I just got off the phone with a good friend of many years—a small business owner—who says things are “tough” and “complex,” citing tariffs as one of the issues his wholesale and e-tail company has to deal with.
He’s not alone. The State of Small Business: Navigating Uncertainty in 2026 report, recently released by First Horizon Bank, shows a drop in small business optimism. Shaun McDougall, First Horizon’s head of Consumer Banking, wrote on LinkedIn that “Navigating uncertainty is what small business owners do every day, and right now they’re doing it against a backdrop of real pressure: taxes at the top of the concern list, persistent labor challenges, and an economic environment that keeps shifting.”
First Horizon uses the NFIB Small Business Optimism Index, which has a long-run average of 98 in its analysis of optimism. According to First Horizon, that Index fell from 102.8 at the beginning of 2025 to 95.9 in April “amid tariff and economic uncertainty.”
Top Three Small Business Concerns
First Horizon’s analysis shows that the top three issues small business owners face right now are taxes, labor quality, and inflation.
Looking at NFIB’s March 2026 report, 19% of those surveyed say taxes are their biggest issue, which First Horizon says is “a return to pre-pandemic trends, where taxes were a consistently top issue.”
Next was labor quality, with 15% citing it as their primary concern. First Horizon says, “Hiring pressures remain elevated, with 32% of business owners in 2026 reporting job openings they were unable to fill—well above the historical average of 24%.
This is followed by inflation, which “remains elevated” with 14% saying it’s a top worry. Ben Shoemake, First Horizon’s head of Small Business, warns, “Inflation isn’t just a number; it’s a daily reality for small business owners. Every dollar spent on higher costs is a dollar not invested in growth, hiring, or innovation.”
It’s not all doom and gloom. Shoemake says, “Small business owners are resilient, but they’re also pragmatic…they’re focusing on what they can control while preparing for what they can’t.” That attitude has paid off, “with the net percentage of owners reporting higher sales rising to +1% this year.” This might not seem like much, but it’s the strongest reading since May 2022, which First Horizon says signals “improving sales trends and broader economic resilience.”
Rieva Lesonsky is the founder of Small Business Currents, a content company focusing on small businesses and entrepreneurship. You can find her on Twitter @Rieva, Bluesky @Rieva.bsky.social, and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.
Photo courtesy Getty Images for Unsplash+
