Middle Market Resilience: Navigating Cost Pressures & The AI Equation

By Daniel Howard

Cleveland, OH – While macroeconomic headwinds continue to swirl, middle-market businesses are demonstrating surprising resilience, according to a new report from CBIZ, Inc. The company’s Q4 2025 Mid-Market Pulse reveals that businesses with revenues between $10 million and $1 billion are doubling down on cost discipline, strategic investments in technology – particularly AI – and workforce development to navigate rising costs and economic uncertainty.

The report, based on a survey of 500 mid-market leaders, found that 62% cite rising healthcare and employee benefit costs as a significant burden, while 59% are negatively impacted by tariffs and international trade policies. A further 36% struggle with the cost of capital and access to financing. Yet, despite these challenges, a significant 44% report that AI and digital transformation initiatives are benefiting their businesses, suggesting a cautious optimism about the future.

A Tightrope Walk: Balancing Costs & Growth

“Mid-market leaders are being incredibly deliberate about where they allocate capital,” explains a source within CBIZ. “They’re focused on managing costs, supporting their people, and making investments that will improve customer service and productivity. It’s about doing more with less.”

This sentiment is echoed by industry analysts. “We’re seeing a clear prioritization of efficiency and cost control,” says a financial analyst specializing in the mid-market. “Companies are scrutinizing every expense and looking for ways to streamline operations.”

Data from the Bureau of Labor Statistics (BLS) and the National Business Group on Health confirm the escalating cost of healthcare, with employee benefits costs increasing by 5.3% in 2025 and projected to rise another 8% in 2026. Tariffs, too, continue to impact input costs, particularly in manufacturing, with the US Census Bureau reporting a 12% increase in imported goods subject to tariffs in 2025.

Furthermore, the tightening credit market, marked by a prime rate reaching 8.5% in Q4 2025, is creating financing challenges for many mid-sized businesses. According to the Small Business Administration (SBA), 38% of these companies reported difficulty accessing capital in 2025.

The AI Dividend: Opportunity Amidst Uncertainty

Despite these pressures, a surprising number of mid-market companies are embracing AI and digital transformation. The CBIZ report highlights that 44% believe these technologies are benefiting their businesses, suggesting a willingness to invest in long-term solutions. This investment is not without risk, however, as some companies struggle to navigate the complexities of implementation and integration.

“The AI story in the mid-market is nuanced,” explains a technology consultant specializing in mid-sized businesses. “Companies that have a clear strategy and a well-defined use case are seeing positive results. But those that are simply jumping on the bandwagon without a plan are likely to be disappointed.”

Several key areas are driving AI adoption among mid-market companies:

• Automation: Automating repetitive tasks to improve efficiency and reduce labor costs.
• Data Analytics: Leveraging data to gain insights into customer behavior, market trends, and operational performance.
• Customer Service: Improving customer experience through AI-powered chatbots and personalized recommendations.
• Supply Chain Optimization: Using AI to predict demand, manage inventory, and optimize logistics.

However, the report also acknowledges that 7% of mid-market businesses report harm from AI, indicating that the technology isn't a guaranteed success. This points to a potential 'digital divide' where businesses with the resources and expertise to effectively implement AI are pulling ahead, while others are left behind.

Sectoral Variations: Who’s Feeling the Pinch the Most?

The impact of these economic pressures isn't uniform across all industries. The CBIZ report identifies construction, healthcare, and consumer products companies as being particularly vulnerable.

• Manufacturing: Tariffs on steel and aluminum are adding significant costs to projects, while rising healthcare benefit costs are impacting labor expenses.
• Healthcare: Hospitals are facing increased labor costs and pressure to improve efficiency and reduce costs.
• Construction: Difficulty accessing financing and rising material costs are delaying projects and impacting profitability.

“Companies in these sectors are having to make tough choices,” says a source familiar with the construction industry. “They’re looking for ways to cut costs, improve efficiency, and maintain profitability in a challenging environment.”

Navigating the Future: Resilience & Strategic Investment

The CBIZ Q4 2025 Mid-Market Pulse paints a picture of a resilient but cautious middle market. Companies are facing significant economic pressures, but they are responding by prioritizing cost control, investing in technology, and focusing on workforce development.

The role of AI is particularly noteworthy. While not a panacea, AI offers the potential to improve efficiency, reduce costs, and drive growth. However, successful implementation requires a clear strategy, a well-defined use case, and the right expertise.

As the economic landscape continues to evolve, the ability to adapt, innovate, and invest strategically will be crucial for middle-market businesses to thrive. Those that can successfully navigate these challenges will be well-positioned to capture opportunities and build long-term success.