Operations, Environment & Expectations
Small Business Operations: Small Businesses Report Good Health, Comfort with Cash Flow
Notably, more small businesses this quarter report being very comfortable with their cash flow (31%) compared to Q2 (23%). Additionally, the percentage reporting an increase in staff in the past year is unchanged from last quarter (28%).
There are various significant differences by sector with retail small businesses less likely to report good business health and cash flow comfort. For example, small businesses in services (73%) and professional services (79%) are more likely than those in retail (62%) to report that their business is in good health. In line with the past two quarters, comfort with cash flow continues to vary across sectors. Small businesses in retail report less comfort with their cash flow than those in manufacturing and professional services. However, manufacturers are more likely than those in services and retail to report they have increased staff in the past year.
This quarter, there are no significant differences in business health or comfort with cash flow by length of business operation. However, continuing a year-plus trend, small businesses in operation for 10 years or less are more likely than those in operation for 21+ years to say they have increased staff in the past year (33% vs. 8%).
Small businesses with younger owners report better business health and cash flow comfort. Similar to last quarter, small businesses owned by Gen Z or Millennials are significantly more likely than those owned by Gen Xers and Baby Boomers and older to report that their business is in good health. Baby Boomers and older-owned businesses are also less likely than those owned by Gen Z/Millennials and Gen Xers to report comfort with cash flow.
Small Business Environment: View of the National Economy Improves Slightly
Perceptions of competition from local businesses are stable this quarter. Thirty-eight percent of small businesses say competition from smaller or local companies has increased compared to six months ago, in line with both last quarter and Q3 2024 (36% each). Similarly, 42% of small businesses are now reporting spending more time on compliance, stable from last quarter (40%).
Businesses in manufacturing are significantly more likely than those in retail and services to report that the national economy and the local economy are in good health and that they are seeing more competition.
Continuing a more than year-long trend, male-owned small businesses are more likely than those owned by women to say the national and local economies are in good health. Similar to last quarter, male-owned small businesses are also more likely to report increased local competition.
Small businesses owned by Baby Boomers or older are significantly less likely than their younger counterparts to say the U.S. and local economies are in good health, and to report that they are seeing increased competition.
Small Business Expectations: Small Businesses Expectations Remain Stable
Small businesses’ expectations for future hiring and investment are largely stable compared to both last quarter and this time last year.
Nearly half (47%) of small businesses expect to increase investment in the next year, unchanged from last quarter (47%) and in line with Q3 2024 (45%). Likewise, 44% of small businesses expect to increase hiring in the next year, stable from both last quarter (42%) and matching this time last year (44%).
Last quarter marked a slight softening in revenue expectations, as there was a nine percentage point shift toward an expected decrease in revenue. Now, seven in ten say they expect revenue to increase in the next year, more in line with the start of 2025 (69%).
By sector, there are no differences in terms of expectation of increasing investment. However, small businesses in manufacturing are significantly more likely than those services and retail to expect increases in revenue or staffing. There are no differences in future expectations by business size.