Key points at a glance:

  • The National Federation of Independent Business (NFIB) said on Tuesday that small business optimism in February came in below expectations, with the proportion of owners expecting sales to increase in the coming quarter declining.
  • However, actual sales reports hit their highest level since May 2022, and profit trends also showed improvement, the NFIB survey showed.
  • "Higher sales and profit growth made February more positive for many owners, but competition from large businesses is putting pressure on Main Street firms, which need to find their way in the current economic environment," said Bill Dunkelberg, NFIB chief economist, in a statement.

In-depth analysis:

Several of the NFIB's findings echo similar results from a survey released by the Federal Reserve last week. For example, among small businesses surveyed by the 12 regional Federal Reserve banks, "increasing sales" was listed as their most frequently cited operational challenge, the Fed report said.

Meanwhile, the Fed noted that small businesses were more likely to report a decline in revenue over the past 12 months than an increase. The central bank concluded its survey on November 14, 2025, receiving 6,525 responses from businesses with fewer than 500 employees.

More than two-fifths of businesses said that price increases resulting from the highest U.S. tariffs since the 1930s, along with rising costs for goods, services, and/or wages, posed financial challenges. 69% of retailers and 62% of manufacturing firms cited headwinds from tariffs.

"Endless increases in operating costs are forcing small businesses to trade longer hours for thinner profits," a respondent from a Missouri service company told the NFIB. "Day after day, month after month, year after year, every dollar of revenue we keep is shrinking."

As optimism fades, the NFIB said the proportion of owners reporting capital expenditures last month fell to 54% from 60% in January. The share of owners planning capital expenditures over the next six months—18%—was unchanged from January.

NFIB data showed that 19% of small business owners cited taxes as their top problem, up 1 percentage point from January.

"We need to keep taxes as low as possible so I can pay my employees more," a respondent from a Kansas financial firm told the NFIB.

The NFIB noted that taxes often become the top issue when other concerns, such as labor quality, inflation, and weak sales, are not as troubling.

12% of business owners viewed inflation as their top operating problem, unchanged from January, the NFIB said.

"Inflationary pressures persist, making pricing and capital expenditure planning more difficult," a respondent from an Indiana agricultural business told the NFIB. "Overhead keeps climbing—it's beyond reasonable bounds."

According to the Small Business Administration, 46% of the U.S. workforce is employed by small businesses.

The NFIB's February survey received 428 responses.