Inflation Concerns Recede from Record Highs
Concerns About Supply Chains and Employee Retention Increase
Just under half (48%) of small businesses select inflation as their main concern, down ten percentage points from Q1 (58%) and marking the first time the level of concern has dipped under 50% since Q2 2022. This marks a significant reversal of what occurred in Q1 2025, when concern with inflation reached the highest level since tracking began.
Similarly, while majorities of small businesses indicate they remain affected by inflation, they may not be feeling the impacts quite as starkly as they did at the height of the inflation surge in 2022. For example, this quarter, 70% agree that rising prices have had a significant impact on their business in the past year, down thirteen percentage points from Q3 2022 (83%). Similarly, 60% report increasing the prices of their products or services in the past year as a result of inflation, down ten percentage points from Q3 2022 (70%). Still, the fact remains that a majority of small businesses report rising prices have had an impact on them or that they have raised prices for their goods or services in the past year due to inflation.
Small businesses also report altering their business’ supply chain in the past six months (47%) or being unable to keep up with customer demand because of supply chain disruptions (30%), although down significantly compared to Q3 2022, the last time the question was asked.
Concern with inflation varies across industries. By sector, small businesses in the retail (55%) and services (54%) sectors report higher concerns about inflation compared to their peers in manufacturing (42%) and professional services (41%).
Similar to inflation, concerns about revenue have also declined after spiking in Q1 (27% now, down from 35%).
Amid these drops in concern with inflation and revenue, other concerns are more widely distributed. For example, there is an uptick in concern about employee retention (16%, up from 11%), and a slight shift in concern about supply chain issues (17%, from 13%).
Founders, K2 and Company
Minneapolis, Minnesota
What Benefits Small Businesses Offer—And Why
Nearly all small businesses recognize the importance of employee benefits. Nine in ten say these benefits are important for demonstrating care for employees and their families (93%), increasing employee productivity and engagement (91%), increasing employee morale (91%), decreasing employee stress (90%), and attracting and retaining employees (89%).
There are significant differences in the type of benefits offered—and whether benefits are offered at all—across business size, industry, and the generation of the business owner. For example, 99% of small businesses with 20-500 employees* offer at least one benefit to full time employees, compared to 57% of small businesses with fewer than five employees. By sector, manufacturing businesses are the most likely to offer at least one benefit (85%), while those in services (54%) are the least likely.
When it comes to the “why” among small businesses that currently offer benefits to full-time employees, a plurality say they started to offer benefits to full-time employees because it was the right thing to do (46%). Other reasons include retaining high-quality employees (35%), recruiting high-quality employees (26%), and because the company’s revenue reached a point where it could afford to (22%).
However, small businesses report facing a variety of barriers to offering employee benefits, including: Limited budgets (40%), the rising costs of employee benefits (37%), a lack of resources (19%), or balancing mandated benefits and other employee-sponsored benefits (15%). Just one in ten (11%) say there are no barriers to offering employee benefits.
* Under the Affordable Care Act, businesses with 50 or more full-time employees are required to offer health insurance.
CEO, National Flooring & Supply Inc.
Sonora, California
Most Say Choosing Benefits Is Difficult and Want Help
While many employers feel their employees are satisfied with their business’s current benefit offerings, many say figuring out what benefits to offer is a challenge—and this concern is rising.
Two in three small businesses say figuring out what benefits to offer (66%) and how to offer benefits (67%) to their full-time employees is difficult. This reported difficulty is up compared to Q1 2023 (55% and 51%, respectively). In a similar vein, two in three small businesses wish they had outside help when it comes to offering employee benefits (67%), also up from Q1 2023 (58%).
Perceived difficulty when it comes to figuring out what benefits to offer and how to offer them are relatively consistent across business size and region. However, slight differences emerge across industry and age of ownership of the business. Businesses in retail and in operation for less than 21 years are more likely to agree that figuring out what benefits to offer and how to offer them is difficult. Generally, these groups are also more likely to say they wish they had help when it comes to benefits.
Currently, there is no one, single source small businesses turn to in order to find information to make decisions regarding benefit plans. The most common source of information is Google or other search engines, though just 32% of small businesses use search engines to find this information. Slightly fewer turn to benefit provider websites (26%), asking employees about their preferences (26%), insurance or benefit brokers, consultants, or agents (21%), or other business owners (21%).
There are some key differences in information sources across business size and age of ownership. Small businesses with 20-500 employees (36%) are far more likely than businesses with less than five employees (16%) to turn to insurance or benefits brokers, consultants, or agents. Also, Gen Z and Millennial owned small businesses (37%) are more likely to turn to Google or other search engines compared to Gen X-owned (32%) and Baby Boomer and older owned (23%) small businesses.
Younger Owners Especially Eager to Get Help With Benefits
When it comes to employee benefits, there is a significant generation gap. Younger generations are significantly more likely to say they offer at least one benefit, more likely to say they find benefits important for a variety of reasons, and, crucially, more likely to say they wish they had outside help when it comes to offering employee benefits.
In total, 78% of Gen Z/Millennial-owned businesses report offering benefits to their full-time employees, compared to 67% of Gen X-owned businesses and 54% of Baby Boomer and older-owned businesses.
Across generations, small businesses also vary on what benefits they find most important and why. A strong majority of both Baby Boomer (and older) and Gen X businesses are more likely to say health insurance is one of the top two most important benefits for full-time employees (71% and 69%, respectively). In contrast, Gen Z and Millennial owned businesses are more split between benefits like health insurance (52%), retirement plans (26%), paid sick leave (24%), and life insurance (18%).
Additionally, businesses owned by Gen Zers/Millennials and Gen Xers are more likely than those owned by Baby Boomers and older generations to say that employee benefits are important for increasing employee productivity and management, increasing employee morale, and supporting workers across generations. Although, at least seven in ten across all generations find benefits important for each of these reasons.
Lastly, Gen Z and Millennial owned businesses are significantly more likely to find it difficult to figure out what benefits to offer employees (74%) and wish they had outside help when it comes to offering employee benefits (78%) than Baby Boomer and older-owned businesses (48% and 38%, respectively).
Co-founder, Hill Top Hospitality
Park City and Salt Lake City, Utah