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May 22.2025
3 Minutes Read

Small Business Confidence Rises While Tariffs Continue To Bite Margins

Concerned mature woman working in modern office on small business confidence.

Small Business Confidence on the Rise: A Closer Look

In recent months, small business confidence has experienced a noteworthy shift. According to the WSJ/Vistage Small Business CEO Confidence Index, confidence levels rose by 5 points to 75.0 in May 2025, indicating a slight but meaningful rebound after a series of declines earlier in the year. Despite this improvement, confidence remains at one of the lowest points observed in the past two years, reflecting the ongoing economic challenges that small businesses face.

Understanding the Tariff Effect

The turbulent landscape created by recent tariff announcements continues to pose significant hurdles for small businesses. A majority of CEOs express concerns about the adverse impacts of these tariffs, with two-thirds reporting negative effects on their operations. Direct consequences include disrupted supply chains and increased input costs, while indirect repercussions manifest as decreased customer demand due to heightened uncertainty. Business leaders like Joey Nelson, president of JoeScan, Inc., share the troubling reality that planned expansions may be thwarted by these barriers. Tariffs create cost disadvantages and fuel negative perceptions of U.S. business abroad, stalling ambitious growth plans.

Shifting Workforce Dynamics amidst Economic Uncertainty

Amidst these challenges, a positive trend is emerging regarding workforce expansion. The percentage of small businesses planning to increase their workforce in the next year climbed to 43%, up from 36% in the previous month. An intriguing catalyst for this optimism may be the growing incorporation of artificial intelligence (AI) within business operations. As firms look towards AI to streamline workflows and improve efficiency, the issue of workforce size becomes complex. A shift towards automation could offset the need for extensive hiring while simultaneously enhancing productivity.

Maintaining Margins in a Fractured Economy

Despite rising confidence, small businesses are grappling with the implications of rising operational costs. Approximately 38% of small business owners report a decrease in profit margins since the beginning of the year, with 31% anticipating further declines in profitability. In response to increasing costs, 59% of small businesses have raised their prices by over 4%, demonstrating a proactive approach to managing their financial health. As input costs rise, this tactic is indicative of how firms are adapting to protect their bottom line.

The Future Outlook: Navigating Challenges

Looking ahead, small business owners face both challenges and opportunities. The sentiment around the overall economy is slowly shifting, with 30% of businesses expecting improvement over the next 12 months. This is an increase from 25% in the previous month. Yet, it’s important to remain cautious; a significant 44% still anticipate economic deterioration. This anticipatory landscape underscores the necessity for small business leaders to remain agile and informed.

What This Means for Business Leaders

For CEOs and business owners, understanding these dynamics is crucial for planning and strategy. Balancing optimism with realism can help navigate the uncertain waters ahead. Businesses that embrace innovation, whether through AI or strategic partnerships, may find new pathways to sustain growth despite external pressures.

As we continue to track these trends, small business leaders are encouraged to foster connections and gather insights to prepare effectively for the challenges ahead. In a time of turbulence, the collective wisdom of the business community may prove invaluable.

Take Action Now

As a leader, it’s crucial to stay informed and connected. By keeping up-to-date with industry trends and actively engaging with networks, you can position your business to thrive despite ongoing challenges. Join discussions, attend webinars, and explore resources available through platforms like Vistage to enhance your leadership capabilities.

Economic Trends

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08.20.2025

Small Business Confidence Dips Amid Rising Economic Uncertainty

Update Navigating Economic Uncertainty: Small Businesses on EdgeThe latest findings from the WSJ/Vistage Small Business CEO Confidence Index reveal a slightly worrying trend: after a modest boost earlier in the summer, the confidence level dipped to 85.0 in August 2025. Despite this small decline, a significant undercurrent of economic uncertainty looms over small businesses. Many CEOs fear the unpredictable effects of recent political and legislative changes, including the ramifications of the One Big Beautiful Bill Act (OBBBA).Nearly half of the surveyed small business leaders have reported experiencing an increase in economic uncertainty over the last few months. The uneasy atmosphere can largely be attributed to sporadic headlines concerning tariffs, trade disputes, and significant legislative movements, including the OBBBA's slow rollout compounded by ambiguity surrounding its tax provisions.Impact of Tariffs: Cost Pressures MountingEven though the index recorded only a slight decline, the reality for many businesses is that uncertainty revolves around changing tariff policies. CEOs find themselves grappling with higher costs incurred from vendors adjusting prices to accommodate tariffs. Guillermo Arrieta, the President of GA Flooring, emphasized this reality, noting that his business had to pass along some of these increased costs to customers, underscoring how external variables influence pricing strategies.Bob Pilon, CEO of Dynamic Tub, Inc., highlighted an alarming trend in pushing costs onto consumers, stating that their company has implemented a notable “120% pass-through of all international tariff charges.” This stark measure illustrates how quickly financial burdens can amplify within supply chains, prompting business leaders to reassess spending plans. Many projects are now being delayed, directly linked to the inability to confidently predict future costs.The Lingering Hesitations Around the OBBBADespite the business-friendly intentions cozying up to the OBBBA, enthusiasm among small business owners remains scarce. A little over one-third of the respondents view the bill positively, while 28% report neutrality and a concerning 24% maintain a negative outlook. These mixed feelings reveal an inherent skepticism toward the promised benefits, despite claims of potential tax stability and growth incentives.An overwhelming 53% of business leaders feel it’s premature to initiate shifts in their operational strategies due to the OBBBA. Among those who are inclined to make changes, workforce investment stands out: 24% intend to hire more employees while 23% are planning wage increases. However, only 3% are looking to provide additional benefits at this time, indicating a conservative approach in light of precarious circumstances.How Small Business Leaders Are RespondingThe mixed reactions to proposed legislative changes highlight a more cautious stance among CEOs. While some continue to cling to hope for eventual economic improvement, many are adamant that the resilience of their businesses depends on navigating through these uncertain waters effectively. Dale Lemmons, President of Interstate Wood Products, shared a sentiment echoed by several peers: tax certainty is crucial and indeed valuable for facilitating sustained growth.On the other hand, the prevalent concern about deficit spending impacts the overall sentiment. Leaders like Tom Ratliff from Canopy Corporation express a growing worry that protracted deficit spending could risk long-term economic health. This cautious but firm perspective further encapsulates how industry leaders navigate the intricacies of financial planning amid shifts in legislation.The Path Forward for Small BusinessesAs uncertainty prevails, the future of small business confidence may hinge on stabilizing economic indicators and clearer legislative communication. The decision-making hesitancy witnessed now poses a ripple effect, delaying growth opportunities and business expansion.It is crucial that business leaders stay engaged and well-informed about policy changes and trade dynamics. Attending advisory group meetings, engaging in discussions with peers, and exploring membership options can possibly help them gather insights that may shape their strategy moving forward.Ultimately, while some small business leaders view the landscape with a sense of unease, it also presents an opportunity for growth through adaptation and innovation. Making informed decisions in these uncertain times will be pivotal to navigating the challenges ahead and ensuring robust business endurance.In conclusion, business leaders must remain proactive and adaptable in response to the fluctuating economic landscape. Understanding these dynamics can enable them to formulate strategies that not only survive but thrive amid challenge. Finding the right support through industry networks, such as Vistage, could provide vital resources and insights for navigating these complex times.

08.07.2025

Navigating Uncertainty: Insights from the Q2 2025 Vistage CEO Confidence Index

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07.25.2025

Small Business Confidence Rises: What This Means for Your Operations

Update Small Business Confidence on the Rise Amid Economic Shifts In July 2025, small business confidence saw a promising uptick, reflecting a broader trend of optimism despite various challenges like rising labor costs and tariff implications. The WSJ/Vistage Small Business CEO Confidence Index recorded a notable increase to 86.1, building on a three-month streak of growth. The Influence of Recent Legislative Changes A key driver of this renewed confidence stems from the One Big Beautiful Bill Act (OBBBA), enacted on July 4, which introduced several tax-friendly policies for small businesses. However, with the opportunities come implementation concerns. Business leaders are keenly awaiting clearer guidance on the timing and scope of the provisions. Insights from experts at the U.S. Chamber of Commerce are expected to help navigate these complexities. Coping Strategies for Ongoing Challenges Although the sentiment is largely positive, a significant portion of small business leaders still anticipates profitability declines. In fact, 22% of respondents project a downturn in their financial performance. To combat potential margin squeezes, some have resorted to stockpiling inventory in anticipation of potential tariff increases. Yet, as the CEO of TouchUpDirect noted, this strategy is not sustainable, as businesses will eventually face increased costs when existing stocks deplete. Labor Market Pressures: A Dual Challenge Worker availability poses another challenge for business owners. The tightening labor market, exacerbated by shifts in immigration policy, has sparked concerns across various sectors. The increasing labor costs are outpacing price adjustments, as reflected in Stephen Moffitt's case, where his roofing company struggled under substantial price hikes. "A 14% surge in material pricing coupled with a 20% increase in labor costs makes operational profitability increasingly difficult," he remarked. Navigating Immigration Policy Impacts While two-thirds of small businesses report no significant effects from the recent acceleration of deportations, industries heavily reliant on immigrant labor are facing acute challenges. The construction sector, as highlighted by Brad Lunz, has seen a dwindling workforce, leading to project delays and Cash flow issues. The growing fear amongst laborers about job site attendance adds another layer of complexity to managing workforce capacity and meeting increasing demand. Strategies for Business Leaders Moving Forward The implications of immigration and labor reforms are vast for those leading small businesses. As companies adapt, they may need to reassess their talent strategies, potentially increasing wages, investing in automation, or altering their business models to accommodate the changing landscape. Compliance remains critical as well, ensuring that as laws shift, organizations maintain operations within legal parameters. Conclusion: An Optimistic Yet Cautious Outlook While the rise in small business confidence signals a positive trajectory, organizations must remain vigilant in adapting to the intertwined effects of legislation and labor market shifts. Engaging in proactive discussions and utilizing available resources will empower leaders to navigate the uncertain road ahead with confidence. Please take action now: Attend local briefings or connect with your CEO advisory group to gain deeper insights into navigating this evolving landscape!

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