(The Center Square) – Michigan’s small business economy remains stable but is no longer growing, according to a new report released this week.
The 22nd edition of the Entrepreneurship Score Card from the Small Business Association of Michigan Foundation found that while small businesses remain “strong and stable,” growth has slowed and is trailing national trends.
“While small businesses continue to provide a stable foundation for jobs and local communities, the slowdown in growth, decline in new business formation, and increasing cost pressures signal that stability is no longer translating into opportunity and growth,” said Brian Calley, president and CEO of SBAM.
The 2026 annual report evaluates dozens of economic indicators tied to what it calls the state’s “entrepreneurial economy,” including self-employed workers and small- to mid-sized businesses.
According to the findings, small businesses still play a dominant role in Michigan’s economy.
Firms with fewer than 100 employees account for 52% of private-sector jobs, and more than 815,000 residents are self-employed. The state also maintains relatively strong business survival rates, with 55% of small businesses lasting at least five years.
But the report highlights a clear slowdown in momentum.
Michigan is seeing weaker early-stage growth, with fewer new businesses forming and fewer companies successfully scaling. Business expansion has also declined and openings and closures have nearly evened out over the past two years.
The report found this is a key indicator of stagnation.
“This does not indicate a collapse in entrepreneurial activity,” it stated. “However, it does raise an important question. The issue is not the level of activity, but the direction. The recent trend suggests that the surge in new business formation has not been sustained.”
Calley said those trends could have long-term consequences if not addressed.
“Without stronger momentum—particularly in helping businesses start, scale, and hire—Michigan risks falling further behind the nation,” he said.
Rising costs, including labor, energy and health care, are also limiting hiring and investment decisions for many small businesses, the report found.
“While financial conditions remain stable overall, margins are under pressure,” it stated. “Michigan’s challenge is not a lack of business activity. It is a lack of sustained momentum. Strengthening new business formation, supporting expansion into larger stages, and addressing cost and workforce constraints will be central to improving long-term economic performance.”
This comes as Michigan continues to experience some of the highest unemployment rates of any state nationally, coming in at 5% in the most-recent data.
Additionally, another recently-released report from the American Legislative Exchange Council found Michigan’s overall economic outlook fell to 32nd nationally in 2026, down from 19th in 2025.
