Nearly half (47%) of middle market CFOs (revenues ranging from $50 million to over $3 billion) predict double-digit growth in 2023, up from 32% one year before, according to BDO USA’s 2023 Middle Market CFO Outlook Survey. These projections follow an unexpectedly strong 2022, in which 79% of companies surveyed saw revenue and profitability growth.
This optimism is tempered by the threat of new and familiar risks. For the second year in a row, CFOs cite supply chain disruption as their top business risk, followed closely by economic volatility and geopolitical disruption. In light of these risks, middle market CFOs are prioritizing resilience; most plan to maintain or increase their investments in key areas like ESG and workplace technology, even if economic conditions worsen.
“Middle market CFOs are focused on the future, leaning into their mandate to foster sustainable growth,” said Wayne Berson, CEO of BDO USA. “To make the most of a slowing economy, this means leaning into the principles of strategic resilience and making smart investments to bolster operations while also empowering your people.”
Middle market CFOs
are prioritizing resilience;
most plan to maintain or increase
their investments in key areas
like ESG and workplace technology,
even if economic conditions worsen.
Investing In ESG, Employees
To weather uncertainty in 2023, middle market CFOs’ top strategies are ESG and cost optimization. Thirty-eight percent of CFOs say ESG investments have improved their organizational resilience, an indication that business leaders see sustainable business practices as a means to achieve stability in difficult times.
From greater business resilience to strengthened recruiting and retention, CFOs are realizing the benefits of ESG go far beyond improved ratings. Forty-one percent of CFOs plan to pursue ESG strategies over the coming year, and the vast majority (79%) will keep or maintain these investments even if economic conditions worsen.
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Despite high competition for talent and low unemployment rates, only 20% of middle market CFOs say a talent shortage poses a significant risk to their business this year, down from 38% in 2022. Many companies are no longer focused on hiring; instead, they are investing in their current workforce by directing resources toward increased training opportunities, including initiatives to upskill and re-skill employees.
Dealmaking Down, But Not Out
Although only 16% of CFOs plan to pursue an acquisition in 2023, down from 31% last year, overall interest in dealmaking activity remains robust. Thirty-one percent of CFOs are considering a sale to a strategic buyer or competitor, while nearly one-quarter (24%) expressed interest in private equity or venture capital investment.
Finally, new legislation including the Inflation Reduction Act (IRA) is driving concern among CFOs about the implications of tax policy changes on their businesses. Sixty-five percent of CFOs consider additional tax reform a business risk over the coming year — a majority, but less than the 79% who said the same last year.