Inflation Remains Top Concern, As Revenue Worries Grow

However, according to the results of the survey (conducted between January 28 – February 14), views of the U.S. and local economies are stable this quarter. Around three in ten small businesses (29%) believe that the U.S. economy is in good health and 37% say the same of their local economy. Both of these measures are on par with last quarter and Q1 2024.

The survey’s findings also show that inflation continues to be small business owners’ top concern by far and this concern is at record highs—although concerns about revenue also jumped this month. In fact, consistent for the past three years, inflation (58%) continues to be the biggest challenge facing small businesses. However, 35% now cite revenue as a challenge, up 10 points from last quarter and at its highest point since tracking began on this issue in 2021. This increased concern about revenue is especially pronounced among small businesses in the Midwest, South, and Western regions; the number of small business decision makers saying that revenue is one of the biggest challenges is up double-digit percentage points in these regions.

The survey also asked small business leaders about workforce readiness. Small businesses reported that when they look to hire new, entry-level hires, the top thing they’re seeking is leadership experience. Two in three (67%) small businesses say they would be more likely to hire an entry-level employee if they have previous leadership experience. A similar percentage say the same of having previous internship or work-study experience (63%). Notably, small businesses in manufacturing and professional services are significantly more likely to value internship experience than those in retail or services.

Nearly all small business owners believe that trade schools or technical colleges are the most effective at preparing new employees to enter the workforce. The overwhelming majority of small businesses say that trade schools or technical colleges are effective at preparing new employees to enter the workforce (94%). A slimmer majority says the same of 4-year colleges or universities (72%), while only half feel that high schools (51%) are effective at preparing new employees for work.

In the same vein, a majority of small businesses believe that the entry-level employees who they have recently hired are prepared, although few believe that they are very prepared. Nearly three in five small businesses (57%) say that their recently-hired entry level employees are prepared to enter the workforce, compared to just 20% who say they are not prepared. However, just 16% say that their new hires are very prepared, compared to 42% that say somewhat prepared.

Finally, more small businesses are planning to be transparent about the compensation they offer to attract new employees. Three in five small businesses plan to list the hourly pay or salary range in their job descriptions in order to attract new talent in the next year. Of note, there are differences among age when it comes to this sort of transparency: Gen Z- or Millennial-owned businesses are most likely to plan for compensation transparency on job listings.