The Headlines Have Finally Caught Up

Private sector payrolls are declining, and many are wondering if the U.S. is already in a recession.

At CRI Simple Numbers, we’ve been closely tracking the performance of 100 entrepreneurial companies since before the COVID-19 pandemic, and the data has been signaling a slowdown for quite some time. The tool we use is our 100 Company Model, which is a diverse sample (various industries and geographies) of the Entrepreneurial economy. It contains an abundance of data that the Fed and others do not have, and over time, we have developed deeper visibility into the trends shaping the private business landscape.

The trend of stagnation and mild decline continues. For our Simple Numbers clients, this isn’t new news. In fact, we discussed this shift in an October 2024 LinkedIn post , noting that the economy had become increasingly divided between the “haves” and “have-nots.”

Currently, our model indicates year-over-year revenue growth at 9%, although since December 2024, this pace has slowed to 5%. Companies with revenues under $10 million are experiencing growth of less than 1%.

The more concerning metric is profit: rolling 12-month profits have decreased by 3% since December 2024. Labor efficiency, a key driver and metric of profitability, has also declined. If labor productivity had held steady with July 2024 levels, these same companies would have generated an additional $4 million in profit over the past year.

What We’re Seeing by Business Type

• High-end/luxury: Still strong, as high-income consumers continue to spend.

• Healthcare: Stable and remaining strong.

• Necessity services and products: Home services (plumbing, HVAC, electrical, etc.) and essential business services remain steady as well. While consumers may not be opting for top-level goods and services, necessity continues to drive spending.

• Discretionary products and services: Continued downturn. Retail, fast-casual dining, and certain B2B sectors are declining. Marketing, business coaching, and other professional services, though arguably not discretionary, are also seeing a decline.

The Outlook

The path forward remains uncertain and cloudy. Efficiencies are being gained from AI, but AI isn’t a consumer. Broader improvement will depend on a rebound in consumer spending. Lower interest rates will also help, but that impact will take time to materialize.

Smaller companies (under $10M) are likely to continue feeling pressure. Real inflation is running between 5% and 6%, and with limited ability to raise prices, leveraging overhead remains a challenge. We are in an environment where you must be profitable at your current gross margin levels.

What This Means Going Forward

These insights are not just data; they highlight trends that can spark meaningful discussion. Growth has slowed, costs have remained high, and profitability is under pressure; however, companies that understand these patterns and manage labor efficiency and margins accordingly will be best positioned when conditions improve.

For those working with or advising businesses, this information provides context for understanding where companies stand in the broader entrepreneurial economy and how efficiency, margins, and strategic choices are affecting overall performance. For business owners, these results continue to remind us that the fundamentals never go out of style: disciplined management and focus on the right performance metrics can help businesses stay grounded and ready to move when opportunities return.

If you have questions about what these trends may mean for your business, feel free to contact us.