Beyond the Headlines: What Firm-Level Data Reveals About How Small Firms Manage Ongoing Challenges

Early insights from SFD USA survey 2

Here on the blog, we often talk about the plethora of data available on small firms and why some are useful, and others are not. But the common thread of all of our posts is that small firm data is omnipresent. Most players in the small business ecosystem either produce or consume data on small firms to inform their work and as a result, there is a steady stream of surveys, reports, and datasets that seek to document - to varying degrees - the lives of small firms. Yet despite the volume of information available, data is frequently reported in aggregate, obscuring important differences in experiences across sectors, cities, and other variables. Even when data is disaggregated by key factors, there are dimensions of the small firm experience that standard surveys aren’t designed to capture.

These differences matter because improvements in national indicators such as inflation or job growth do not affect small firms uniformly. Firms operate in distinct local labor markets, face sector-specific challenges, and experience volatility in demand, costs, and access to credit in unique ways. So while the headlines may read that macroeconomic conditions are improving, many small firms continue to experience volatility and precarity. Understanding how economic conditions affect firms on the ground, not just how they are measured at a macro level, requires an understanding beyond averages. 

We have some early data that sheds light on the gap between macro-level optimism and micro-level realities, and why understanding these nuances is essential to shaping effective supports for small firms.

The visible and invisible challenges facing small firms

Headlines from the second half of 2025 paint a fairly consistent picture of the top concerns for small firm owners: they are struggling to hire and retain workers, supply-chain disruptions continue to threaten revenue, and rising costs and uneven sales as a result of tariffs and inflation pose an ongoing challenge. For example, in September 2025 (during the period when our survey 2 was administered), the National Federation of Independent Business reported labor quality as the single most important concern for small business owners (tied in equal first place with taxes). Thirty-two percent of owners said they had open positions that they couldn’t fill, while 64% said supply chain disruptions were also affecting their business to some degree. Data from the sample in SFD USA tells a similar story. In the past year, 47% of firms in our sample had difficulty hiring or retaining qualified staff, and 27% cited supply-chain issues as a major challenge. 

But what national data doesn’t reveal - and where SFD USA can shed some light - is the salience of “uncommon” challenges owners are navigating, such as the 26% of our sample reporting that health issues affecting the owner or their family was one of their most significant challenges. This is rarely reported in national datasets, not because it’s uncommon among firm owners, but because it’s hard to capture through standardized economic indicators. Yet for small firms, where the owner is often central to operations, health shocks can be just as disruptive as labor shortages or supply-chain delays.

Financial strain is widespread and often compounded

When it comes to the financial challenges facing small firms, cash flow problems and irregular or unpredictable sales tend to dominate. In October 2025, BillGO’s inaugural Small Business Payments Pulse report found that 43% of small businesses consider inefficient or inconsistent cash flow as their biggest business challenge, while 49% report that late customer payments are one of their biggest cash flow challenges. Meanwhile, the Q3 2025 Small Business Index showed that 31% of small business owners are very comfortable with their cash flow, up from 23% in the previous quarter. 

In contrast, data from SFD USA paints a more dire picture. Sixty-eight percent of our sample say irregular or unpredictable sales are their biggest financial challenge, while 66% say cash flow is what affects them most.

Open-ended responses from surveys with owners provide some specifics on these cash flow challenges:

• When asked about the worst thing that happened to their business in the last few weeks, one owner said: “Cash flow issues that lead to having to borrow funds to keep our agency running.”

• Another business owner reported that they had recently applied for a new line of credit for “Cash flow to get through.”

• One business owner said that the hardest decision they had made recently was “Figuring out how to pay employees or bills during rough moments (referring to cash flow problems).”

• A restaurant owner reported that their electricity bill “doubled over the summer”, increasing their operating costs significantly.

How small firms cope with challenges differently

Understanding the challenges facing small firms also requires understanding how owners respond to them. Comparing data from our sample on strategies firms use to mitigate challenges to national datasets that include firms with between 1 and 499 workers, such as the Federal Reserve’s 2025 Report on Employer Firms, illustrates the meaningful differences between small and large firms. While firms in our sample draw on many of the same mitigation strategies observed in national surveys, the strategies they prioritize reflect the far more limited resources and buffers available to firms with 1–20 workers.

Why this matters for policy and practice

These findings demonstrate the importance of moving beyond the hope that improved macroeconomic conditions will trickle down to small firms. When owners lack viable options to manage financial and other challenges beyond strategies like cutting staff hours, delaying pay (including to themselves), or using cash reserves/personal funds, both owners and their workers experience heightened volatility in their income and therefore greater financial instability. Interventions that help firms smooth cash flow, access affordable capital, or plan for uncertainty can support not only business continuity, but also more stable and secure employment.

What stands out about our sample so far is how unevenly challenges are felt among them. In these next few months, our research team will be focused on gaining a deeper understanding of how the firms respond to shocks and changes in economic conditions and how the constraints they may face in seeking to mitigate these challenges.