Utah has one of the most exciting start-up ecosystems in the U.S. It is a sandbox of innovation and new technology. I know firsthand from having had the good fortune to base the U.S. headquarters for one of my businesses here.
But there is a flip side to having a vibrant tech ecosystem: a concentration of smaller and midsized businesses. And, having spoken to many founders over the last couple of months, I have started to feel quite worried about the outlook for smaller firms in the U.S., including those in Utah.
Many smaller and mid-market companies are ramping up investment. President Donald Trump came into office promising a slew of tax cuts, a crackdown on government spending and a bonfire of red tape. In response, these smaller firms are optimistic and they’re going for growth, increasing spending, hiring and much else besides to realize these ambitions.
In fact, 56% of CEOs expect economic conditions to improve over the coming six months — nearly double what they said in Q4 2024, according to The Conference Board.
As an investor, stripping back regulations and reducing taxes is a good thing — in principle, at least. But the real risk is in the execution. New announcements seem to be coming out from the new administration every day, with the markets rallying or collapsing in response. Investors like stability, and we do not have that at the moment.
At the same time, tariff threats pose the very real risk of inflation. The labor market is starting to cool down, according to reports from Reuters. And government spending cuts will bite into the private sector soon: Defunding science research could stifle innovation when global competition in new technology, such as artificial intelligence, is at an all-time high.
The risks to Utah are particularly high, given the state’s historic ability to attract external investment and its track record of innovation. Utah had the third highest private equity penetration rate in the U.S. in 2023 — and it was recently predicted to have the fastest-growing tech workforce of any state in the decade leading up to 2033.
Now, perhaps, I’m taking all these risks too far. But while it wouldn’t be sensible to scaremonger, that’s no reason to be complacent either.
My worry is that economic optimism, especially among our smaller businesses, has tipped over into irrational exuberance. Many small business leaders are so bullish on the economy that they are blinded to the real risks — and they aren’t taking the careful management decisions every sensible business should.
Smaller businesses are particularly vulnerable to this issue. One of the biggest challenges they face is a lack of management experience. In fact, 75% of those who enter management positions say that they have not had any proper training — and failing to prepare for potential risks coming down the track is just the latest example of this in action.
Smaller businesses are founded by ambitious people who see an opportunity. They are big-picture thinkers, excited by commercial opportunities but not particularly interested in the minutiae of management. They are usually bored by Gantt charts, annual budgets and strategic planning, and that is especially the case in fast-growing, entrepreneurial tech firms — just like those across Utah.
In a stable economy, this might be an issue, but typically, small and midsized firms can get by. In a highly volatile economy, however, with risks looming, it is a much bigger problem. And it becomes potentially existential when those risks are approaching, but business owners are caught in a period of unfiltered optimism.
The result is a real risk that some small and mid-market firms will overcommit to growth and then feel the pain in 12 months. This would be a real tragedy: smaller businesses are key for the U.S. and Utah’s wider economy. They need to be protected at all costs.
I am hopeful that small-business owners, especially those in Utah, will wake up before that happens. Some very real risks are now potentially on the horizon, and I would urge them to prepare for all potential outcomes ahead.