Mid-Market Outlook: Companies Taking Action for Growth
Mid-market perspectives blog: Growth enterprise services
Posted by Tom McGee on August 22, 2012
Mid-market companies are the engines of the American economy. The numbers speak for themselves: the middle market produces revenue equivalent to 40% of the U.S. GDP and employs more people than the entire S&P 500.
Today it seems everyone is talking about this vital segment, but that wasn’t always the case. About eighteen months ago, we perceived a void in research and thought leadership devoted to the middle market. Since that time, we’ve published numerous reports examining this space and what mid-market executives are thinking – about the economy, their expectations for growth and plans for hiring - and doing – making investments in people and technology, increasing the health of their balance sheets, and taking steps to improve productivity. In fact, last week CNBC, on the recently relaunched Mighty Middle Market section of its website, posted an article I wrote about our most recent report, "Mid-market perspectives: 2012 report on America’s economic engine."
Our report revealed that compared to last year, mid-market companies are more optimistic about their individual growth prospects than they are about the overall economy, which encourages them to take action. They are planning to grow their companies through innovation, capturing higher-value customers, boosting revenue per customer, and improving customer loyalty. More companies are also escalating efforts to sell abroad. At the same time, many executives say that productivity — sales or profitability per employee — continues to improve. Their actions fall into three specific areas: talent, technology, and balance sheet health.
There is a growing consensus on the importance of leveraging existing talent within an organization, rather than dramatically increasing hiring; the watchword of 2012 is stability. The 528 executives we surveyed acknowledge the difficulty of finding qualified talent, a theme that seems to prevail despite high unemployment. Companies are increasing their emphasis on investing in current employees through training, which may mitigate the need for new hiring and is consistent with a more cautious approach to increasing the workforce.
Survey respondents also recognize the growing importance of technology. They continue to prioritize automation of business processes, data analytics, and business intelligence as triggers to increase productivity and areas where they are most likely to make investments in 2012. There seems to be a greater recognition of the benefits of cloud computing. In our September 2011 survey, it was recognized as a distant fourth as a means to increase productivity; this year 40% of respondents included cloud computing and software as a service among the top three tech investments for 2012. This represents a democratization of technology, providing access to previously unaffordable technology and allowing mid-market companies to better understand their markets, supply chains, customers, profitability and ultimately improve their competitiveness.
As for the strength of their balance sheets, mid-market companies report that balance sheets are healthier than they were one year ago, with 35 percent of respondents predicting higher cash balances and another 55 percent predicting them to remain stable in the coming year. They are being pragmatic in making investments while ensuring they have the financial capacity to withstand a potential downturn. This year’s survey also indicates the potential for more merger activity. When asked if they were “very likely” to be involved in a merger or acquisition in 2012, 18 percent responded “yes” as an acquirer (up from 11 percent last year) and 6 percent responded “yes” as a target (up from 3 percent last year).
America’s economic engine continues to drive growth, as mid-market companies move forward with determination. The actions of these companies will help them achieve meaningful economic growth – and while no one can predict what will happen over the next year, they just might help power the entire U.S. economy in the same direction.
I invite you to read more about our survey online, and stay tuned to this blog for more updates on America’s economic engine.