NFIB data from 2020 through July 2025 reveals a pattern that challenges expectations that pricing increases lead to improved profitability.
The Pricing-Profit Disconnect
During this period, the net percentage of businesses raising prices and their reported net profit trends moved in opposite directions. The years with the highest pricing activity (2022-2024) coincided with periods when more businesses reported declining profits than improving profits. Conversely, as pricing activity moderated in 2025, profit trends began stabilizing.
This pattern suggests that pricing increases alone don’t guarantee sector-wide profitability improvements. Customer response and market dynamics effectively constrain pricing power, even during inflationary periods.
Behind the Disconnect
The available data suggests that businesses faced multiple challenges during periods of declining profits. In July 2025, businesses citing declining earnings identified “increased costs” and “sales volume” as primary factors, indicating that pricing adjustments alone were insufficient to address underlying profitability pressures.
Labor quality continues to be identified as a significant concern, ranking as the top business problem for 21% of respondents in July 2025. This suggests that operational challenges beyond pricing decisions affect business performance.
The 5.5-year dataset demonstrates that even when businesses had apparent pricing power during crisis periods, overall sector profitability remained negative, indicating systematic constraints on the effectiveness of pricing strategies alone.
Looking Forward
Small businesses appear to be adapting by focusing on operational improvements rather than continued price adjustments. As potential tariff policies loom, this historical data suggests that companies may need strategies beyond pricing to achieve sustainable profitability improvements.
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