Middle Market CEOs Show Renewed Confidence in Q3 2025

The latest RSM U.S. Middle Market Business Index (MMBI) shows that confidence among CEOs, business owners, and entrepreneurs in the middle market is rising again, signaling resilience despite economic challenges. The Q3 2025 MMBI registered 122.5, reflecting optimism about growth, investment, and hiring plans across the San Francisco Bay Area, Silicon Valley, East Bay, and nationwide.

For executives navigating increasingly complex markets, understanding these trends is critical. CFOs and business owners can leverage insights from the survey to make informed decisions on pricing, capital expenditures, workforce planning, and strategic investments.

Key Findings from the RSM Survey

1. Input Costs Remain Elevated

67 percent of middle market firms reported higher input costs, including wages, raw materials, and transportation. While many companies have absorbed these costs so far, unchecked increases could erode margins. For Bay Area and Silicon Valley businesses, where labor and operational costs are higher than average, managing cost pressures is a top priority.

2. Limited Pricing Power

Only 48 percent of firms were able to raise prices for their products or services. This mismatch between rising input costs and constrained pricing power creates a margin squeeze that middle market CEOs and entrepreneurs must address proactively. Companies that understand their value proposition and strengthen their customer messaging are more likely to maintain profitability without losing clients.

3. Cautious Investment Plans

• Capital Expenditures: 50 percent of firms plan to increase CapEx in the coming months.

• Hiring: 46 percent intend to expand headcount in the next six months.

• Inventory: 44 percent plan to increase inventories in anticipation of demand.

These indicators suggest cautious optimism. CEOs and business owners in the East Bay and San Francisco Bay Areashould assess their internal processes, technology investments, and operational efficiency to ensure that any spending is strategic and ROI-driven.

Implications for CFOs, CEOs, and Entrepreneurs

The survey highlights several trends that have specific implications for finance leaders, CEOs, and entrepreneurs:

1. Margin Management Is KeyHigh input costs paired with limited pricing power demand careful cost control. CFOs should work with CEOs to evaluate nonessential spending, renegotiate supplier contracts, and streamline operations to protect profit margins.

2. Strategic Capital AllocationWhile optimism encourages investment, middle market firms must prioritize high-impact CapEx. Investments in automation, SaaS tools, and supply chain efficiency can help offset rising costs and improve productivity, particularly for Silicon Valley tech and East Bay manufacturing firms.

3. Workforce Planning and RetentionHiring plans remain strong, but labor costs and talent competition are intense in the Bay Area. Companies should focus on targeted recruitment, upskilling programs, and retention strategies to maintain operational effectiveness without overextending budgets.

4. Scenario Planning for UncertaintyCEOs and entrepreneurs should develop multiple financial scenarios. What happens if inflation persists or if customer demand softens? Planning ahead allows leadership to act decisively, safeguard cash flow, and adjust hiring or investment timelines as needed.

Actionable Strategies for Bay Area Leaders

For CEOs, entrepreneurs, and finance executives in San Francisco Bay Area, Silicon Valley, and East Bay, these survey insights can inform several practical strategies:

A. Strengthen Pricing and Customer Value

• Conduct a pricing analysis to identify products or services that can absorb cost increases.

• Enhance customer communications to explain value and differentiation, reducing resistance to price adjustments.

B. Optimize Operational Efficiency

• Implement lean processes to reduce waste and boost margin.

• Automate repetitive tasks where possible to increase productivity without additional headcount.

  
  

C. Make Smart Investment Decisions

• Prioritize capital projects that improve cash flow or reduce operational risk.

• Delay non-essential spending until revenue trends stabilize, focusing instead on high-impact technology upgrades.

D. Build a Flexible Workforce Strategy

• Mix full-time, part-time, and contractor roles to adjust capacity according to market conditions.

• Invest in employee training and retention programs, especially in competitive markets like Silicon Valley.

E. Leverage CFO Expertise for Strategic Decision-Making

• CFOs should not only manage financial reporting but also act as strategic partners to CEOs and business owners.

• Analyze survey trends and internal financial data to provide forecasting, scenario modeling, and actionable insights.

Why This Matters for the San Francisco Bay Area

Middle market firms in the Bay Area, Silicon Valley, and East Bay operate in high-cost environments with intense competition for talent and investment. Rising input costs, uneven pricing power, and cautious investment plans make it crucial for business leaders to be proactive rather than reactive.

For CEOs and entrepreneurs, understanding the nuances of the RSM survey provides a data-driven foundation to make strategic decisions that protect margins, optimize resources, and fuel sustainable growth.

The Q3 2025 RSM survey confirms that middle market CEOs, business owners, and entrepreneurs remain cautiously optimistic, but success will require strategic action, disciplined financial management, and forward-looking leadership.

At CFO Growth Advisors, we help Bay Area CFOs, CEOs, and business owners translate these insights into practical strategies for growth, profitability, and operational efficiency. Whether it’s scenario planning, margin optimization, or capital allocation, our team provides guidance tailored to your business.

Schedule a consultation today and ensure your company navigates 2025 with confidence and clarity.