A new report released by the Alaska Small Business Development Center highlights a shift in the challenges and outlooks faced by small businesses across the state in the first quarter of 2025, driven largely by inflation, rising operating costs, and political uncertainty.
The findings stem from the SBDC’s 2025 Quick Pulse Survey, which followed up on an initial survey conducted at the end of 2024. Of the 958 businesses that participated in the earlier survey, 273 — nearly 29% — responded to the new round of 13 questions issued in April. The new round of questions was issued due to the center’s sense that business conditions had shifted and that the 2024 report might not reflect attitudes in 2025.
While the 2024 survey focused heavily on workforce challenges and client acquisition, the 2025 data shows a dramatic shift in business concerns. The top three challenges cited in the new survey were:
- Increase in the cost of goods/inflation
- Operating costs
- Political uncertainty
This marks the first time political uncertainty has cracked the top three challenges in the survey’s eight-year history, even during the height of the Covid-19 pandemic, it had never placed in the top 10, according to the SBDC.
The shift in concerns may indicate that Alaska’s small businesses are moving from a growth-focused mindset to one more centered on economic survival. Rising costs, often linked to volatile global marketplace, replaced prior concerns such as attracting customers and hiring qualified employees.
“The difference this year appears to be rooted in the nature of the disruption,” the report notes. “While the COVID-19 crisis was health-related, the current pressures stem from global economic policies and trade tensions.”
The financial outlook of business owners has also taken a sharp turn. After four consecutive years of increasing optimism, the percentage of businesses expecting their financial situation to be “good” or “very good” in the next 12 months dropped from 60% at the end of 2024 to just 46% in early 2025.
This was the lowest level of optimism since the manufactured Covid pandemic crisis in 2020.
One of the most telling changes was in how businesses are preparing for the year ahead. For the first time since 2021, there was a noticeable uptick in the number of businesses planning to seek outside capital, rising from 32% to 36%. However, unlike the pandemic-era surge, which was driven by federal relief programs and investment in growth, today’s interest in capital is viewed as a defensive move to help maintain operations in the face of mounting costs.
The SBDC noted that Alaska’s unique economic and geographic challenges, including remote location, small population, and labor shortages, continue to exacerbate broader economic issues. High shipping costs, already a longstanding issue, are now colliding with inflation and global trade disruptions, making it even harder for some small businesses to remain competitive.
“The 2024-2025 comparison reveals a significant shift toward uncertainty in Alaska’s small business outlook. Positive sentiment has declined sharply, with businesses reporting “Good” or “Very Good” conditions falling from 60% to 46%. Most notably, neutral responses (“Neither Good nor Poor”) jumped by 10 percentage points to reach 41%, indicating businesses are increasingly hesitant to make definitive forecasts. Negative sentiment nearly doubled from 8% to 14% in the first few months of 2025. This is the highest level of negative sentiment since the height of the COVID pandemic in 2020 and indicates that businesses are struggling to adjust to the new economic headwinds,” the report says.
Hiring qualified help remains a challenge. A substantial portion of businesses (22%) cite a lack of qualified applicants as the primary challenge, highlighting the need for skilled workers in Alaska’s small business sector. Another 15% struggle with compensation, noting that they cannot offer competitive pay to attract talent. Other challenges include seasonal issues (13%) and inconsistent workloads (14%), which create uncertainty and make long-term hiring decisions difficult.
“This is becoming a more pressing issue as Alaska’s population continues to decline in the 18-65 year old range, reducing an already limited population of potential workers,” the report says. One respondent lamented that “Everyone wants $30/hour but brings no experience to the table.”