Rising Costs Pressure Small Business Margins [WSJ/Vistage May 2026]

Small business confidence stabilized in May, with an incremental gain driven by a see-saw effect of individual factors that increased (revenue projections) or decreased (economic sentiment) marginally over the past month. The WSJ/Vistage Small Business CEO Confidence Index edged up 0.6 points to 84.0, a modest gain following the sharp 7.7-point drop in April.

The WSJ/Vistage Small Business Index remains 4.6 points below the 12-month average of 88.6, with the Iran conflict and related increased fuel prices as the defining force behind the continued compression. Gas prices have climbed nearly 47% since the start of the war. Although the fragile ceasefire eased some immediate pressures, business owners still face uncertainty around fleet costs, supply chains, and declining customer demand.

Energy Costs Hit Operations from Multiple Directions

Nearly half of small business leaders (49%) report current energy cost impacts on their operations, with 13% describing the impact as significant. For businesses that rely on vehicle fleets, field service operations, or freight delivery, fuel has become the most volatile line item on the cost sheet. The consequences are evident in the financial reporting.

“Gas prices are impacting our bottom line as we have a fleet of 20+ cars on the road day in and day out!” says Greg Bacheller, owner of Real Property Management Colorado, LLC, in Denver. The operational reality is even more direct for businesses where fuel is both input and output: “Fuel costs drive everything. Transportation is a significant portion of the delivered cost,” says James Phillips, President & CEO of Azomite Mineral Products in Nephi, Utah.

The pressure is not limited to businesses that operate vehicles. Energy costs are moving through supply chains as vendors pass their own increases downstream. “I have seen my multiplier for over 50% of my vendors go up in the past month, and many cite energy costs in their messaging,” says one CEO at a $5-9M company in New York. Service businesses with no direct fuel exposure are discovering that energy is still permeating their cost structure.

Margin Compression Deepens as Small Businesses Absorb Costs

Revenue expectations among small business leaders remain net positive, with 57% anticipating growth in the year ahead. But the gap between the revenue and profitability outlooks is widening. Just 43% of small business leaders expect improved profitability, flat from April, and down 17 points from February’s peak of 60%. The divergence points to a consistent pattern in this month’s survey data: small businesses are absorbing cost increases rather than passing them through to customers.

Whether the costs are related to talent, tariffs, or energy, the pattern is consistent. Many SMB CEOs say maintaining price stability has come at a significant cost to their bottom line. “We never changed our prices to the customer; we have taken the full brunt of the margin hit from tariffs,” says Sean McDonald, president of RevHD in Nashville, Tennessee. Competitive pressure, locked-in contracts, and relationship protection prevent companies from changing prices in response to increased costs. The cumulative weight of layered cost shocks is evident in the profitability expectations.

Customer Demand Softening Adds to Pressure

In addition to rising costs, another impact of energy prices is a softening of demand. The customer behaviors that small business leaders describe are consistent across industries: hesitation to start projects, delays in purchasing decisions, and reductions in discretionary spending as higher fuel costs absorb more of their budgets. “There is too much uncertainty in the marketplace currently,” says Kannan Kaliyur, CEO of ConnectTel, Inc. in Austin, Texas. “Customers are hesitating to start projects, and budgets are very tight.”

The businesses that reduce friction in the buying decision, including shorter commitments, clear pricing, and fast delivery, will be the ones that pull ahead.

May Highlights

The May 2026 WSJ/Vistage Small Business CEO Confidence Index was calculated from an online survey sent to CEOs and other key leaders who are active U.S. Vistage members. The survey, conducted between May 1 and 11, 2026, collected data from 334 respondents with annual revenues ranging from $1 million to $20 million. The Index is calculated based on favorable minus unfavorable responses from this set of standard questions, plus 100, anchored to June 2012 = 100.

• Current Economy: Sentiment about the U.S. economy compared to a year ago remained negative in May. 44% of small business leaders report conditions have worsened, up slightly from April, while just 15% report improvement, down 2 points from last month.
• Future Economy: Forward-looking economic sentiment remained more pessimistic than optimistic, with more than a third (34%) of small business leaders expecting conditions to worsen, while just 1 in 4 small business leaders expected the economy to improve in the next 12 months, down 1 point from April and 5 points below last year.
• Revenue Projections: Compared to last year, the proportion of small business leaders anticipating revenue growth in the year ahead is up 10 points. This remains well below the February peak of 71%. Just 14% expect declining revenues, but this proportion has slowly grown over the past 4 months.
• Profitability Projections: Just over 4 in 10 small business leaders (43%) expect improved profitability in the year ahead, unchanged from April and down significantly from February’s 60%. More than 1 in 5 (21%) expect profitability to worsen.
• Fixed Investment Plans: Plans to increase fixed investments edged up to 33%, a 4-point gain from April and 4 points above May 2025. Just 17% plan to scale back, suggesting some stabilization in capital planning after earlier uncertainty-driven pauses.
• Workforce Expansion Plans: Nearly half (47%) of small business leaders plan to add staff in the next 12 months, down 1 point from April but 4 points above May 2025. Just 11% plan reductions, up a point from last month.

To explore the full May 2026 WSJ/Vistage Small Business data set, visit our data center or download the infographic.

The June 2026 WSJ/Vistage Small Business CEO Confidence Index will be calculated from small business respondents to the quarterly Vistage CEO Confidence Index survey, which will take place June 1-15, 2026.

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