US Small-Business Outlook: Growth, Change, Complexities in 2025

Much will depend on federal policies, labor shortages, and inflation, experts say.

People walk past small businesses in Doylestown, Pa. Matt Rourke/AP Photo

News Analysis

Less taxation, fewer federal regulations, and more optimism regarding inflation and job hirings—that is the view of the U.S. Chamber of Commerce heading into the balance of 2025.

As the economy continues to grapple with issues from the past five years, several key factors are projected to make the difference between more substantial small-business growth and a continued plodding market.

“The economic growth that powers people’s lives comes from cities, regions, and states where private enterprise, supported by smart public policy, drives progress and creates opportunity,” U.S. Chamber of Commerce President and CEO Suzanne Clark said in the annual State of American Business address on Jan. 16.

“The actions our policymakers take will impact our nation’s prospects for growth, your communities’ potential for strength, and all Americans’ pursuit of their dreams.”

She said that the key factor for 2025 is realizing a 3 percent economic growth rate over the next decade.

“When the economy is growing at 3 percent, someone who is born today will see their living standard double by their early 20s,” she said.

But in a Jan. 31 webinar, Neil Bradley, the Chamber of Commerce’s chief policy officer, pointed out that getting to 3 percent means battling both current and potentially new economic concerns. Here are some of those concerns.

Regulatory Uncertainty

Changes in commerce regulations can significantly affect a small business’s earnings, profit margin, hiring needs, and growth potential. Bradley stressed the need for small-business owners to understand potential compliance burdens and explore available resources to navigate these changes.

“We saw a lot of new regulatory requirements coming out of the prior administration, and by their own counts, the regulations imposed costs on the private sector of about $1.8 trillion—an historic level,” he said.

“Many of those regulations are now in the process of being put on hold, of being re-written, and, in some cases, actually being removed from the books entirely.”

The process will take the better part of 1 1/2 years, but when finished, Bradley said, expect to see “a significant rollback in the regulatory burden imposed on businesses.”

“The regulations that have been imposed on banks have actually restricted the availability of credit to small businesses,” he said. “Rolling back those regulations should mean that it’s easier for small businesses to access credit.”

Effect of Tariffs

President Donald Trump on Feb. 1 announced a 25 percent tariff on imports from Mexico and Canada and 10 percent for China. Though negotiations are currently unfolding regarding the implementation of those tariffs, Bradley said if tariffs were to remain a full policy of the new administration, they could negatively affect small businesses that rely heavily on imported goods.

“On his first day in office, [Trump] issued an executive order that told some of his agency officials to go out and look into these tariffs and to report back to him by April 30 with their recommendations on what to do,” Bradley said. “So this is a space where my best advice for small businesses is ‘pay close attention’—it could change very quickly on things you’re importing and you probably ought to be thinking about your plan for what happens then.’”

Tax Uncertainty

Both Bradley and Clark are urging the federal government and policymakers to extend the competitive tax provisions of the 2017 Tax Cuts and Jobs Act, which are set to expire this year. Failure to do so would result in the “largest federal tax hike in American history,” Clark said.

“Over the past year, we have been educating new members of Congress on the high stakes,” Clark said. “Sixty percent of lawmakers were not in office when Republicans passed pro-growth tax reform, and it’s critical they understand what these policies will mean for the people they represent.”

Bradley further added that no extension will mean returning to the higher tax rates before 2017.

“What that provision says is that if you are a pastor business, a sole proprietorship, a partnership, or an S-Corp., your top marginal tax rate today is 29.6 percent. If that expires, you go to 39.6 percent—a 10-point jump—that would hit basically every small business in America,” he said.

“Add up all those parts, and it’s about a $4.5 trillion automatic tax increase—and it would have a devastating impact on the economy if it were allowed to occur. That’s what we’re working with Congress and the new president to avoid happening.”

Effect of Inflation

The goal of the U.S. Federal Reserve is to get inflation down to 2 percent this year. Labor shortages, elevated shipping costs, and high government spending have halted this momentum, with the new tariffs also expected to have an as-yet uncertain effect.

But while national economists have forecast that consumers will regain a lot of purchasing power previously lost because of persistent inflation, Bradley said if inflation remains, small businesses could continue to be limited in accessing capital and credit.

“Prices are still going up faster than we want,” he said. “The biggest challenge in 2025 is finishing the fight against inflation.”

Workforce Shortages, Immigration

Another persistent challenge for many small businesses over the past five years is worker shortages, which have forced employers to explore innovative recruitment strategies focusing on competitive compensation and packages.

Based on a 2022 survey of 2,202 employees by the online job site Flexjobs, nearly one in three (31 percent) cited lack of, or poor, benefits, such as health insurance or a 401(k) account, as a reason for seeking other jobs.

Compounding the problem is that 99.9 percent of all businesses in the United States are considered small (typically less than 500 people). This equates to more than 33 million firms as of 2023, employing close to 50 percent of private sector workers.

While the Chamber of Commerce expects workforce shortages to ease in 2025, Bradley said one solution is the “processes for bringing immigrants in and integrating them into our society.”

He noted that before the pandemic, the norm was that the number of people who were looking for work was greater than the number of open jobs. Now, that has flipped—with far more open jobs than people looking—such that the chamber estimates there are 7.7 million open jobs with only 7.1 million people looking to fill them.

“The ability to expand your business and meet consumer demand is constrained by the lack of workers,” Bradley said. “So we need more people with legal work authorizations to be able to work in the U.S.”

The Rise of AI

While solving worker shortages through more legal immigration will take time, Bradley indicated that one action every small business can take now is to strategically leverage artificial intelligence (AI) for efficiency, customer service, and innovation.

“Technology helps us become more efficient, and the breakthrough today is AI,” Bradley said, likening the rise of AI to the personal computer of the 1980s.

“Think about how much more efficient businesses got because we had computers. And then came the breakthrough of the internet in the 1990s and our ability to do things virtually and reach consumers around the world beyond our physical footprint.”

In two small-business surveys, one in 2023 and another in 2024, Chamber of Commerce researchers found that 40 percent of respondents were directly using some type of generative AI product.

“That’s up from 23 percent in 2023, which is rapid growth,” Bradley said.

“But if you add in small businesses using services that are provided by other big firms that utilize or rely on AI, it’s 98 percent. So virtually every small business in America today is using AI. Here’s the regulatory threat: people aren’t certain about what it’s going to mean for businesses or employment or the customer experience, and so we want government to regulate it. And some of the proposals we’ve seen ... could be really harmful at the state level.”

And there is one other major factor that could prove favorable to small businesses both now and in the long run: more older people in the workforce.

Pew Research Center, a think tank in Washington, reported that 3.2 million baby boomers retired in 2020—more than double the previous year—and Investor’s Business Daily projected 4.4 million more to retire in 2024.

But in 2025, ResumeTemplates.com, a platform for free professional resume templates and examples, reported that 22 percent of baby boomers have unretired—with one in four seniors still working and a growing number planning to return to the workforce this year.

Pew Research, for example, projects older adults will account for 57 percent of U.S. labor force growth through 2032.

For small businesses, this is something akin to a ready-made, fully experienced workforce who could help solve a lot of concerns over hiring and retaining workers.

“It used to be that we were at 10,000 baby boomers a day reaching retirement age,” Bradley said. “Now we’re a little bit above that, and the generations who are coming along behind just aren’t quite as big.”

Plus, growth signs are encouraging: About 70 percent of all sectors in the economy are seeing faster growth today than before the pandemic, he said.

“I am amazed by the number of small businesses that are just newly opening or growing,” Bradley said. “Where we are seeing some of the fastest growth is retail, health care and social services, hospitality with hotels and restaurants, and construction. So this year will require navigating many complexities. But with the right approach, small businesses can continue to be the driving force of the American economy.”