The US Bank today released its third SME outlook report, revealing how owners across the country are responding to the environment defined by rapid change. A national survey of 1,000 US small business owners looked at how they navigate the challenges from economic stressors to the rise of generated AI, focusing on long-term growth, succession planning and lasting legacy.
“This year's survey reveals that small business owners are working to maintain their business in the future in response to today's economic situation and rapid technological changes.” Shruti Patel, Chief Product Officer of Business Banking at US Banks, said. “From adopting generative AI to responding to changing economic situations such as tariffs and actively thinking about succession, owners are taking the future of their business seriously. There is a real opportunity and responsibility for small businesses to emerge as strategic partners to help them do the following.”
Passing the reins to the next generation
With more than half of us currently owning small business owners, who are over 55, succession plans are becoming increasingly urgent. Many owners are still not ready to leave, but only 54% have created inheritance plans, while new generations are preparing for themselves. A third (36%) of GenZ and millennial owners are planning to acquire business from retired owners.
This report reveals a significant gap between intention and behavior. Eighty-five percent of participants surveyed said they were originally owners to create what they could pass on, while 84% wanted to generate wealth for their family generation, while only 54% have a formal succession plan.
The growing owners (62%) have seen their retirement timelines accelerate over the past five years. But for many, navigating inheritance is a challenge.
- 62% find the process overwhelming
- 56% worry that they won't be able to get a reasonable price for business when it's time to sell
- 53% lack the right resources or guidance to plan the future of their business
Owners with strong business performance are more likely to develop succession plans. 64% of people with plans reported significant growth over the past year compared to 50% of people with plans.
Four in 10 small business owners (37%) say they plan to sell their businesses in the next 12 months, suggesting how quickly the ownership transition is coming in some businesses. However, not only retired business owners are considering selling, with more Gen Z and Millennial owners (41%) planning to sell their businesses than Boomers and Gen X (33%).
The landscape of small businesses has changed dramatically over the years, but the motivations that originally encouraged owners still drive them today. Most people are deeply committed to their work. 86% want to continue their business as much as possible, and 87% hope to leave a positive legacy when they finally leave.
Economic pressures have an impact on how owners operate
The need for our small business owners to make long-term plans is reinforced by the daily worries they face. Respondents reported the macroeconomic top stressors as follows:
- Economic environment (98%)
- Materials/supply inflation or increased cost (92%)
- Competition (92%)
- Consumers' ability to maintain spending (86%)
- Fraud or Cybersecurity Threats (85%)
- Get enough funding to support my business (84%)
Among other stressors, among the others quoted by SME owners, four in five (81%) owners felt that at least there was a bit of emphasis on tariffs.
Despite these stressors, 96% of owners reported being successful now, with 88% growing over the past year. To manage pressure and place businesses in the future, many owners prioritize key steps over the next year, including focusing on revenue (48%), ensuring adequate staff (33%), improving efficiency and cost-effectiveness for the company (32%), and addressing the general economic environment such as inflation and recession risk (29%).
To pulsate the latest emotions, the US Bank conducted a follow-up survey of 500 small business leaders during May. The stress levels in the economic environment were similarly high, but two-thirds (66%) said the country's economy is moving in the right direction, with only 18% saying it is moving in the wrong direction. This sentiment was even stronger among younger business leaders (Z and millennials), with 74% saying they were moving in the right direction.
Despite this optimism, a majority of leaders (58%) have expressed at least some concerns that tariffs could affect business operations, with 57% expecting input costs to rise as a result of tariffs. At the same time, leaders were slightly more likely to predict negative impacts from tariffs across several business factors, including product costs, customer demand, margin profitability, capital investment, and labor/HR, but these expectations are generally modest, with most leaders expressing neutral or slightly positive outlook on the potential impact of tariffs.
Small business owners are turning their eyes to Gen AI and digital tools to stay competitive
Small and medium-sized US business owners are using Generator AI (GEN AI) and digital tools as they aim to bring long-term success to their businesses. Currently, six in 10 (57%) are using or planning to implement Gen AI solutions next year. Among those using it, top applications include content creation (44%), data analysis and information gathering (41%), and marketing and sales strategies (39%).
The majority of owners using Gen AI have found that recruitment does not require large investments. Seven in 10 (68%) Gen AI users report spending less than $50 a month, with one in 5 (18%) using the free tool or subscription. These tools allow users to spend more time on personal connections with their customers (88%).
Still, the rise of AI is not without tension. Reports of over 8 in 10 people (81%) keeping up with technological advances such as Gen AI are stressful, with 56% worried about their business (or products/services) being replaced by Gen AI or automation.
Beyond AI, digital tools are considered more essential than ever. The number of owners who view digital tools as extremely important or essential has earned 15% points since last year (87% in 2025 vs 72% in 2024). At the same time, 63% say they are overwhelmed by the number of tools they need to run their businesses, while 82% say they are a priority to integrate them.
Looking at payment methods, almost half of owners (48%) still report cash as the primary method of in-person payments. However, the new payment method catches up to reporting 42% tap-to-pay as the main method.
Despite the challenges, most owners will do it again
Even amid today's business challenges, most small business owners remain based on the original purpose that encouraged them to become entrepreneurs. When asked why they launched their business, 90% said they wanted to be their boss, 88% quoted their desire to control their financial future, and 86% wanted their passion to become part of their work.
Legacy also plays a critical role. Over two-thirds of owners (67%) come from entrepreneurs' families, and 62% have taken over relative businesses to take over the family legacy. But for Gen Z and Millennial entrepreneurs, the path to ownership often shaped as needed. Half of the younger owners (52%) say they became business owners because they were unable to find work elsewhere, compared to 44% of Gen X and Boomer owners.
When asked if they would try again, 80% of owners say they are starting their business today as well. This confidence is particularly noteworthy given the challenges seen in today's environment. Eight in 10 (79%) (79%) say there is greater market competition today, while 70% say it's more difficult to secure funds and capital now.
For a closer look at insights from US Small Business Owners, check out our 2025 US Bank Small Business Outlook Report.
