A recent report from the National Federation of Independent Business (NFIB) Research Center shows that optimism among California small business owners has dropped below the national average. The California Small Business Economic Trends (SBET) survey, released on March 2, 2026, compares responses from California entrepreneurs to national data collected throughout the year.
“The Small Business Economic Trends survey has provided essential information about the small business economy for decades,” said Holly Wade, Executive Director of NFIB’s Research Center. “While this data is a useful tool for evaluating the economy on a national scale, no state can be defined by national numbers alone. This state-specific report allows us to better understand business conditions and the unique challenges and strengths owners’ face in California.”
The SBET found that California’s Small Business Optimism Index stood at 94.4 during summer 2025, which is 3.5 points lower than the national average. Negative views about the broader economy and fewer plans to hire contributed to this decline in optimism.
“This report will come as no surprise to any small business owner in California,” said John Kabateck, NFIB’s State Director for California. “This data simply underscores the barrage of regulatory and economic difficulties California entrepreneurs regularly endure. Our small business members are telling us that government regulation is by far the greatest hurdle they face. It is time for lawmakers in Sacramento to heed the concerns of California’s Main Street businesses and make positive change.”
When asked about their business health, only 6% of surveyed owners in California rated their operations as excellent—six points below the U.S. average—while half described them as good, slightly underperforming compared to other states. More owners reported fair or poor conditions than elsewhere.
Government regulation emerged as the top concern for small businesses in California, while it ranked fifth nationally. Labor quality was less problematic for Californian businesses than elsewhere; only 15% cited it as their main issue versus a 20% national average.
Inflation concerns have eased since last year among these businesses: just 10% now say inflation is their primary problem compared with 20% previously.
Both statewide and nationally, uncertainty levels remained high through 2025 according to NFIB’s Uncertainty Index—the highest recorded since tracking began—affecting planning and investment decisions among small firms.
The NFIB has gathered SBET data since 1973 through quarterly surveys and monthly updates starting in 1986. The current state-focused analysis draws from pooled responses covering April through September of last year.
The National Federation of Independent Business California acts as a leading voice for more than 35,000 small businesses across the state (source). The organization works to protect its members from excessive regulations and taxes while advocating for policies that support economic opportunity (source). It also provides resources, legislative updates, and representation at both state and local levels (source).
For over eight decades, NFIB has represented America’s independent business owners nationwide.
