While small business bank accounts remain in the black overall, the trajectory is concerning. Year-over-year earnings growth fell below zero (-0.02%) last month, marking the first negative reading for this metric in 18 months. BofA sees two real reasons it is likely to be related to tariffs, with the net percentage of owners raising average sales prices jumping 13 points from October to a net 34%, the highest reading since March 2023 and the largest monthly jump in the history of definitive small business survey from the National Federation of Independent Business.

It was also reflected in small business profit growth by sector tracked by BofA’s small business account data, where wholesale sales fell by the most of the year, falling 1% in November. Within wholesale, durables such as tariff-exposed electronics and furniture drove most of the decline in the second half of the year, although non-durables such as apparel also declined so far this quarter. This contraction indicates that while revenues are still coming in, the cost of doing business is eating into margins faster than sales can compensate. The data suggests that for many owners, absorbing the costs associated with the tariff is no longer an option; they have to charge more to survive.

Holiday anticipation and hiring freezes

Despite the drop in profits, gross profit remained positive in November, boosted by the holiday calendar. Small Business Saturday, which falls on November 29, has become a critical event, with owners estimating that the day generates 20% of their annual sales. However, the BofA report said that consumer momentum appeared to have faded at the end of the Black Friday weekend, suggesting that holiday spending was not the panacea retailers had hoped for.

Economic pressure is also cooling the job market. Paying hiring companies fell 4.6% year-over-year, confirming a weak job market for small businesses. BofA noted support for the thesis of the collapse in small business hiring from other research, namely the Institute’s November Job Report and data from payroll-service provider ADP, both of which revealed a decline led by losses in small businesses. “With nearly half of the US workforce employed by such companies, this underscores the importance of the small business foundation.”

However, the labor picture remains nuanced. While overall hiring has cooled, sectors facing chronic labor shortages, such as construction and restaurants, have actually picked up wage growth as they scramble to fill open positions. However, BofA said that small businesses generally both plan to add employment and are unable to fill job openings at a higher rate than the average over the past two decades. Talked to luckEva Roytburg Earlier this week in the release of disappointing jobs data across the economy, Moody’s chief economist Mark Zandi said there was “no forward movement,” that the labor market was “down in the mud.”

Looking forward to 2026

Despite the current squeeze on profits, business sentiment is not entirely gloomy. Optimism about the year ahead is on the rise, and hiring plans for the next three months are actually at their highest point of the year.

Looking ahead, owners are betting on technology to restore efficiency. According to the 2025 Bank of America Business Owner Report, 50% plan to implement artificial intelligence (AI) in the next five years. Spending on tech services, including AI, rose 6.2% in November, indicating that businesses are investing in digital transformation to navigate a high-cost environment.

Currently, however, the small business sector finds itself in a precarious position—like a ship taking on water while moving forward. The gains are there, but the drag from tariffs and inflation is heavier than it has been in nearly two years.