Recently a colleague of mine sent me a link to a study recently published by Deloitte. She thought I might find it of interest because it was based on a survey earlier this year of middle-market business owners. Given that this publication is dedicated to developing a dialogue with this group, I certainly was interested.
In February of 2011, Deloitte in conjunction with the Economist Intelligence Unit (EIU) conducted a survey of over 500 private and public middle-market companies in the U.S. The survey was quite comprehensive covering a wide range of topics, including questions about pre- and post-recession metrics, growth plans, and the general outlook regarding the future of the companies and the economy. The findings were quite compelling.
Many of you are aware of just how vital the U.S. middle market is to the engine of our economy. According to the EIU, the middle market generates $6.1 trillion in revenue (this survey included companies with revenues from $50 million to $1 billion), which is about 40% of the entire U.S. GDP. In addition, this group employs 24.6 million people. So the middle market is possibly the most important component of our economic health. To keep all of this in perspective, take a look at the following graph.
Middle Market Annual Revenues and Total Employees
Source: Deloitte’s Mid-Market Perspectives – 2011 Report on America’s Economic Engine
Only the S&P 500 with $8.3 trillion in revenue is larger than the U.S. middle market and none of these segments employ more people. Based on this data, it is clear that the middle market’s perspective is critical to where the economy and the country is heading. Or as Deloitte describes it in the study:
“The success, struggles, and decisions of mid-market businesses have a profound influence on the national unemployment rate, consumer confidence, investment spending, and the general health of the American economy. Understanding what the middle-market is thinking and where it’s moving today is critical to understanding where the U.S. economy is heading.”
I would concur with this assessment. And that is why I find the study’s insights into the middle market’s perspective so fascinating. Overall, here is a sampling of the results of this survey (if you want to download a copy of the full study, you can do so by clicking here).
- Growth: About 93% of the respondents expect the economy to grow and around. 81% expect their company’s revenue to increase in 2011.
- Productivity: 72% of the middle market report that productivity is higher than it was pre-recession.
- Employment: Nearly 70% plan on hiring new, full-time employees in 2011.
- Global Reach: 34% of the firms surveyed are planning to expand globally in 2011.
- Capital: Despite a tight capital environment, 38% plan to pursue and obtain financing to expand in 2011.
These findings would indicate to me that the middle market is very confident about the future, especially through the end of 2011. The 81% expecting growth in 2011 will be focusing on the areas featured in the graph below.
Middle Market Growth Strategies
Source: Deloitte’s Mid-Market Perspectives – 2011 Report on America’s Economic Engine
Based on the graph, you can clearly see the optimism in the mid-market community. Expanding target markets, and upselling or cross-selling in the U.S. indicates that respondents are expecting demand to grow for their products and services in 2011.
One very interesting finding is that the recession has had a “Darwinian effect” on the middle market. The companies that have survived and are now positioned for solid growth are clearly separated from those companies that were unable to adapt, change and evolve into the new “normal.” Those that have survived are more nimble, more responsive to changes in the market, and have a new adaptability that they did not have prior to the recession and its effects. As one survey respondent put it, “Our attitude was ‘never waste a crisis.’ A crisis requires quick change and if you are able to respond quickly, it offers opportunities. You can seize the moment or let it pass.”
The Deloitte survey validates other surveys I have seen so far this year. Namely, that the engine of the U.S. economy, the middle market, is much more resilient and optimistic than it is given credit for. And since most of the press coverage focuses on the very large public companies in the U.S., the sentiments of the middle market are not widely heard or analyzed. The Deloitte study does a great job in helping all of us be aware of where the mind set of this key segment of our economy is regarding the economy and its growth.
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