Everything is bigger in Texas — and small business optimism is no exception, according to new data.
Released on Tuesday, the National Federation of Independent Business (NFIB) small business economic trends report ranked the Lone Star State high when compared to other U.S. states. The NFIB’s latest Small Business Optimism Index for Texas checked in at 101.1, which was 3.2 points ahead of the national average.
Of the index’s 10 components, Main Street businesses in the state reported higher sales expectations, as well as positive earnings trends and employment trends when compared to NFIB’s overall U.S. data, the organization said.
Small businesses significantly contribute to the Lone Star State’s economy, according to a Texas Comptroller of Public Accounts report, representing 44.4% of the state’s workforce.
Business Briefing
Jeff Burdett, the state director for Texas at The National Federation of Independent Business, said Texas remains on entrepreneurs’ radars.
“Texas remains one of the best places to own, operate and grow a small business,” Burdett said in a statement.
The optimism index has dipped recently, but remained above its 52-year average of 98, as small businesses’ enthusiasm is generally higher now than in 2025.
“2025 was a really tough year, uncertainty-wise,” said Peter Hansen, NFIB’s director of research and policy analysis. “National data continued to discount the economy slightly.”
Small-business trends across the U.S.
From a national perspective, the impact of small businesses is also significant if understated. According to the Small Business Administration, 45.9% of U.S. employees work for the sector.
NFIB assessed small businesses’ success around the country based on 10 areas: Good time for business expansion, general economic outlook, current earnings and inventory, planned capital outlays, current job openings, hiring plans, satisfaction and expected inventory change, sales and credit conditions.
And the U.S. is doing slightly better than in previous years.
From manufacturers to farmers, NFIB aims to evaluate a broad range of small businesses, said Hansen.
“We try to represent a cross section of small businesses,” he added.
Texas outperforms the nation
Despite economic headwinds in 2025, Texas outperformed the U.S. by only a modest margin.
It had a gross domestic product (GDP) of roughly $2.9 trillion in the third quarter, according to Federal Reserve Economic Data, making it the second-largest economy in the U.S. This contributed to the stability of small businesses.
“Our state’s practical approach to governing allows small business owners to do what they do best: serve their customers, create good-paying jobs and invest in their communities,” Burdett said in a statement.
In Texas, 17% of owners rated the health of their business as excellent, and 6% rated it as poor, both figures 6 and 1 point above the national average, respectively.
It also showed stronger earnings trends and employment conditions compared to NFIB’s overall U.S. data.
Navigating workforce and cost pressures
Tight labor markets and shifting workforce dynamics have posed challenges, with the organization citing labor quality as “the top issue” for more businesses in the sector, and “the only issue that is meaningfully worse in Texas than in the U.S.”
According to NFIB’s data, 28% of Texas owners reported labor quality as their single most important problem in summer 2025, compared to the national average of 19%.
“When you see more economic or business growth and need more workers, it makes you worry about labor quality,” Hansen said.
Texas still has a decidedly business-friendly regulatory environment, with the data sending a positive signal about the fortunes of small businesses in the state overall.
Meanwhile, businesses are slightly increasing compensation, with inflation as a contributing factor, producing mixed effects for workers and owners.
“It is an extraordinarily tight labor market,” Hansen said. “Workers are feeling the impact of inflation, and consumers are spending a bit more consistently.”
When inflation rises, wages often increase, but whether workers or owners actually gain depends on who can better adjust.
Simultaneously, higher interest rates have also increased borrowing costs and made financing expansion more difficult.
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