For Michigan’s small business owners, economic uncertainty grows as cost increases negate expansion opportunities

Survey of 300+ SBAM members shows double-digit health care premium increases, inflation woes and increased use of AI for operations

Lansing, MI – Small business owners of varying industries and regions are feeling the continued crush of increased costs, while at the same time working to increase employee compensation and benefits and embrace AI technology, according to the Small Business Association of Michigan’s quarterly survey.

“Small business owners are being crushed on both ends – higher costs, but a need to invest in technology and employee retention,” said Brian Calley, President and CEO of SBAM. “Despite significant cost increases, our state’s small businesses continue to invest in their staff by offering health care benefits and higher wages, but these pressures limit their expansion, which is bad news for our state’s overall economic forecast.”

Eighty-nine percent of SBAM survey respondents said their business is facing higher costs compared with past years. Despite those increases, the majority say they have increased wages and benefits within the past year. Smaller businesses are more vulnerable to cost increases and faced with making drastic decisions, such as curbing employee benefits or considering business closure.

The overall economy was the biggest concern facing small businesses, with inflation and availability/quality of labor second. Forty percent of respondents said their health insurance premiums rose by 10 to 15 percent over last year, with 37 percent showing increases of 16 percent or more.

AI use shows increasing levels of adaptation, with one-third of respondents saying they actively use AI tools to automate tasks and improve efficiency. Another 45 percent are still in the learning and exploring phase of AI adoption. The largest “small” businesses (100 employees or more) have the highest rates of AI use and exploration. Microbusinesses (1-10 employees and sole proprietors) are significantly less likely to be utilizing AI, or have no plans to use it at all.

Overall, in 2025, 24 percent say the confidence in the future of their business increased, 27 percent say confidence decreased, and 48 percent report confidence unchanged.

The survey was conducted prior to Thanksgiving. Eighty percent of respondents have 50 employees or less.

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