The NFIB Small Business Optimism Index declined by two and three-tenths points in January, bringing it to a reading of one hundred two and eight-tenths. This marks the third consecutive month in which the index has remained above the fifty-one-year average of ninety-eight. However, the Uncertainty Index increased significantly, rising by fourteen points to reach one hundred, marking the third-highest recorded level of uncertainty after two months of decline.
NFIB Chief Economist Bill Dunkelberg noted that, "Overall, small business owners remain optimistic regarding future business conditions, but uncertainty is on the rise. Hiring challenges continue to frustrate Main Street owners as they struggle to find qualified workers to fill their many open positions. Meanwhile, fewer plan capital investments as they prepare for the months ahead."
Key findings of the survey include:
The net percentage of owners expecting the economy to improve declined by five percentage points from December, standing at a net forty-seven percent. Eighteen percent of small business owners identified inflation as their most significant operational challenge, a slight decrease of two percentage points from December, equaling labor quality as the top concern. The last time inflation was ranked this low as a top concern was in November of 2021.
The percentage of owners who reported raising average selling prices declined by two percentage points from December to a net twenty-two percent, while seasonally adjusted, a net twenty-six percent planned price hikes in January, reflecting a two-percentage-point decrease from the previous month.
Approximately thirty-five percent of small business owners reported job openings they could not fill during the current period, which remained unchanged from December’s figure. Among those hiring or attempting to hire in January, fifty-two percent noted difficulties in finding qualified applicants for open positions. Of this group, ninety percent reported that there were either few or no qualified applicants available for the roles they needed to fill.
Regarding planned capital outlays, twenty percent of owners indicated their intent to make capital investments in the next six months, a drop of seven percentage points from December. This particular decline contributed significantly to the overall decrease in the Small Business Optimism Index.
A net three percent of business owners reported that obtaining their most recent loan was more difficult compared to past applications, marking a one-percentage-point decline. The last time this measure was as low was in June of 2022. Additionally, a net zero percent of owners planned to make inventory investments in the coming months, a decrease of six percentage points from December’s highest reading since December 2021.
In terms of labor challenges, a seasonally adjusted net thirty-three percent of small business owners reported raising compensation, which is an increase of four percentage points from December’s lowest reading since March of two thousand twenty-one. Meanwhile, a net twenty percent planned to raise compensation in the next three months, marking a four percentage point decline from December.
Fifty-eight percent of business owners reported making capital outlays in the past six months, which was a two-percentage-point increase from December. Among those making capital expenditures, forty-one percent allocated funds to new equipment purchases, twenty-four percent acquired vehicles, and sixteen percent expanded or improved their facilities. Twelve percent invested in new fixtures and furniture, while five percent purchased new buildings or land for expansion purposes.
Sales performance also showed some areas of decline. A net negative fourteen percent of owners reported higher nominal sales over the past three months, which was a one-percentage-point drop from December. Expectations for higher real sales volumes declined by two percentage points, bringing the net total to twenty percent.
Inventory levels presented another area of concern. A net negative six percent of business owners reported inventory gains, reflecting a six-percentage-point drop. When not seasonally adjusted, nine percent reported increasing their stock levels, while twenty-one percent reported reductions. A net negative one percent of owners stated that their inventory stocks were "too low," which remained unchanged from December.
Pricing trends indicate that the net percentage of owners raising average selling prices declined by two percentage points from December, standing at a net twenty-two percent. Eighteen percent of business owners identified inflation as their single most important operational problem, reflecting a two-percentage-point decrease from December and placing inflation on par with labor quality as the most pressing concern. Unadjusted, nine percent of business owners reported reducing their average selling prices, while thirty percent reported increasing them.
Price hikes were most prevalent in the finance sector, where forty-seven percent of owners increased prices, compared to six percent who lowered them. The retail sector followed, with thirty-five percent raising prices and six percent reducing them. Similarly, the wholesale sector saw price hikes from thirty-four percent of businesses, with four percent decreasing prices. The professional services sector had a net thirty percent increase in prices, with three percent reporting reductions.
The frequency of reports regarding positive profit trends remained at a net negative twenty-five percent, reflecting a one-percentage-point improvement from December. Among business owners who experienced a decline in profits, thirty-four percent attributed the drop to weaker sales, seventeen percent cited typical seasonal variations, ten percent blamed higher material costs, and nine percent pointed to rising labor costs. Conversely, among those who reported higher profits, forty-nine percent credited stronger sales volumes, twenty-four percent attributed the gains to seasonal changes, and eleven percent attributed the increase to higher selling prices.
Three percent of small business owners reported that their borrowing needs were not met, which was a one-percentage-point increase from December. Twenty-five percent reported that all their credit needs were satisfied, while sixty-two percent stated that they had no interest in obtaining a loan. A net three percent reported that their most recent loan was more difficult to secure than in previous attempts. The last time this measure was as low was in June of two thousand twenty-two. Additionally, three percent of owners identified financing as their primary business challenge, reflecting a one-percentage-point decrease from December. A net three percent reported that they had to pay a higher interest rate on their most recent loan, which was a two-percentage-point increase from December’s lowest reading since September of 2021.
How outsourced or fractional CFOs can assist small businesses in navigating the challenges highlighted in the NFIB Small Business Optimism Index:
Managing Financial Uncertainty – With rising uncertainty among small business owners, an outsourced CFO can provide strategic financial planning, scenario modeling, and risk assessment to help businesses prepare for economic fluctuations.
Optimizing Cash Flow & Access to Capital – Many small businesses struggle with cash flow management, capital outlays, and securing financing. A fractional CFO can streamline budgeting, negotiate better loan terms, and identify funding opportunities to ensure financial stability.
Controlling Costs & Inflation Strategy – Inflation remains a top concern for business owners. Outsourced CFOs can analyze cost structures, identify inefficiencies, and implement pricing strategies that protect margins while keeping customers engaged.
Workforce & Compensation Planning – The survey highlights labor shortages and rising compensation costs. A fractional CFO can help forecast labor expenses, develop sustainable payroll strategies, and ensure businesses remain competitive in hiring and retention.
Data-Driven Decision-Making – Small businesses often lack real-time financial insights. CFOs bring expertise in financial reporting, key performance indicator (KPI) tracking, and data analysis, enabling owners to make informed, strategic decisions.
Capital Investment Guidance – With fewer small businesses planning capital expenditures, a CFO can assess whether investing in equipment, expansion, or technology is financially viable and align it with long-term growth objectives.
Navigating Tax & Regulatory Challenges – Compliance can be a burden for small business owners. A fractional CFO ensures businesses stay compliant with tax regulations, leverage available tax credits, and optimize financial structures to reduce liabilities.
By leveraging the expertise of an outsourced CFO, small businesses can gain the financial acumen and strategic insights typically reserved for larger corporations—helping them remain resilient and competitive despite economic uncertainties.
If you are a business owner or CEO within the San Francisco Bay Area and Silicon Valley, in need of an experienced fractional or outsourced CFO to help your company control costs, increase profit margins, improve cash flow as well as identify strategic growth opportunities, our highly skilled outsourced CFO services provide direct access to high-quality expertise in a cost-effective manner.
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