Who is Thriving and who is Struggling and Why (May-June 2025 Update)

As of mid‑2025, U.S. SMEs face a challenging yet opportunity-rich environment.

Drawing on lessons from our growth playbook, we have analysed some key trends in the U.S. SMEs world and identified how they operate, where they collaborate, who’s being left behind, and what’s next.

So—where are we? Let’s break it down.

How Are U.S. SMEs Doing in 2025?

The short answer: mixed.

While tech-driven and service-based SMEs adapt quickly, many brick-and-mortar businesses are still struggling.

The Federal Reserve’s tight monetary policy has kept borrowing expensive, making capital harder to access—especially for microbusinesses and first-time founders.

At the same time, SMEs in logistics, digital services, health tech, and green construction are seeing growth, thanks to structural shifts in the U.S. economy and public-sector incentives like the Inflation Reduction Act and CHIPS Act.

Key SME trends:

• Retail, hospitality, and traditional manufacturing SMEs are seeing declines in margins and difficulty with hiring.
• Digital-native SMEs and those offering B2B services are reporting stable or rising revenues.
• Alternative lending and revenue-based financing are gaining traction. An example is the growing reliance on peer-to-peer lending platforms.

Let’s take an in-depth look.

Who’s Struggling and Why?

While some sectors are thriving, others continue to face serious challenges—particularly those classified as high-risk industries. These include retail, hospitality, manufacturing, and construction SMEs, all of which have struggled since the Covid-19 pandemic.

• Retail and hospitality SMEs are battling staffing shortages, inflation, and shifts in consumer behaviour. Demand for long-haul international travel—particularly from the U.S.—has softened in 2025, with many travellers opting instead for road-based or short-haul holidays. This shift in travel patterns has impacted footfall and spending across UK venues, while high raw material costs and rising overheads continue to squeeze margins (or poor) digital adoption and logistics.
• Manufacturing and construction SMEs face high input costs, supply chain delays, and tight access to credit, especially for smaller or newer firms.
• Minority- and women-owned SMEs report higher rates of cash flow problems and loan rejections, while rural SMEs continue to struggle with poor digital infrastructure, high transport costs, and limited access to skilled labour.

These risk factors make it harder for under-resourced SMEs to compete, scale, or access traditional funding.

One of the most promising developments is the increase in SME-to-SME collaboration. Rather than competing head-on with larger corporations, many U.S. SMEs are forming tight-knit ecosystems.

Examples include:

• Local service providers that are bundling offerings (e.g., marketing, HR, and IT) to bid on larger contracts.
• Product-based SMEs that are partnering with logistics or warehousing startups to cut costs.
• Shared back-office platforms and digital tools like Airtable are making it easier to co-manage functions.

This trend not only increases resilience but also allows SMEs to operate with the scale and speed of larger enterprises—without the bureaucracy.

Who is Thriving instead?

The winners in late 2025 and beyond will be those who go digital at the core, not just in appearance. A basic website or social media presence isn’t enough.

SMEs embracing AI tools, CRM systems, and workflow automation are moving faster, operating leaner, and gaining serious competitive ground.

Workforce models are also shifting. Flexibility is the new standard, with many SMEs relying more on contractors, part-time staff, and AI-powered solutions to manage rising labour costs without losing momentum.

Meanwhile, businesses that go deep instead of wide—focusing on specific niches or highly personalised services—are better positioned to stand out and weather volatility. Broad-scale strategies without a strong differentiator are becoming harder to sustain.

Finally, sustainability is no longer optional.

ESG compliance and green practices are increasingly tied to access—whether it’s public contracts, procurement panels, or even investor attention. SMEs that lead with sustainability aren’t just doing the right thing—they’re gaining a strategic edge.

Key Takeaways

U.S. SMEs are at a crossroads. The top-performing businesses are agile, digitally fluent, and open to partnering with others in the ecosystem.

Meanwhile, more traditional SMEs—especially in retail and manufacturing—face an uphill climb unless they adapt fast.

To thrive, SMEs will need to get smarter, faster, and more connected. Because in 2025, survival isn’t just about selling more.

It’s about working smarter and working together.