US SME profitability forecasts drop nearly 50% year-over-year

Profitability expectations among US small and medium-sized enterprises (SMEs) took a sharp hit in 2025, with the share of small business owners exceeding profit goals falling nearly 50% year-over-year, according to new research released by Bluevine, a digital banking platform for small businesses in the US.

Bluevine’s 2026 Business Owner Success Survey (BOSS) Report, conducted with polling partner Centiment and based on responses from more than 1,000 owners, founders, CEOs and senior executives, highlights a widening gap between financial strain and optimism as entrepreneurs head into 2026. Despite persistent economic headwinds, many small business owners remain confident about growth in the year ahead.

The report found that only 30% of business owners finished 2025 with profitability above expectations, down from 57% at the end of 2024, marking a nearly 50% year-over-year decline. Rising costs continue to weigh heavily on performance: 34% of respondents said higher supply costs impacted their business in the past year, while 31% cited ongoing inflation as a direct challenge. To offset margin pressure, 28% of business owners raised prices in 2025.

Even as margins tightened, optimism remained resilient. Nearly four in five small business owners (78%) said they are optimistic about their profitability forecasts for 2026, a figure largely unchanged from last year. When asked which macroeconomic changes would most support their growth, respondents pointed to decreases in inflation and cost of goods (49%), increased demand (46%), lower tariffs (31%), reduced supply chain costs (27%), and improvements in the labour market (22%).

“Small businesses face challenges beyond their control from inflation to shifting consumer behaviour, but our surveys have shown they continue to pivot and adapt amid uncertainty,” said Bluevine CEO Eyal Lifshitz.

“Their optimism about 2026, despite these headwinds, underscores the resilience of small business, and we’re committed to providing the tools and resources they need to succeed.”

The prolonged impact of sticky inflation and elevated interest rates has also driven a surge in interest in external funding. The report found that 63% of respondents plan to seek capital in 2026, up from 38% in the prior year’s survey and representing a 66% year-over-year increase.

Behind the optimism, the personal toll on entrepreneurs is growing. More than three-quarters (77%) of respondents said they made personal sacrifices in 2025 – ranging from health and wellness to time with family and financial stability – to keep their businesses afloat. Nearly half (49%) said they questioned whether entrepreneurship was “worth it” on a monthly basis, and 18% reported having those doubts daily.

Looking to 2026, small business owners plan to focus on internal improvements and growth initiatives. Key priorities include increasing efficiency and productivity through new software and automation (42%), launching new products or services (37%), and strengthening financial operations through budget reallocation and investment strategies (32%).