Business leaders continue to cite talent issues, inflation and supply chain concerns as top challenges across all industries. Other major factors influencing the rapidly changing business environment are cybersecurity risks and Environmental, Social, Governance (ESG) initiatives. But there is cause for optimism as leaders develop strategies and goals for greater efficiency, sourcing, staffing and sustainability.

In this annual outlook report, we offer perspectives on the business landscape over the last 12 months and impactful trends for 2023. We dive into key strategies and goals that can support a more robust operational and financial model for business leaders as they face rapid change.

The Rapidly Changing Business Environment

What top challenges are accelerating rapid change in the U.S. business environment? Let’s take a closer look at staffing and retaining talent, inflation and recession concerns; Environmental, Social, and Governance (ESG) issues; supply chain, and cybersecurity risk.

Staffing & Retaining Talent

Since late 2021, the economy has experienced the initial onslaught of the Great Resignation and a rise to something never heard before called quiet quitting. The rate of resignations and turnover increased rapidly and had a very near-term impact on business survival. As a result of insufficient staffing, companies have changed hours of operation, extended customer service wait times, and reduced or changed service and product offerings.

The longer-term impacts of talent turnover include the time and cost of onboarding and training new employees as well as maintaining and reinforcing the company’s culture consistently. There appears to be consistency across all industries that leaders feel the business and morale impacts of employee resignations.

Some strategies being used to retain talent have included higher priorities on leadership education and management development programs, learning and development for all staff, ensuring a work/life balance, hiring contract workers during peak workloads, making timely market adjustments, and communicating often with employees.

In a recent study with 25,000 Americans polled, nearly 90% of the people surveyed said, if offered, they would accept a flexible work option. There is a lot that goes along with flexible work options. To hire top talent, leaders are leaving the flexibility up to the candidate. In many cases, it’s whatever they want to do. Flexibility works best when people are doing their jobs well. Our talent at LBMC has the autonomy to do what they would like to do if job responsibilities are managed well. In our company, about 80% of our workforce has a hybrid arrangement. If the work is getting done and everyone is progressing in their careers, the long-term outlook is good.

Life has changed and that’s okay. Businesses have to change too. The fact is that remote and hybrid jobs are consistently being filled more rapidly. This has been more challenging for leaders in the manufacturing and distribution sector, transportation sector and the healthcare sector because they don’t have as many remote and hybrid work options.

It’s been said that people don’t leave a bad job; they leave a bad boss. While that could have been the case in the past, some of the more current factors for turnover include lack of communication from leadership, lack of growth and development options, work/life imbalance, below market salaries and lack of flexibility.

It’s not just about more money or an occasional catered lunch; it is how you sequence all of that together to build relationships that may have happened more naturally in a pre-COVID world.

We recently asked a group of business leaders, “What has been your biggest challenge in the past 18 months?” Thirty-seven percent (37%) responded “finding talent” while another 37% said they were struggling with all areas of finding and retaining talent and keeping up with client demands due to lack of talent. With more than half of leaders struggling with staffing issues, it is worth being strategic.

Try including your talent in corporate communications on operational or productivity issues you are having. Ask them how they would solve them with you. Among young professionals, you may find many innovative ideas for your recruiting and retention challenges, too. What is best for someone who entered the workforce 25 years ago is completely different from the needs of the new generation of workers.

Inflation and Recession

inflation and recession

In a recent Conference Board survey, 82% of CEOs globally reported facing upward pricing pressures from raw materials, wages and other products from suppliers. Just over half of CEOs expect the current inflationary environment to last into 2023 and beyond. To cope with these pressures, leaders are reviewing ways to lower costs and pass price increases downstream to customers. Some of the cost has been deferred to the customer with increased pricing, but companies are still taking a cut in their profit margins.

Prices have gone up about 8% in 2022 which is the highest inflation seen in almost four decades. It’s putting a lot of pressure on people and companies alike. Wages have gone up for a lot of industries, but they’re not going up as much as inflation has gone up.

Recession expectations are high. We polled a group of leaders, and more than 80% said they expect to see a recession in 2023. The Conference Board reported that about 60% of the CEOs polled expect a recession by the end of 2023. Most of the C-suite expect some sort of recession in 2023.

Supply chain

Expect an emphasis on supply chain resilience at a critical response level for leaders to gain momentum. Priorities will be focused on more environmental and social responsibilities as well as on transparency.

We’ve seen a lot of disruptions in the supply chain due to the pandemic, and it’s forcing businesses to adapt. Business leaders must take what they learned from the pandemic and improve supply chains to be more sustainable moving forward. Some companies are in-sourcing to shift dependency off vendors and on the flip side, some companies are totally outsourcing supply chain jobs because it’s been hard to fill those positions.

Circular supply chain is trending more now versus a linear supply chain. An example of this would be that instead of discarding items at the end of a cycle, those items are being refurbished and used as part of raw materials versus just scrapping them and buying new raw materials.

Technology will continue to play a significant role in improving supply chains. This includes software integration and having one platform or system to be used for invoicing and payment. It also includes end to end supply chain management and visibility tools.

Environmental, Social, and Governance (ESG)

About 70% of middle market business leaders are focused on ESG initiatives with economic opportunity and equality as a top priority. Additional areas of focus include labor conditions, gender equality, public health, human rights and racial equality.

Consumers are making purchasing decisions by prioritizing factors such as ecological impact and sustainability when they choose who to buy from. In addition, environmental, social and governance factors can have a material impact on future business profitability due to the global and interconnected nature of many industries. The war in Ukraine is an obvious example, but natural disasters as well as unsustainable fiscal policies also create market risk.

Having an ESG process strategy in place (or beginning to develop one) will be important for leaders to consider in 2023. Several ESG reporting frameworks and disclosure requirements are already in play to standardize global reporting in the future, making a proactive strategy important in the C-suite.

Cybersecurity and risk

Cybersecurity has been a consistent topic in businesses for the past few years and will likely continue as technology advances. Many attacks are due to human error and are preventable with training.

User Awareness

Larger amounts of money are being allocated in company budgets to be spent on cybersecurity and security awareness training to prevent cyber-attacks. Companies are increasing user awareness on phishing and other types of scams and improving password strengths.

Attacks on Healthcare

Certain sectors will be more vulnerable to cybersecurity because of the amount of information and the type of information that they deal with. The financial sector and healthcare sectors have seen a significant increase in the number of cyber-attacks. In the last three years, healthcare companies have seen attacks increase over 80%.

Cloud Security

As more and more businesses move data storage to the cloud, careful attention to sensitive data being transferred to the cloud is a must. Continue to expect more security improvements and innovative ways to make sure data is secure and to prevent cyber-attacks.

General Data Protection Regulation (GDPR) Continues

GDPR is a European Union data privacy policy with global implications for all businesses. And while it is aimed at EU citizens, it affects any global business that operates in a European market.

Targeting of Mobile Devices

Over two thirds of the world owns or uses a smartphone. As we see more devices connect to a network, more opportunities for someone to gain active access to data that they shouldn’t have increases. Smartphones are becoming the method of choice for cyber attackers because they’re able to gain access to a lot of data. Companies must continue to ensure they have procedures in place to prevent access, as well as train employees to make sure they understand potential cyber-attacks.

Growth Opportunities and Optimism

Strategic Business Priorities and Goals


According to a recent Gartner survey of over 400 senior business leaders, more than half of CEOs place growth as the top strategic business priority and goal for 2023. This goal has faded over the past year and may continue to drop in the list as leaders prepare for possible upcoming inflation that could affect their business. Tech-related issues were more of a priority during the pandemic lockdowns but are still a priority at 34%. Moving up the list this year, we are seeing greater importance placed on the workforce, up 32% from 2021. Many employees want a more hybrid environment with flexibility, which affects technology needs in that more security is necessary to keep employees and company data secure.

New to the list we see environmental sustainability, up 292% from the previous year. More consumers want businesses to be more transparent with their standards and are using it to make purchasing decisions.

Business Challenges


Source: The National Center for the Middle Market Mid-Year Report

Top internal and external business challenges continue to align with core business issues, including revenue and sales growth, customer satisfaction, and retention. Since it costs more to get a new customer than retain a customer, businesses are focused on improving customer service and making sure clients are satisfied.

In addition, half of the middle market leaders cite issues with talent management as another key internal challenge. Retaining employees and finding new talent to meet needs continues to be difficult.

Costs both internally and externally also top the list as challenges for 2023. With increasing costs working within the supply chain, identifying opportunities to improve costs and not transferring entire increases to the consumer is a common tactic throughout all sectors.

Top Growth Opportunities

Business leaders are reviewing new market growth areas to increase their market share. There are multiple government policies that leaders can take advantage of including effective energy transaction transition plans, increased investments in infrastructure, or increased investments in research and development. These are just small ways that businesses could increase their market growth.

Review potential for strategic alliances with both vendors and customers. The goal isn’t to only cut costs but also to work together effectively and maintain the relationship.

When looking to enter new markets and introduce new products and services, there are multiple areas that a business could pursue. Enhancing customers’ digital experience is just one possible area. Another area is digital transformation within the business to adopt technology to create better processes that will decrease business expenses moving forward. Automating certain processes to more effectively utilize employees’ time and then upskilling the existing workforce will help employees to be more effective and satisfied.

Digital Transformation Trends

Digital transformation is the adoption of digital technology by an organization to digitize non-digital products or services or operations, which means taking what is not digital and making it digital. The reality is that digital transformation can be anything. It’s customer experience, employee experience, leadership experience, and governance experience. It is an experiential type of investment and experiential type of spend.

Reducing costs by automating processes to optimize the supply chain and working with vendors to solve issues on both sides of the table will continue to be big trends. Utilizing all features within large systems could eliminate the need for additional smaller systems that do the same function. Another example is realizing that a large system isn’t necessary and a smaller system that costs less would work better.

Independent consultants can audit business processes, point out areas that can be automated, and find areas they can help improve. Reducing the time needed on repetitive processes will free up employee time to discover other growth areas for the business.

According to ElevatIQ, the top 10 digital transformation trends in 2023 are as follows:


Business Performance/ Strategies

In a recent survey of business leaders, we asked what their company’s sales strategy would be moving into 2023, and they responded that improving productivity and efficiency as well as decreasing operating expenses would be the primary focus.

Sales & Profitability Strategies

There are many ways to make a company profitable. With compressed margins, it’s always good to take an intentional look at spending. Being in an inflationary period, it’s especially important to understand and determine the impacts or benefits of capital spending.

Capital Spending

It’s somewhat surprising that our survey results show automation so far down the list at 32%. It could be with digital transformation coming in at 58% that business owners just consolidate those items or view them as similar investments.


Source: The Conference Board

Mergers & Acquisitions

The current private equity (PE) dealmaking landscape continues to be challenging. It was hard to get diligence providers during 2021 due to the demand, but now leaders are doing a bit more cybersecurity diligence as part of what would normally be financial and tax diligence. PE firms can be patient and strategic, but they’ve seen valuations come down. As a leader, be thoughtful about projecting versus relying on a trend that hasn’t been consistent.

The understated risk here is that some sellers are out there thinking, “I missed my chance when valuations were high.” It all comes back to relationships and trust between those who would like to own your business and the sellers who are either exiting completely and want their company in good hands or who are going to sign up for another four or five years with or without their PE firm.

Mergers & Acquisitions

Mergers & Acquisitions

2021 was a record year for mergers and acquisitions. From a transaction advisory perspective, shops were referring work that they would normally love to other bigger and/or national diligence shops. However, not as many huge deals happened in 2022 as did in 2021.

There have been declines in both investment and exits since March 2022. On the investment side, there are a lot of funds on the sidelines right now which has shifted focus to add-ons. There are still more investments than there are exits.

Mergers & Acquisitions



Companies in all industries are facing staffing issues and talent gaps in their workforce to keep pace with growth and technology – Upskilling, leadership development, automation and workplace culture initiatives will be critical to sustain productivity and market agility.

Inflation will be a factor throughout 2023 with increasing concerns about flat or negative GDP (and recession) – Cash flow analysis and pricing strategies will assist with short-term needs while long-term negotiations with business partners and customer-focused incentives will support loyalty and referrals.

Supply chains are recovering in some areas and experiencing the ripples of suspended or decreased production and transportation in other areas – Leaders should continue to strengthen supply chain relationships while seeking alternative sourcing, being careful with strategic stockpiling or warehousing of only the most critical materials and products. Project management upskilling and technology solutions such as ERPs and end to end visibility tools will be valuable investments.

ESG is an emerging reality that will impact financial reporting and valuations as well as consumer expectations and buying patterns – Study existing frameworks and check with your advisors on how ESG initiatives can align with your corporate core values and strategic goals.

Cybersecurity is the silent threat of any industry, with solutions arriving in the form of blockchain as well as stronger security protocols – The primary solution for businesses is staff training to identify and mitigate the risks of cyber breaches, especially in a more hybrid and remote work environment.

Digital transformation is part of every business leader’s toolkit, and it will look different in every company – Automating repetitive processes, adding tools that increase work efficiency and employee health, leveraging data analytics for smarter business decisions and improving the customer experience are all ways to make technology work for you.

Merger and acquisition activity has cooled off from a peak in 2022, but strategic M&A can support staffing and sourcing challenges while also strengthening finance for innovation – Identify long-term growth goals and opportunities that favor bringing certain specialties in-house or expanding them. Divest of product or service divisions that don’t offer long-term value. If planning to sell, invest in cyber, finance and tax advisory for the highest valuation and increased prospective buyers.

Growth projections across industries are trending lower for 2023, with CEOs focusing on their workforce, innovation and customer experience – Establishing a positive workforce culture aligns with fresh ideas for products and services along with a focus on agile and personalized customer experiences. These pillars support stronger operational infrastructure and cash flow as companies continue to digitize, build new relationships and secure their futures.

Contact your advisors at LBMC for further insights and guidance.