fears of economic turmoil [1].

Survey Insights: Growth with Reservations#

Seven major surveys conducted in 2025 by reputable firms provide a comprehensive snapshot of small business performance:

Principal Financial’s Well-Being Index (June): 56% of businesses reported growth, with 90% maintaining or expanding their workforce and 49% raising wages in the past three months. Yet, financial health concerns grew, with declines in optimism about the local and national economy.
EY Survey: 95% of entrepreneurs were confident in future growth, with 73% reporting revenue increases (29% saw 20%+ growth). However, 43% said economic conditions were hurting, though many plan to invest in AI and M&A.
Intuit QuickBooks Small Business Index: Drawing from anonymized payroll data, it found stable job growth in seven of 12 sectors, but real monthly revenue for businesses with 1–9 employees dipped by 0.06%.
Paychex Small Business Employment Watch: Based on 350,000+ clients, job growth was flat, and hourly earnings growth hit a four-year low, signaling caution in hiring and wages.
National Federation of Small Businesses (NFIB) Optimism Index: In May, optimism rose above its 51-year average, with taxation overtaking inflation as the top concern. Sales expectations and hiring plans improved, but uncertainty lingered.
US Bank Small Business Perspective (June): 96% of owners called their businesses successful, 88% saw growth, and 66% felt the economy was on the right track. Younger leaders (Gen Z and Millennials) were more optimistic (74%) than Gen X and Boomers (52%). Tariffs stressed 80% of owners, but many anticipated positive impacts.

Navigating Economic Challenges#

Tariffs remain a double-edged sword. While some businesses dodge them to cut costs, risking penalties [2], others see potential benefits, like boosted domestic manufacturing. Inflation continues to pinch, though its ranking as a top concern has slipped behind taxation. Labor shortages and higher financing costs further complicate operations, yet small businesses are adapting through AI investments and strategic funding.

Optimism Among Younger Leaders#

A generational divide emerges: Gen Z and Millennial owners are notably bullish, with 74% seeing economic progress compared to 52% of older counterparts. This optimism fuels investment plans, particularly in technology and expansion, despite broader economic headwinds.

Key Highlights#

Growth Persists: 56% of businesses grew, with 73% reporting revenue increases and 90% maintaining or expanding workforces [1].
Cautious Outlook: 43% cite economic harm, with declines in financial health and revenue dips of 0.06% for small firms.
Generational Divide: Younger leaders (74%) are more optimistic than older generations (52%).
Tariff Concerns: 80% of owners are stressed by tariffs, but many expect positive outcomes.
Investment Focus: AI and M&A lead small business strategies to navigate uncertainty.

Conclusion#

In 2025, small businesses are neither jumping for joy nor abandoning ship. Despite tariffs, inflation, and labor challenges, surveys show steady growth, stable employment, and cautious optimism. Younger entrepreneurs drive a bullish outlook, investing in AI and expansion, while older leaders remain wary. As small businesses navigate this complex economic landscape, their resilience underscores their critical role in powering half of US jobs. The path ahead demands adaptability, but for now, small businesses are holding firm.