Middle Market Research Presentation
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Virtually ignored by the media, one of the most important drivers of America’s economy flies largely under the radar. It accounts for a third of private sector GDP and jobs, and has been growing even over the past four difficult years, yet it gets little attention from policy makers or the public. This overlooked, perhaps surprising, force in U.S. business? The Middle Market segment.
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Middle Market Research Presentation
- 1. 1
- 2. Engine of Sustainable Community Economy Job Growers Pillars Conclusions Growth Resilient Challenges Champions and Diverse 2
- 3. Small Businesses ? Large Corporations 3
- 5. Database Sources 5
- 6. Comprehensive Survey 2,028 C-level interviews (total) 1,447 Middle Market decision maker interviews Principals C-Level Execs MD & EVP Company Officer (Partners/Owner) 16% 51% 24% 9% 6
- 7. Small Businesses ? Large Corporations 7
- 8. Small Business ? Big Business <$10M ? >$1B Annual Revenue Annual Revenue Annual Revenue ~6M ? ~2,000 Businesses Businesses Businesses 35% ? 31% Employment Employment Employment 8
- 9. th the U.S. largest Middle Market global is the economy MM $3.8 Trillion in Private Sector GDP 9
- 10. Small Business Middle Market Big Business <$10M $10M - <$1B >$1B Annual Revenue Annual Revenue Annual Revenue ~6M 195,000 ~2,000 Businesses Businesses Businesses 35% 34% 31% Employment Employment Employment 10
- 11. The Middle Market is resilient. In the face of extraordinary economic challenges and the recent recession, Middle Market businesses survived and grew. 11
- 12. 82% Survivorship rate • Unprecedented credit crisis • Severe economic downturn • Sharply increasing commodity costs • Sweeping regulatory changes
- 13. Survivorship Rate by Business Sector 97% 82% 57% Big Business Middle Market Small Business
- 14. Western Middle Market Companies Net Jobs Contributions: 2007 - 2010 -37,528 New England +192,483 MM Midwest +2.2M +459,917 Jobs Big Biz NJ & NY Mountain- -3.7M Jobs +369,296 Plains +162,383 Mid Atlantic Southeast +330,154 Southwest +372,735 +323,715 14
- 15. Jobs Contribution per Surviving Business (2007 – 2010) big business middle market +20 - 2,000 jobs per business jobs per business downsizing growing 15
- 16. Community Pillars Middle Market firms are foundations of their communities, providing sustainable jobs and more 16
- 17. In business more than 20 years… 71% 70% 16% Big Business Middle Market Small Business
- 18. “Supporting the communities we serve is probably the most important part of what we do.” CFO, Wholesale Trade $500M and 2,150 employees 18
- 19. Markets operated in Middle Market 43% 30% 27% Big Business 18% 22% 60% Markets sourced from Middle Market 42% 35% 23% Big Business 20% 32% 49% Local/regional national Global 19
- 20. The Middle Market is diverse in revenue, geography, industry and structure 20
- 21. $10-50M $50-100M $100M-$1B Operates more like Consistent business Resemble smaller businesses, practices; project multi-nationals despite revenues strong growth $9.3T revenue 34% 15% 51% 195,00 firms 80% 11% 9% 40.7 million employees 39% 15% 46% 21
- 22. The Middle Market is diverse and complex 22
- 23. Ownership Middle Market Diversity Structure Public Private Family Owned Local/Regional National Global
- 24. The Middle Market Geography 24
- 25. 11.7% NY/NJ 6% 5.7% New Mountain England Plains 18.6% 20.9% Western Midwest 10.1% Mid Atlantic 10.6% 16.4% S. West S. East 25
- 26. The Middle Market Geography Industry 26
- 27. Middle Market Industry Diversification 17.3% 0.7% 13.8% $ Agriculture, Forestry 8.4% & Fishing Manufacturing Financial , Insurance & Wholesale 5.4% Real Estate 9.3% Transport & Communication Construction 31.3% Services 12.4% 0.8% 0.6% Holding Companies Mining Retail 27
- 28. The Middle Market Geography Industry Structure 28
- 29. Ownership Structure Big Business 13% 20% 67% 1% Middle Market 31% 40% 14% 5% Small Business 50% 37% 4% 9% Other 29
- 30. The Middle Market Geography Industry Structure 30
- 31. Comprehensive Survey 2,028 C-level interviews (total) 1,447 Middle Market decision makers interviews Principals C-Level Execs MD & EVP Company Officer (Partners/Owner) 16% 51% 24% 9% 31
- 32. You are… Optimistic 32
- 33. 80% expect to grow in 2012
- 34. You are… Optimistic Generating Growth 34
- 35. more than 1 in 4 Big businesses 1⁄ 3 were Middle reported 10%+ Market companies revenue growth five years ago vs. 2007/2008
- 37. External headwinds Economy 37
- 38. Level of confidence is low in all economies: 17% 16% 14% (local) (national) (global)
- 39. External headwinds Economy Inflation 39
- 40. 37% Are unable to pass on rising commodity costs to their customers
- 41. External headwinds Economy Inflation Access to Capital 41
- 42. 55% Don’t have sufficient access to capital markets
- 43. External headwinds Economy Inflation Access to Capital Global Competitiveness 43
- 44. 45% Are challenged by international competition
- 45. External headwinds Economy Inflation Access to Capital Global Competitiveness Regulation 45
- 46. 71% by regulatory Are challenged compliance 75% by cost of compliance Are challenged
- 47. Middle Market Growth Champions A unique subset we can learn from 47
- 48. All projected +10% growth this year and next the 9% “Growth Champions” All growing at 3 to 5 times rate of GDP growth
- 49. Middle Market Growth Champions Distinguishing Sharper customer focus Characteristics Broader geographic vision Invest in innovation Strong management culture Superior talent management 49
- 50. Middle Market Growth Champions Distinguishing Sharper customer focus Characteristics 50
- 51. Growth Champions Rest of MM 72% Successfully strengthen customer relationships 53% Industry leading marketing 44% and communications capability 28% 41% Have a social media strategy 20% 51
- 52. Middle Market Growth Champions Distinguishing Sharper customer focus Characteristics Broader geographic vision 52
- 53. Growth Champions Rest of MM 65% Take advantage of new geographic markets 39% 61% Find new opportunities in fast growing foreign markets 37% 53
- 54. Middle Market Growth Champions Distinguishing Sharper customer focus Characteristics Broader geographic vision Invest in innovation 54
- 55. Growth Champions Rest of MM 66% Innovators in new processes 43% 54% Invest in innovation & new product development 29% 44% Dedicated funding for R&D 25% 55
- 56. Middle Market Growth Champions Distinguishing Sharper customer focus Characteristics Broader geographic vision Invest in innovation Strong management culture 56
- 57. Growth Champions Rest of MM 66% Set formal annual growth targets for each fiscal year 31% 58% Have formal process to track growth targets 33% 61% Contain costs through operating efficiency 37% 57
- 58. Middle Market Growth Champions Distinguishing Sharper customer focus Characteristics Broader geographic vision Invest in innovation Strong management culture Superior talent management 58
- 59. Growth Champions Rest of MM Recruiting 53% power to attract the skill levels required 28% Variable employee 55% compensation based on growth targets 28% 29% Emphasis on employee training & education 17% 59
- 60. Middle Market Conclusions 60
- 61. The health of the Middle Market is vital to overall U.S. prosperity 61
- 62. Key Middle Market Learnings • Huge U.S. economic contributor • Resilient - job creator even in tough times • Foundation of communities • Diverse and complex • Much to learn from Growth Champions
- 63. 63
- 64. What’s Next? 64
- 65. Begin Middle Market National Dialogue and Advocacy The rest of today…
- 66. Begin Middle Market National Dialogue and Advocacy • Increase understanding of the Middle Market • Strengthen andIncrease and Attract the best build capabilities Strengthen and • Attract the best and of today… to The rest brightest talent brightest talent of understanding to build capabilities Middle MarketMiddle Market firms Middle Market firms the
- 67. 67