Small Business Owners Adapt to Higher Costs in 2025
Inflation remains a top concern this week as the latest Consumer Price Index data exceeded economists' expectations, coming in at 3%. The January inflation data sparked market reactions, highlighting ongoing concerns about the Federal Reserve's path forward on interest rates. While Wall Street responds to inflation climbing higher, Main Street business owners recognize that these numbers confirm what they've been experiencing firsthand. According to BizBuySell’s Insight Report survey data, over 75% of owners reported increased business expenses over the last year.
Small Main Street businesses are navigating an evolving economic landscape dominated by concerns over tariffs, funding freezes, interest rates, and labor shortages. Despite these challenges, owners are adapting and showing remarkable resilience in what remains, by many standards, a relatively healthy economy.
Impact of Inflation on Small Businesses
The effects of inflation continue to ripple through small businesses, affecting virtually every aspect of their operations. The food service sector has been particularly impacted by recent price spikes. The national average price of eggs hit an all-time high in January, soaring more than 15% in a single month to $4.95 for a dozen large Grade A eggs, according to data from the U.S. Bureau of Labor Statistics. This surge, driven by an ongoing avian bird flu outbreak affecting the U.S. egg supply, has created significant challenges for restaurants, bakeries, and food manufacturers already operating on thin margins.
In addition to specific commodity spikes, businesses face rising costs across utilities, equipment, and labor. The Federal Reserve's ongoing efforts to achieve their 2% inflation target through elevated interest rates have created additional hurdles for business owners, particularly those with existing loans or seeking capital.
Business Owner Sentiment
The proportion of business owners reporting relief from inflation has nearly doubled over the last two years, from 13.60% to 26.25%, according to BizBuySell’s Insight Report. However, while over a quarter of owners are seeing improvement, the majority continue to grapple with elevated costs. Many owners note that although prices aren't rising as rapidly as before, they remain high, with the cumulative impact of sustained inflation creating significant pressure on their operations.
When asked about sources of increased business expenses, owners consistently cite the cost of goods as their primary concern. While the impact varies by sector, businesses across industries report rising costs in insurance, marketing, payroll, fuel, energy, rent, and other operational expenses. In response, owners are implementing strategic adaptations to protect their profits, including careful evaluation of pricing policies, implementation of cost-saving measures, and exploration of additional revenue streams. Many are turning to technological solutions, including AI, to streamline operations and reduce costs across various business functions, from marketing to customer service.
Looking Ahead
While the slowing rate of inflation offers hope, small business owners face a complex reality. Though prices may not be rising as quickly as before, the cumulative impact of years of elevated costs continues to challenge operations. Nevertheless, as consumer confidence rises and economic sentiment improves, small business owners maintain a cautiously optimistic outlook. Through their commitment to adaptation and innovation, they continue working to build valuable, sustainable businesses capable of weathering economic challenges.