The Silent Layoff: How Economic Strain Is Pushing Small Businesses Into Survival Mode

Alongside thousands of formerly employed federal and corporate workers lies a second group of Americans hit hard by downsized jobs and lost wages without ever receiving a formal pink slip: small business owners.

The economic downturn is hitting the middle class and entrepreneurs hard. 

73% of U.S. workers are struggling financially, unable to afford anything beyond basic living expenses, according to the 2025 Wage Reality Report. This financial strain leads to reduced discretionary spending, directly impacting small businesses that rely on middle-class consumers.

“Some of us are scaling back, opening fewer days to cut overhead, or collaborating with others to share costs,” said Owings Mills, Maryland-based entrepreneur Dr. Chere Goode. Founder of Total Harmony Enterprises, she continued, “Other entrepreneurs are going back into the workforce because they just can’t make ends meet anymore.”

Nicole Flanagan, owner of Earth Born Beauty, an Elkridge, Maryland, plant-based skincare company, emphasized that entrepreneurs from every background have been affected.

“I’ve done about 10 festivals this year. Sales were low at every single one,” said Flanagan. “People are more hesitant about spending money and are reconsidering anything that may not be a direct necessity.”

The Trickle-Down Effect on Small Businesses

Small businesses are the backbone of the U.S. economy, accounting for 44% of economic activity. However, the current economic climate is challenging their survival. 

Inflation, rising interest rates, and decreased consumer spending are creating a perfect storm of economic instability. The U.S. Chamber of Commerce reports that 58% of small business owners cite inflation costs as a significant challenge, with 35% concerned about declining revenue.

Business experts indicate that financial stress is reaching critical levels among many entrepreneurs, affecting both personal well-being and business sustainability.

“Just not knowing how you are going to afford overhead and necessities or how to pay business expenses can be overwhelming,” Goode explained. “Maslow’s hierarchy of needs is real. Heightened economic stress affects everything, including sleep, energy, and health.”

A recent survey revealed that 76% of Americans feel alone in managing money-related worries, and one in five reports a decline in their mental health over the past year due to financial stress.

“When I talk to people at events, the conversation always turns to the economy. They’re worried about their jobs or helping their families survive,” Flanagan recounted. “Even if people are not directly affected, they’re providing economic support for someone who is.”

Resilience in Reinvention

In response to economic hardship, entrepreneurs are finding innovative ways to survive, with many adapting, getting creative, and leaning on community. 

Community-based organizations such as Congress Heights Community Training and Development Corporation (CHCTDC) are experiencing a marked increase in demand for professional training, support, and access to capital.

Stephanie Campbell, the organization’s executive director, encourages local business owners to attend neighborhood and community events, including D.C. city council meetings, in order to learn what resources may be available.

She also stressed the value of building relationships.

“More than anything, learn to work together and partner with other business owners in your community,” Campbell indicated.  “Ask yourself, how can I combine resources with other businesses to reduce overhead and expand my target audience?”

Entrepreneurs like Flanagan note that strategies such as building relationships have been a key component in keeping their businesses afloat.

“You have to diversify,” Flanagan said. “When I couldn’t afford to purchase products from other Black-owned businesses for a raffle, I pivoted. I interviewed Black entrepreneurs on my Instagram every Friday night instead. Those points of connection proved invaluable.”

Goode also offered practical advice for small business survival in an uncertain economy.

“Be frugal when times are good, so you have reserves when crises hit. When times are slow, use it to your advantage and learn new skills that allow you to become more marketable and offer new services,” she advised. 

The District’s Department of Small and Local Business Development (DSLBD) has recently expanded access points for education and support. Through its Small Business Assist hub at the Martin Luther King Jr. Memorial Library, entrepreneurs can receive one-on-one guidance to secure grants, capital, and technical assistance every Wednesday. The agency is also taking its services “into the neighborhood,” bringing in-person support across all eight wards, such as its upcoming stop at the Southwest Library on Sept. 25.

Rosemary Suggs-Evans, director of the D.C. Department of Small and Local Business, urged the District’s more than 70,000 business owners to take advantage of the programs offered by CHCTDC and DSLBD, many of which are provided at no cost to small business owners.

“Lean into your community,” said Suggs-Evans, also giving gentle encouragement to residents, “shop small, shop local, and help our businesses not only survive, but lead our city forward.”

For business owners struggling to remain viable, Flanagan gives powerful advice: “Do it scared.”

“Every step is unknown,” she said, “but if your dream is rooted in passion, keep moving forward.”