The Key to Growth: How Small Businesses Turn Disruption Into an Edge

By Gabby Burlacu

Executive summary 

Disruption didn’t break small and medium-sized businesses (SMBs) in 2025 — it made them stronger. While market volatility caused enterprise giants to cut the very jobs they had rapidly added in the preceding years, SMBs leaned into experimentation, AI, and flexible talent models. The result: antifragility in the face of economic and labor market headwinds. 

The Upwork Research Institute surveyed nearly 500 SMB C-level executives, vice presidents, and directors to learn how they navigated the macroeconomic shocks of 2025. We found that success in 2026 likely won’t depend on headcount scale — but on reinvention. 

Key takeaways

In 2025, SMBs:

• Experienced confidence-whiplash: Amid roller-coaster macro conditions, SMB leader confidence was more sharply affected than that of leaders of other company sizes, falling from 59% in Q1 to 47% in Q2, then rebounding to 58% in Q3. Willingness to innovate across talent and technology similarly fluctuated.
  
  
• Adopted stabilizing strategies: The most confident SMB leaders — those who avoided the Q2 slump – were twice as likely to have: 
  
  • Fully implemented AI across front- and back-office functions: 27% infused AI into sales, marketing, and customer service functions, while 23% used AI to optimize finance and operations 
  • Built mature AI reskilling programs: 19% deployed comprehensive skilling across their full workforce to get ahead of potential skill gaps 
  • Infused experimentation and innovation: 23% approached volatility as a chance to try something new, partnering with peers to learn and iterate
  • Hired independent talent for specialized skills: 31% tapped external, freelance talent pools to bring in advanced skills like AI proficiency, data analysis, and creative and strategic thinking
    

• Closed the innovation gap: SMBs, historically slower than their larger counterparts to adopt Work Innovator practices, closed the gap in 2025 as more SMB leaders leveraged work models that included independent talent, AI, and bold experimentation. For instance on Upwork, SMB clients’ job posts requiring freelance AI expertise rose 44% between January and July.

Calls to action for business leaders: 

In 2026, SMB leaders can navigate continuing disruption by: 

1. Moving beyond technology adoption to unlock AI’s value by integrating AI-first process design for specialized, AI-enhanced workflows
2. Identifying skillsets that have historically been difficult or expensive to attain and tapping into independent talent to access specialized skills
3. Approaching macroenvironmental disruption with innovation and experimentation, strengthening through systems of innovation that include partners and peers

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Zoom out

For decades, rapid headcount growth was the marker of organizational success. But recent macroeconomic shocks have proved that bigger is not always better. 

In 2025, SMBs faced the same challenges as enterprises — geopolitical tensions, a tightening labor market, and economic volatility. But their responses couldn’t have been more different. The giants, viewing talent as relatively abundant ¹, turned to large cuts, eliminating nearly a million jobs across sectors like technology, retail and media. But while large-scale layoffs and restructurings dominated the headlines, SMBs met the moment with a test of endurance. 

This research chronicles the response of SMBs to the disruptions of 2025, showing how adaptability exceeds disruptive boom-bust approaches to meet the demands of modern work.

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How we got here: SMBs in 2025

The journey SMB leaders have navigated in 2025 is best illustrated in Figure 1 below. 

Figure 1.

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Q1: Confidence amid chaos.
A polarizing U.S. election cycle and trade uncertainty set the stage. Yet SMBs were optimistic: 59% felt confident about their prospects, even as 61% defined the macroenvironment as challenging. 

SMB leaders leaned into finding the right talent and combining it with existing resources. Sixty-nine percent planned to increase full-time employee (FTE) hiring in the coming three months, 59% planned to expand their use of freelancers, and 34% reported openness to exploring AI agents. The strategy was clear: invest in people and tech to stay afloat.

Q2: Retreat to the familiar.
As the economy shifted and the labor market tightened, conditions worsened. April 2025 brought pandemic levels of expected volatility. The result? SMB confidence levels dropped to 47% — a steeper drop than leaders of other company sizes faced.² As a result, SMB leaders disproportionately pulled back from experimentation: plans to use AI agents slowed (28%) and the use of freelance talent flatlined. 

Instead, many defaulted to familiar, tried-and-true strategies. Traditional approaches to hiring abounded, with 73% planning to expand FTE hiring. But these approaches proved insufficient, and the cracks showed: 36% of SMB leaders said talent was scarce, and fewer than half felt confident they could attract the right people.

Q3: Progress through experimentation.
As headwinds abated by summer, SMBs renewed interest in innovative technology and work models. Only 57% described the macro environment as “challenging,” down from 67% in Q2. 

And more SMB leaders joined the 47% who had retained high confidence in Q2, as confidence rebounded to 58%. The MetLife and the U.S. Chamber of Commerce Small Business Index also reflected this Q3 revival, with SMB confidence levels reaching an all-time index high. 

Accordingly in Q3, AI investment rose (40% planned to expand AI agents, an increase of 12 percentage points), talent scarcity concerns dropped (to 21%, a decline of 15 percentage points), and freelance use climbed to 68%. On Upwork, SMB leaders sourced skilled talent for complex work in areas like customer service and technology support design, product and project management, international and immigration law, and AI and machine learning.³

Although Q3 shows the positive impact that a steadier environment can have on SMB confidence and innovation, we have certainly not seen the last of macroeconomic disruption — something SMB leaders are only too aware of. 

“2025 was an interesting year,” shared Matthew Menashe, Director of Business Development at industrial distributor MRO Supply, as he reflected on the “yo-yo” effects of the year. “I think a lot of people knew that it was going to be volatile, a bit up and down, a bit shaky. That’s the effect that’s out there.” 

Despite the rise and fall in challenges, a particular group of SMB leaders — 47% of those we surveyed — retained high levels of confidence and stability even as the world rapidly shifted around them. These leaders tell a story of macroenvironmental volatility met with perseverance. By exploring what they did differently, SMB leaders broadly can better prepare for the challenges that lie ahead. 

For Jen Libby, MS, CEO & Founder of youth-focused advocacy and connection platform Promly, this year “felt like a fun house when the floor is moving.” She explained that stability came from continuing to innovate and try new things in the face of change. “There’s a huge opportunity for real leaders to step up, for leaders to emerge in a strong and effective way even as everything is shaky. I think that’s what the world is asking for, to be honest.” 

Five drivers of SMB confidence

Our research shows SMB leaders who remained confident throughout the year embraced five approaches. They:

1. Unlocked AI’s value. Thirty percent retooled operating models for AI (vs. 16% of their less confident peers), adopting an AI-first mindset when, for instance, designing processes to store and organize data, develop technology, and streamline information sharing and communications. And accordingly, 37% strongly agreed they have the right operating model in place to ensure future business success, vs. just 27% of others.
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2. Infused AI broadly. Twenty-seven percent fully implemented AI in sales, marketing, and customer service vs. 13% of their peers, and 23% embedded AI in back-office functions like finance and operations vs. 11% of others. Human-I-T, a social enterprise that aims to empower people by closing the digital divide, has infused AI into “virtually every department,” shared Gabe Middleton, Cofounder and CEO, describing how his company has embedded AI tools into everything from internal communications to logistics.
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3. Reskilled talent. Nineteen percent rolled out comprehensive AI training across their workforce vs. 11% of their less-confident peers, getting ahead of the skills gaps that topped the list of SMB leader concerns in all three quarters we surveyed.^{4
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4. Embedded experimentation. Twenty-three percent designated innovation and experimentation as core organizational capabilities (vs. 13% of others) — something larger enterprises do at relatively high rates. “We work in a risky business in that trends change very quickly,” Libby shared. “So we know we need the data and flexibility that allow us to make better movements, better decisions.”  
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   Core to this is approaching disruption with an experimental mindset — something SMB leaders do not need to do on their own. “A big part of our learning has been conversations with [SMB] leaders about what’s worked and what hasn’t,” said Libby. “As the market shifts day-to-day, we have to be flexible. Learning from others who have been down similar roads allows us to more quickly respond and prepare for the inevitable sea change. Those are extremely imperative conversations to be having.”
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   Similarly, Human-I-T leveraged relationships in their vendor network. “We partner with vendors or software providers in ways that help us achieve what we want to achieve," shared Padric Gleason, Senior Vice President of Operations. “This creates a kind of symbiosis as we navigate difficult waters.”
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5. ‍Leveraged skilled independent workers. Thirty-one percent of highly confident SMB leaders (vs. 16% of others) relied on flexible talent to tap into specialized skills. Independent workers were not a stopgap — they were partners in creating a resilient workforce ready for disruption.They were also core to AI strategy: SMB clients’ job posts requiring freelance AI expertise rose 44% on Upwork between January and July.
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   “When facing the yo-yo effect of this year, we stayed ahead by moving business forward through AI,” shared Menashe, as he described the company’s transformation in automating data entry, building models, and ultimately better serving clients. “We found freelancers particularly helpful in knowing exactly how to apply AI to various operations and solving some critical challenges we were facing.”
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   Libby similarly combined external and AI work models to get expedited results. “Freelancers were key to helping us even identify what was possible,” she shared. “Because they were authentic and transparent in how they were using advances in technology — ‘I can do this really quickly and here’s how’ — we could plan for utilizing the power of AI in an actionable way and account for how it gets us to our goals much quicker.” 
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So what now? Three imperatives for SMB leaders in 2026

If 2025 was about surviving shocks, 2026 must be about building antifragility: growing stronger because of turbulence, not despite it. 

Read transcript

This is clearly not about hiring more people only to trim the workforce when disruption occurs. Nassim Taleb, who coined the term “antifragility,” said it best: “When you double the dose of, say, a medication, or when you double the number of employees in a factory, you don’t get twice the initial effect, but rather a lot more or a lot less.” 

Previous research from The Upwork Research Institute has shown that specific practices — orchestrating distributed work, flexible talent strategies, and advanced technology into a unified operating model — create antifragility, earning companies the moniker of “Work Innovators.” And while SMBs have historically been slower to adopt these Work Innovator practices, the highly confident SMB leaders in our research show that antifragility is not a trait unique to the large.

The strength of highly confident SMB leaders comes from within, and offers lessons for all leaders heading into 2026. Start by aligning around three key strategies (summarized in Figure 2 below): 

Figure 2.

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1. Unlock the value of AI 

The SMB leaders who retained their confidence throughout 2025 did more than simply adopt AI — they restructured for it. And for some, AI proved to be the key to scale. While AI does not replace people, it can boost productivity without ballooning payrolls. 

Research conducted by The Upwork Research Institute in collaboration with Zoom found that when SMBs used AI to scale, 93% reported increases in revenue — in fact, 41% reported increases in excess of 10%. Eighty-two percent reported AI-related cost reductions, and 91% said they saw year-over-year ROI of their AI investments.⁵ 

➡️ Start by:

• Rethinking an organizational process end-to-end, considering how you would redesign it around AI versus fitting AI into existing steps 
• Considering how skilled independent workers can help your organization unlock opportunities to streamline with AI  

2. Hire for skills, not headcount 

Scaling by headcount alone is brittle, but expanding team skillsets with flexible talent is both effective and durable. Twenty-eight percent of SMB leaders say access to specialized skills is the top reason they engage freelancers; an additional 23% say they depend on independent talent to give them the flexibility to scale up and down as needed. In short, freelancers close the skills gap for SMBs and allow them to have on-demand access to legal expertise for policy shifts, data scientists for AI pilots, and designers for new product lines. 

➡️ Start by:

• Identifying skillsets that have historically been difficult or expensive for your organization to attain 
• Considering how independent talent pools can supplement traditional talent models to bring the right mix of skills into your organization 

3. Build systems of innovation 

Highly confident SMB leaders recognize that in smaller organizations, innovation is not the job of one function or team, but of everyone. And accordingly, many SMB leaders embedded innovation and experimentation into the very fabric of their organizations, approaching disruption and change as opportunities to try something new. 

“You put one foot in front of the other,” shared Libby. “And that feels very stabilizing, even in unstable times. Because even within a month, you can look back and say, ‘I wasn’t just waiting. I was doing.’”

A key lesson from highly confident SMB leaders in 2025: innovation does not need to happen in isolation. Big enterprises often achieve innovation by relying on established networks and communities for playbooks. For instance, 46% of companies with over 5,000 employees partner with professional services firms, versus just 10% of SMBs. But SMBs have an opportunity to build their own networks through center-of-excellence ecosystems across employees, freelancers, vendors, and peers in the market. 

“We navigated the same waters as every other boat in the business world this year,” Menashe shared. “We intentionally engaged in conversations with people and companies. Our strategy was to be as involved as possible, and in that way to stay ahead of things.” 

The most confident SMBs in 2025 weren’t isolated; they shared lessons, iterated together, and treated volatility as a lab.

➡️ Start by:

• Identifying a system to determine what is and isn’t working as the macroenvironment changes, pinpointing where experimentation is needed 
• Deepening relationships with vendors, freelancers, and other partners to co-create innovative solutions that work best for your business in a changing world 

The future belongs to the small

Half a century ago, economist E.F. Schumacher argued: “Any intelligent fool can make things bigger and more complex. It takes a touch of genius — and a lot of courage — to move in the opposite direction.”

2025 proved him right. While enterprise giants cut jobs, successful SMBs stayed small, flexible and smart: thoughtfully embedding AI, reskilling from within, and tapping into the independent talent market to access skilled talent without accelerating headcount.

“The world is changing faster than ever,” shared Middleton. “The opportunity to do what you’re doing better is no longer limited just to large organizations.” 

In 2026, leaders must ask: will we shrink from disruption — or grow stronger because of it? 

Methodology

The Upwork Research Institute conducted surveys in Q1 (January–February 2025), Q2 (April–May 2025), and Q3 (July–August 2025) with 1,500 U.S.-based business leaders representing the manufacturing, business and professional services, software and technology, retail and consumer goods, and healthcare and medical industries. Four hundred and eighty-seven of the respondents represented SMB organizations, employing between 10 and 499 people. 

About the author

Dr. Gabby Burlacu is Senior Research Manager at Upwork, where she studies how organizations are adjusting their cultures and talent practices to access skilled talent in a rapidly evolving world of work. Her research has been featured in a variety of peer-reviewed studies, articles, book chapters, and media outlets, and has informed strategy and technology development across a range of Fortune 500 companies. Gabby holds a Ph. D. in industrial-organizational psychology from Portland State University.

About The Upwork Research Institute

The world of work is not the same as it was just a few years ago, and leaders are facing brand new challenges as a result. The old work playbook is gone, and in its place, there are debates and decisions around workforce location, worker arrangements, and flexibility. However, leaders do not need to navigate this new world of work on their own.

The Upwork Research Institute is committed to studying the fundamental shifts in the workforce and providing business leaders with the tools and insights they need to navigate the here and now while preparing their organization for the future. Using our proprietary platform data, global survey research, partnerships, and academic collaborations, we will produce evidence-based insights to create the blueprint for the new way of work.

Acknowledgments

The Upwork Research Institute would like to thank Anna Brown, Gabe Middleton, Jen Libby, Matthew Menashe, Padric Gleason, and McGuire Research for their contributions to this research report. 

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¹ Based on an analysis comparing the responses of leaders of larger enterprise organizations to SMB leaders on the following survey question: “How would you describe the current availability of qualified candidates in the labor market for your business needs?” with response options ranging from “Very scarce” to “Very abundant.” 

² Based on an analysis of quarter-over-quarter change in VSB (very small businesses, employing between one and nine people), SMB, and larger enterprise leader responses to the following survey question: “How confident are you in your organization's ability to adapt to macro-economic shifts?” with response options ranging from “Not confident” to “Extremely confident.” 

³ Based on Upwork data showing the top five SMB hiring categories in Q3 2025, by average contract size. Larger contract sizes typically denote more complex, longer-term work. 

⁴ Based on an analysis of responses to the following survey question: “What are the top factors impacting your organization’s performance this quarter?” Respondents were asked to select three factors from a longer list of macro stressors including inflation, supply chain challenges, technology disruption, and geopolitical uncertainty. In all three quarters, skill gaps represented a top three concern for SMB leaders.  

⁵ Survey and ethnographic research conducted in partnership with Zoom. Key insights were shared during Hayden Brown’s keynote presentation at Zoomtopia 2025.