Middle market companies – those with annual revenues of $10 million to $1 billion – represent 197,000 U.S. businesses and one-third of the private sector GDP, and employ approximately 43 million people and as such can be a real barometer of the overall U.S. economic condition. RTi Research conducts an ongoing quarterly study among C-level executives for The National Center for the Middle Market (a partnership between GE Capital and The Ohio State University Fisher College of Business).
In the most recent Middle Market Indicator 3Q 2015, nearly two-thirds of the firms surveyed continued to report improved overall performance versus a year ago. Mean total revenue growth rate is slightly higher than in the second quarter of the year. But the tracking research also indicates that MM firms anticipate declines in revenue growth in 4Q 2015, with expectations of this softening extending into 2016.
Some of the key findings from the 3Q study:
Continued but slower expected revenue growth
- In 3Q 2015, middle market companies reported mean total revenue growth rate of 7.2%, up slightly over the 2Q rate of 6.6% and just below the 7.6% reported in 3Q a year ago. But in 3Q, significantly fewer MM firms expect growth over the ensuing 12 months than last quarter (49% vs 60%), a clear indication of tempered revenue generation expectations.
- In 3Q, mid-market sector firms continue to hire at rates comparable with 2Q levels (4.1% vs. 3.9%, respectively), with similar proportions indicating work force increases (42% now and 46% in 2Q).
Talent and regulation remain key concerns
- Long- and short-term challenges focus on maintaining a skilled workforce and compliance with government regulations. Appropriate staffing and employee retention are key challenges. Salaries, flexible work arrangements, employee training, and health care insurance are factors seen as impacting talent retention.
MM Service Industries are faring better
- Firms in the Retail, Financial Services, and Service industries report more positive performance outcomes and expectations for 2016 than those in other industry verticals.
For those of you who are also in the middle market, how are these trends impacting your businesses in fiscal 2015? What about expectations and customer insights research planning for 2016?
As market researchers, we always welcome hearing from those of you at the forefront of the marketplace.