Operations, Environment & Expectations

Nearly seven in ten small businesses (67%) say their business is in good health this quarter, unchanged from last quarter (66%) and relatively stable since Q2 2022. Similarly, 72% say they are comfortable with their cash flow, similar to last quarter (68%) and one year ago (67%). Additionally, about one-fifth of small businesses (22%) say they have increased staff over the past year, identical to the past two quarters.

Consistent with historical patterns recorded from the start of the survey in 2017*, small businesses with more employees are more likely to report good business health, comfort with cash flow, or having increased staff than those with fewer employees. However, male-owned small businesses are more likely this quarter than female-owned small businesses to report comfort with cash flow or staff increases over the past year.

While there are no significant differences in reported business health or cash flow comfort by sector, small businesses in retail are more likely than those in services to say they increased staff in the past year (26% vs. 16%, respectively).

There are also no significant differences in business health or cash flow comfort by length of business operation; however, consistent since Q2 2024, small businesses in operation for 10 years or less, as well as those in operation for 11-20 years, are more likely than those in operation for 21+ years to say they have increased staff in the past year (24% and 25% vs. 10%, respectively).

Further, small businesses owned by Gen Z or millennials continue to be more likely than their older counterparts to say they have increased staff in the past year (30% vs. 19% Gen Xers and 12% baby boomers and older).

* Beginning in Q2 2020, an online approach was used in place of the typical phone methodology. This change in mode may be responsible for some of the shifts in the data after Q1 2020.

About one in three small businesses (32%) say the U.S. economy is in good health, consistent from Q1 2024, but up significantly from this time last year (25%). When it comes to their local economy, roughly two in five small businesses (38%) say it is in good health, stable throughout 2024 but up from Q4 2023 (30%). Further, about one-third (34%) say competition from smaller or local companies has increased compared to six months ago. This reading is also stable from the start of the year.

Similar to last quarter, small businesses in retail are especially likely to say the national economy is in good health. Compared to those in retail, significantly fewer small businesses in manufacturing or services say the same. Unlike last quarter, however, there are no significant differences in local economic health by sector. Sector-by-sector readings of local economic health resemble those from Q2 2024, the first quarter since Q3 2023 when there were no significant differences in local economic perceptions by sector.

Notably, small businesses are now more likely than last quarter, as well as this time last year, to say the time or resources spent on fulfilling compliance or regulatory requirements has increased in the past six months (39% now vs. 33% last quarter and 34% last year, respectively). By sector, small businesses in the retail and professional services sectors are more likely than those in services to say the time or resources spent on fulfilling compliance or regulatory requirements has increased. Those in manufacturing fall in the middle.

In a trend observed for more than a year, male-owned small businesses are more likely than those owned by women to say the national and local economies are in good health. Yet they are also more likely to say that competition, as well as the time or resources spent on compliance, have increased.

Similarly, small businesses owned by Gen Zers or millennials, as well as those in operation for ten years or less, are especially likely to say the U.S. and local economy are in good health.