Navigating 2026: What Middle-Market CEOs Should Expect and How to Prepare
Executive Summary
As 2026 approaches, middle-market companies, particularly those in the Pacific Northwest and similar trade-exposed, operationally intensive sectors, face a landscape of modest economic growth, persistent cost pressures, and strategic uncertainty. The leaders who thrive in this environment won’t necessarily be those with the biggest budgets or boldest visions; they’ll be the ones who execute with discipline, respond to change with speed, and make data-driven decisions with confidence.
Working alongside middle market CEOs and CFOs nationwide, Turning Point Strategic Advisors is helping leaders make smarter decisions as 2026 takes shape. This article outlines the key economic signals we’re tracking, the risks and opportunities we see for our clients, and the actions we recommend leaders take to stay ahead of a dynamic and demanding year.
Market Outlook: A Year of Cautious Momentum
While the reporting regarding the broader U.S. economy indicates that the country is not entering 2026 in a recessionary state, few expect a boom. Most major forecasts anticipate real GDP growth of approximately 2%, paired with a gradually easing, but elevated, cost environment. Labor markets remain tight, and wage pressures persist, particularly in jobs that require tacit skills and or highly technical roles.
For the middle market, “steady” macro conditions can still feel restrictive, translating to flattened demand curves, margin compression, and increased operational risk. As of September, many of our clients expected to fall short of their 2025 targets, not due to poor execution, but because top-line growth has slowed while cost structures remain elevated.
Here are three key economic characteristics heading into 2026:
Moderate GDP growth (~2%) with uneven demand across industries
Tight labor markets with sustained wage pressure
Elevated input and logistics costs with ongoing volatility
Geopolitical and policy uncertainty, particularly around tariffs, trade, and regulation
Strategic Implications for the Middle Market
The middle market’s strength lies in its agility, but 2026 will demand more. The firms that succeed will be those that combine operational rigor, technology adoption, and strategic foresight.
Our client engagements over the past 12 months reveal common patterns:
Companies that invested early in AI and digital tools are beginning to see efficiency.
Firms that didn’t focus on working elevated costs into their pricing, managing working capital, or building in supply chain flexibility are now playing catch-up.
Talent strategy has become a differentiator, especially in industries where skilled labor is critical to scale. In this tight labor market, hiring for potential and culture fit, not specific skill sets, can set the company up for success. At Turning Point, we call it Evergreen Hiring.
Opportunities: Technology and Competitive Dislocation
One of the clearest opportunities to do more with less in 2026 is applied AI. In the past year, nearly 90% of middle market firms have reported some level of AI investment. But only those who moved from experimentation to implementation are seeing returns. AI is proving valuable not just in customer service, but in pricing strategy, demand forecasting, and back-office automation.
Five Priority Actions for 2026 Execution
Based on our experience advising growth-stage, distressed, and transformation-stage companies, we recommend CEOs and CFOs take the following priority actions to ensure readiness for 2026:
Re-anchor Strategic Planning to a 2% Growth World
Assume modest top-line growth and build scenario-based flexibility into plans. Anticipate possible rate hikes, trade volatility, or demand softening. Identify operational and financial “triggers” that will dictate when to adjust pricing, hiring, or capital deployment.
Build a Focused AI Roadmap
Avoid scattered pilots. Instead, define 3–5 high-impact AI use cases (e.g., AR and AP automation, predictive procurement and inventory management, financial close automation, AI-driven business intelligence and data analytics) and align teams around rapid deployment, accessing the results or impacts, and learning for the next round. The Lean Start-Up concept of fail fast so you can learn faster certainly applies to deriving an ROI from AI investments.
De-risk Supply Chains
Diversify sourcing, develop secondary suppliers, and renegotiate contracts to allow for responsiveness to tariff shifts and logistics disruptions. Many companies that bought ahead of tariff impacts or didn’t fully price in the cost escalation are now facing compressed margins. Accessing the true cost of goods and working with customers and suppliers to navigate the impacts to gross margins will be critical in 2026
Redesign Talent Strategy Around Potential, Fit and Capability, Not Just Cost
Selectively invest in key hires. Upskill existing employees in digital tools and AI. Redesigning org structures to enhance productivity, rather than simply filling traditional roles, will be key in 2026.
Strengthen Balance Sheets and Preserve Optionality
Refinance debt where advantageous. Tighten working capital management by increasing inventory turns, negotiating better vendor terms, and preserving cash. Explore opportunistic M&A, particularly tuck-in acquisitions that provide talent, customer access, or operational leverage. With a strong Balance Sheet and operational synergies, there is capital available both in commercial lending and private credit to support strategic acquisitions.
Aligning Leadership, Outcomes, and Incentives
Well-run companies are increasingly aligning compensation and performance expectations around profitability, operational efficiency, and strategic transformation. CEOs should ensure internal scorecards reflect these priorities. Transparency, alignment, and unified communication will be critical in building resilience, driving cash flow, and unlocking value in an uncertain and complex 2026.
Sources
• Deloitte: U.S. Economic Outlook Q4 2025
• McKinsey & Co.: Middle Market AI Adoption Report, 2025
• National Association for Business Economics (NABE): Business Conditions Survey, December 2025
• PwC: CFO Pulse Survey, November 2025
