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.

Published in: Business, Economy & Finance

Middle Market Research Presentation

  1. 1. 1
  2. 2. Engine of Sustainable CommunityEconomy Job Growers Pillars Conclusions Growth Resilient ChallengesChampions and Diverse 2
  3. 3. SmallBusinesses ? Large Corporations 3
  4. 4. Foundational,multi-sourced research 4
  5. 5. Database Sources 5
  6. 6. Comprehensive Survey 2,028 C-level interviews (total) 1,447 Middle Market decision maker interviewsPrincipals C-Level Execs MD & EVP Company Officer(Partners/Owner) 16% 51% 24% 9% 6
  7. 7. SmallBusinesses ? Large Corporations 7
  8. 8. Small Business ? Big Business <$10M ? >$1BAnnual Revenue Annual Revenue Annual Revenue ~6M ? ~2,000 Businesses Businesses Businesses 35% ? 31% Employment Employment Employment 8
  9. 9. th the U.S. largestMiddle Market global is the economy MM $3.8 Trillion in Private Sector GDP 9
  10. 10. Small Business Middle Market Big Business <$10M $10M - <$1B >$1BAnnual Revenue Annual Revenue Annual Revenue ~6M 195,000 ~2,000 Businesses Businesses Businesses 35% 34% 31% Employment Employment Employment 10
  11. 11. The Middle Market is resilient.In the face of extraordinaryeconomic challengesand the recent recession,Middle Market businessessurvived and grew. 11
  12. 12. 82% Survivorship rate• Unprecedented credit crisis• Severe economic downturn• Sharply increasing commodity costs• Sweeping regulatory changes
  13. 13. Survivorship Rate by Business Sector 97% 82% 57% Big Business Middle Market Small Business
  14. 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. 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. 16. Community Pillars Middle Market firms are foundations of their communities, providingsustainable jobs and more 16
  17. 17. In business more than 20 years… 71% 70% 16% Big Business Middle Market Small Business
  18. 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. 19. Markets operated inMiddle Market 43% 30% 27% Big Business 18% 22% 60% Markets sourced fromMiddle Market 42% 35% 23% Big Business 20% 32% 49% Local/regional national Global 19
  20. 20. The Middle Market is diverse in revenue,geography, industry and structure 20
  21. 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. 22. The Middle Market isdiverse and complex 22
  23. 23. Ownership Middle Market Diversity Structure Public Private Family Owned Local/Regional National Global
  24. 24. TheMiddleMarket Geography 24
  25. 25. 11.7% NY/NJ 6% 5.7% New Mountain England Plains18.6% 20.9%Western Midwest 10.1% Mid Atlantic 10.6% 16.4% S. West S. East 25
  26. 26. TheMiddleMarket Geography Industry 26
  27. 27. Middle Market Industry Diversification 17.3% 0.7% 13.8% $ Agriculture, Forestry 8.4% & FishingManufacturing Financial , Insurance & Wholesale 5.4% Real Estate 9.3% Transport & Communication Construction 31.3% Services 12.4% 0.8% 0.6% Holding CompaniesMining Retail 27
  28. 28. TheMiddleMarket Geography Industry Structure 28
  29. 29. Ownership Structure Big Business13% 20% 67% 1% Middle Market 31% 40% 14% 5% Small Business 50% 37% 4% 9% Other 29
  30. 30. TheMiddleMarket Geography Industry Structure 30
  31. 31. Comprehensive Survey 2,028 C-level interviews (total) 1,447 Middle Market decision makers interviewsPrincipals C-Level Execs MD & EVP Company Officer(Partners/Owner) 16% 51% 24% 9% 31
  32. 32. You are… Optimistic 32
  33. 33. 80%expect to grow in 2012
  34. 34. You are… Optimistic Generating Growth 34
  35. 35. more than1 in 4 Big businesses 1⁄ 3 were Middle reported 10%+Market companies revenue growth five years ago vs. 2007/2008
  36. 36. Yetchallengingheadwinds remain… 36
  37. 37. Externalheadwinds Economy 37
  38. 38. Level of confidence is low in all economies:17% 16% 14% (local) (national) (global)
  39. 39. Externalheadwinds Economy Inflation 39
  40. 40. 37%Are unable to pass onrising commodity coststo their customers
  41. 41. Externalheadwinds Economy Inflation Access to Capital 41
  42. 42. 55%Don’t have sufficientaccess to capital markets
  43. 43. Externalheadwinds Economy Inflation Access to Capital Global Competitiveness 43
  44. 44. 45%Are challenged byinternational competition
  45. 45. Externalheadwinds Economy Inflation Access to Capital Global Competitiveness Regulation 45
  46. 46. 71% by regulatoryAre challengedcompliance75% by cost of complianceAre challenged
  47. 47. Middle MarketGrowth Champions A unique subset we can learn from 47
  48. 48. All projected +10%growth this year and next the 9% “Growth Champions”All growing at 3 to 5times rate of GDP growth
  49. 49. Middle MarketGrowthChampionsDistinguishing Sharper customer focusCharacteristics Broader geographic vision Invest in innovation Strong management culture Superior talent management 49
  50. 50. Middle MarketGrowthChampionsDistinguishing Sharper customer focusCharacteristics 50
  51. 51. GrowthChampions 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. 52. Middle MarketGrowthChampionsDistinguishing Sharper customer focusCharacteristics Broader geographic vision 52
  53. 53. GrowthChampions Rest of MM 65% Take advantage of new geographic markets 39% 61% Find new opportunities in fast growing foreign markets 37% 53
  54. 54. Middle MarketGrowthChampionsDistinguishing Sharper customer focusCharacteristics Broader geographic vision Invest in innovation 54
  55. 55. GrowthChampions 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. 56. Middle MarketGrowthChampionsDistinguishing Sharper customer focusCharacteristics Broader geographic vision Invest in innovation Strong management culture 56
  57. 57. GrowthChampions 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. 58. Middle MarketGrowthChampionsDistinguishing Sharper customer focusCharacteristics Broader geographic vision Invest in innovation Strong management culture Superior talent management 58
  59. 59. GrowthChampions 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. 60. Middle Market Conclusions 60
  61. 61. The health of the Middle Market is vital to overall U.S. prosperity 61
  62. 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. 63
  64. 64. What’s Next? 64
  65. 65. Begin Middle MarketNational Dialogue and Advocacy The rest of today…
  66. 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
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