2026 Could Be a Make-or-Break Year for Small Businesses in the United States: small.world Economic Series

By Rhett Buttle, CEO Of Public Private Strategies

(small.news) —As we entered 2025, small businesses were coming off a record period.

The previous four years had seen 21 million new business applications, which was an unprecedented number for this timeframe and an indication that more Americans were confidently pursuing their dreams of entrepreneurship. However, a recent survey of small business owners shows that a majority are entering 2026 worried they will not make it to 2027. The next 12 months will be critical for many of them.

Economic Headwinds and Policy Challenges

Regardless of where you lean politically, it is hard to argue against the fact that 2025 was a year of upheaval for small businesses. Widely used tariffs have added costs to many businesses’ bottom lines and disrupted their operations. This is compounded by inflation, which has hovered around 3% for most of the years, tightening the finances of business owners and their customers. While the “One Big Beautiful Bill Act” offers tax relief in certain areas to some businesses, many others could experience skyrocketing healthcare costs because of expiring Affordable Care Act (ACA) subsidies.

Business Owners Worry About Survival

All of this has small business owners worried about their survival. A survey of 1,048 small business owners conducted in the fourth quarter of 2025 by Small Business for America’s Future found that 74% are worried about their business surviving through the next 12 months. In addition, 57% said they are pessimistic about the state of the economy for small businesses over the next year, while only 17% expressed any optimism about economic conditions improving.

Tariffs and Operating Costs Impacting Decisions

Digging deeper into their specific concerns, tariff policies appear to be negatively affecting small businesses’ operations and outlook, with 44% reporting they must increase prices due to them. Of the businesses affected by tariffs, 60% say they are being forced to make difficult decisions. As a result, one in four are raising prices and losing customers to larger retailers, while 35% are absorbing costs that are cutting into their profit margins.

Customer Spending and Demand Are Declining

These increased operating costs are also juxtaposed with less customer engagement. Of the business owners surveyed, 68% reported that their customers have less money to spend when compared to last year. Additionally, 58% of businesses have seen decreased demand for their products or services, with 32% reporting a significant drop.

Limited Focus on Growth and Expansion

To give an even greater sense of how businesses are entering this in survival-mode, the survey found very few are thinking about growth. Only 5% are actively hiring and expanding, and just 9% plan to hire or expand in the next six months. Overall, 15% have put growth and hiring plans on hold, with 16% having to cut back on staff or operations.

Resiliency of Established Businesses

It is also important to note that the majority of these businesses are not startups either. Nearly two-thirds (65%) have operated for more than 10 years and likely weathered multiple economic cycles and crises, including the COVID-19 pandemic.

When you go to a town or city, and you see a business that has been around for decades, you know that it has experienced ups and downs and overcome numerous challenges. This is a testament to the resiliency of small business owners in communities across the country. That being said, most do not have large cash reserves on hand, and there are only so many financial hits that they can take before being forced to close their doors.

Policy Interventions Could Be Critical

If 2026 is a repeat of 2025, a large number of small businesses may not survive the year. Congress and the Administration have some options in front of them that could help prevent this, including tariff relief, extending ACA subsidies, and other efforts to cool inflation. Utilizing some or all of them could provide a critical lifeline to Main Streets across America.

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