Small Business Earnings See Slow Start to 2025

2025 is off to a whirlwind start. Optimism soared entering the new year among small business owners. However, this hasn’t yet translated into higher earnings amid rising expenses and stubborn inflation.

Here’s what you need to know, and how you can be financially smart  for your own small business during this uncertain time.

Biz2Credit Small Business Earnings Report: February 2025

In our February 2025 edition of the Biz2Credit Small Business Earnings Report, we analyzed data from over 100,000 small businesses revenue and earnings. This study is a deep dive into how small businesses are performing financially in terms of revenue, expenses, and earnings.

Here’s what we found in our February 2025 version of the Biz2Credit Small Business Earnings Report.

Small businesses continue to be pressured by rising costs, leading to lower earnings. Revenue is up 29% year-over-year, but expenses have pushed earnings down. Compared to January 2024, earnings are down nearly 58%.

The Fed's latest CPI show inflation at 3%, renewing cost pressures on small businesses. While the overall rate has been rising since August 2024, January's data highlights specific pain points. Egg prices, a key input, jumped 15.2% in one month, demonstrating cost volatility.

Beyond eggs, the CPI reveals broader increases in essential goods and services impacting businesses. Rising food and energy costs translate directly into higher operating expenses. CPI subcategories like "food away from home," "rent of shelter," and transportation costs further illustrate the specific pressures.

These rising costs, reflected in the CPI, directly impact SMB profitability. Even with rising revenues, escalating operating costs can erode profit margins, hindering investment and growth. The January CPI data underscores the challenges SMBs face navigating an economy with significant cost pressures.

What Lies Ahead for Small Businesses

After the election, there was palpable excitement among the small business community for deregulation and pro-business leaders to be in power. That is now tampered slightly in the wake of President Trump’s sweeping executive actions, tariff spats with essential trading partners like China, and rising inflation.

However, economic analysts see better days ahead. There is still hope for one or more rate cuts later this year, and a strong consumer keeps the economic engine going. According to McKinsey, “consumers are spending more than they were before the pandemic and are spending more each year.”

Lastly, Kelly Loeffler looks to be only days away from taking the helm of the Small Business Administration (SBA). This appointment by President Trump could mean new technology upgrades at the Federal government’s small business agency to improve efficiency, increase access to SBA loans, further emphasis on deregulation for small businesses, and reduce financial fraud.

Bottom Line

The January earnings and inflation numbers paint a frustrating picture for small business owners, but there are reasons for optimism. If you operate a small business, be sure to consider how you can set up different revenue streams without increasing your expenses and keep an eye out for funding options to grow or stabilize your business if costs are starting to rise. And if you’re considering financing in 2025, keep an eye on changing interest rates as they may continue to drop when economic conditions improve.