Why SMB's are being crushed
11 mins read
Published May 6, 2025
Small and medium-sized businesses (SMBs) are increasingly under pressure as the economic structure of the modern economy shifts in favor of scale, data, and technological leverage. Over the past several decades, globalization, digitization, and financialization have altered cost structures and competitive dynamics in ways that disproportionately disadvantage smaller firms. Fixed costs associated with compliance, technology, marketing, and logistics have risen, while variable costs have declined for large firms able to spread these investments across vast customer bases. As a result, economies of scale that once mattered primarily in manufacturing now dominate services, retail, and even local markets.
Technological change has further widened this gap. Large corporations benefit from network effects, proprietary data, and access to advanced digital infrastructure, allowing them to optimize pricing, supply chains, and customer acquisition at a level that SMBs struggle to match. Digital platforms and marketplaces, while lowering barriers to entry in theory, often impose fees, algorithmic dependence, and winner-take-most dynamics in practice. From an economic perspective, this reflects a shift toward increasing returns to scale and market concentration, where productivity gains accrue to firms already positioned to exploit technology rather than to new or smaller entrants.
At the same time, labor and capital markets have become less forgiving for small businesses. Rising wages, tighter labor markets, and higher interest rates increase operating and financing costs, while access to affordable capital remains uneven. Large firms can internalize these shocks through automation, global sourcing, and balance sheet strength; SMBs cannot. The result is a structural squeeze in which small businesses face rising costs, stagnant margins, and intensifying competition without the tools required to adapt. In this context, the survival of SMBs increasingly depends on their ability to adopt productivity-enhancing technologies that offset scale disadvantages and restore competitiveness in an economy that now systematically rewards size, data, and efficiency.
