Small businesses across America are drowning in red tape, with more than half reporting that regulatory compliance is actively hindering their growth and future plans.
At a Glance
- 51% of small businesses report regulatory compliance negatively impacts growth
- 47% of small business owners spend excessive time on compliance issues
- Small business confidence dropped from 71.2 in Q3 to 69.1 in Q4 2023
- 69% of small businesses spend more per employee on compliance than larger competitors
- Inflation remains the top challenge for small businesses for the 12th consecutive quarter
Regulatory Burden Crushing Small Business Growth
The crushing weight of government regulations is taking a serious toll on America’s small businesses according to the latest MetLife & U.S. Chamber of Commerce Small Business Index. The report reveals a troubling reality: more than half of small business owners (51%) believe regulatory compliance is actively hindering their growth.
This represents a significant barrier to economic expansion at a time when local communities need their small businesses to thrive. The burden isn’t just financial – it’s also consuming valuable time that could be spent on business development.
Nearly half (47%) of small business owners report spending excessive time navigating regulatory compliance, time that could otherwise be devoted to serving customers and growing their enterprises. This mounting pressure has contributed to a decline in the Small Business Index score, which fell from 71.2 in Q3 to 69.1 in Q4 of 2023. The drop signals growing concern among entrepreneurs about their ability to operate effectively under the current regulatory environment.
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The Disproportionate Impact on Main Street
Small businesses face a fundamentally unfair playing field when it comes to regulatory compliance. According to the Chamber’s report, a staggering 69% of small businesses spend more per employee on compliance than their larger competitors. This disparity gives corporate giants a distinct advantage, as they can distribute compliance costs across much larger revenue streams. For main street businesses operating on thin margins, these costs can mean the difference between growth and stagnation – or even survival.
The most burdensome regulatory issues cited by small business owners are taxes and record-keeping requirements. These administrative demands force entrepreneurs to divert resources away from core business operations. Many business owners find themselves spending evenings and weekends completing paperwork rather than developing new products or services that would benefit their customers and communities. Some have resorted to hiring expensive outside consultants to navigate the increasingly complex regulatory landscape.
— Dan Gray (@credistick) April 18, 2025
Real-World Consequences of Regulatory Delays
Beyond compliance costs, regulatory delays can have devastating impacts on small business expansion plans. The permitting process has become particularly problematic, with many entrepreneurs reporting significant project delays or even cancellations due to bureaucratic holdups. This directly affects local economic development and job creation in communities across America. When small businesses can’t expand, everyone loses – from potential employees to other local businesses that would benefit from increased economic activity.
Despite these significant challenges, America’s small business owners remain remarkably resilient. The report indicates that 46% plan to increase investment and 41% anticipate staff increases in the coming year. This persistent optimism in the face of regulatory headwinds speaks to the entrepreneurial spirit that drives our economy. However, that spirit is being unnecessarily tested by bureaucratic requirements that could be streamlined without compromising important protections.
Inflation Compounds Regulatory Challenges
Adding to the regulatory burden, inflation continues to be the most significant challenge for small businesses, cited by 55% of owners for the twelfth consecutive quarter. This persistent economic pressure, combined with regulatory compliance costs, creates a perfect storm for struggling entrepreneurs. While larger corporations can often absorb or pass on these increased costs, small businesses are frequently forced to make difficult choices between compliance, growth, maintaining staff levels, or simply keeping their doors open.
The U.S. Chamber supports policies aimed at achieving at least 3% annual economic growth, including lower tax rates, smarter regulations, and expanded global trade opportunities. These policy changes would provide meaningful relief to small business owners currently struggling under the weight of excessive regulation. Without such reforms, America risks stifling the very entrepreneurial energy that has traditionally driven innovation and prosperity throughout our nation’s history.
