Enhanced Growth Strategies Gain Momentum for 2025
January 2025 saw a shift in small business sentiments, with 17% of owners viewing the current climate as an opportune time for substantial expansion, a significant jump from the 4% recorded in September 2024. The construction and non-professional services sectors led this surge, with 15% and 26% of businesses respectively expressing expansion intentions (1).
The improved business outlook ignited the entrepreneurial spirit within these small business owners, many of whom had initially embarked on their ventures with dreams of expansion (rivaling the giants like Amazon). This optimism translated into a 59-point rise in the percentage of owners anticipating better business conditions (from -12% to 47%) (1).
Expansion equates to investment, specifically in infrastructure and human resources. Consequently, the percentage of firms intending to make capital outlays surged from 17% in September 2024 to 28% in November and December, before dipping to 21% in January 2025 (1). The graph below illustrates the industries leading these investment plans, with professional services and financial services topping the list (26% and 29% respectively) (2).
In January 2025, half of all private sector firms reported having made capital investments over the past six months (56%) (2). Given that approximately half of the U.S.'s GDP is generated by small businesses (under 500 employees) (3), Congressional policies and federal agency implementations will significantly influence the investment landscape and the subsequent impact on productivity and employee compensation.
Meanwhile, the unemployment rate remains low, which means small businesses are facing talent shortages. In fact, 35% of all small business owners are wrestling with unfilled job vacancies, and 90% of those actively hiring or seeking to hire are struggling to find qualified applicants (3).
In essence, while overall optimism has dipped, there are signs of ongoing investment in both workforce compensation and capital expenditures, indicating that small business expansion plans may be quietly gathering momentum. However, hiring challenges continue to pose a significant concern for many business owners (1).
Enrichment Data Integration:
- The National Federation of Independent Business (NFIB) Small Business Economic Trends report for January 2025 revealed that while the overall Small Business Optimism Index took a dip (from 106.2 in December 2024 to 104.2 in January 2025), there were some positive trends related to small business expansion plans and capital outlays (1).
- Table 1, presented in the original article, provides a detailed breakdown of the industries that are leading the charge in making capital outlays. The table showcases the percentage of each industry group planning to spend, as well as the share of the total number of firms planning to invest that is accounted for by each industry group (2).
- Based on the 2024 Q4 NFIB Small Business Economic Trends report, in December 2024, 9% of all owners reported raising employee compensation, while the figure has now risen to 33% in January 2025, indicating that businesses are investing in their workforce and potentially setting the stage for future expansion (1).
[1] Their source: National Federation of Independent Business (NFIB). Small Business Economic Trends. January 2025 release. nfiB.com[2] Their source: National Federation of Independent Business (NFIB). Small Business Economic Trends Report, January 2025. Table 1: Plans to Spend on Capital Expenditures by Industry, 2025Q1, 2015Q1-2025Q4. nfiB.com[3] Their source: National Federation of Independent Business (NFIB). Small Business Economic Trends Report, January 2025. Hiring Plans and Current Job Openings, 2025Q1, 2015Q1-2025Q4. nfiB.com
- Despite a minor decrease in the Small Business Optimism Index in January 2025, small businesses with a 'small business' mentality viewed the climate as an excellent opportunity for 'capital spending', particularly in the construction and non-professional services sectors.
- The positive shift in small business sentiments led to an increase in 'investment' plans, with 28% of businesses intending to invest in infrastructure and human resources by November and December 2024.
- The improvement in the business outlook has also resulted in a significant rise in layoffs, with 35% of small business owners facing unfilled job vacancies and struggling to find qualified applicants.
- In January 2025, the unemployment rate remained low, making 'improvement' in workforce compensation a priority for small businesses, with 33% of owners reporting an increase in employee compensation.
