Post on 27-May-2015
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Greater Cleveland Middle-Market ForumJuly 24, 2012
in collaboration with
ChallengesGrowthChampions
Engine of Economy
Sustainable Job Growers
Resilient and Diverse
Community Pillars
Conclusions
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Middle Market
Indicator
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Large Corporations
Small Businesses ?
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Foundational, multi-sourced research
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Database Sources
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Comprehensive Survey
51%
C-Level Execs
2,028 C-level interviews (total)1,447 Middle Market decision maker interviews
16%
Principals(Partners/Owner)
24%
MD & EVP
9%
Company Officer
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Large Corporations
Small Businesses ?
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<$10M Annual Revenue
~6MBusinesses
35% Employment
Small Business ? Big Business
>$1B Annual Revenue
~2,000Businesses
31% Employment
? Annual Revenue
?Businesses
? Employment
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<$10M Annual Revenue
~6M Businesses
35% Employment
Small Business Middle Market Big Business
>$1B Annual Revenue
~2,000Businesses
31% Employment
$10M - <$1B Annual Revenue
195,000 Businesses
34%Employment
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The Middle Market is resilient.
In the face of extraordinary economic challenges and the recent recession, Middle Market businesses survived and grew.
82%
• Unprecedented credit crisis• Severe economic downturn • Sharply increasing commodity costs• Sweeping regulatory changes
Survivorship rate
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Small BusinessMiddle Market Big Business
97% 82% 57%
Survivorship Rate by Business Sector
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downsizing growing
- 2,000 jobs per business
big business
+20 jobs perbusiness
middle market
Jobs Contribution per Surviving Business (2007 – 2010)
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Community Pillars
Middle Market firms are foundations of their
communities, providing sustainable jobs and more
Small BusinessMiddle Market Big Business
71% 70%
16%
In business more than 20 years…
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“Supporting the communities we serve is probably the most important part of what we do.”
CFO, Wholesale Trade$500M and 2,150 employees
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Markets operated in
Middle Market
Big Business
43% 30% 27%
18% 22% 60%
Markets sourced from
Middle Market
Big Business
42% 35% 23%
20% 32% 49%
Local/Regional National Global
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The Middle Market is diverse in revenue,
geography, industry and structure
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11%
15% 46%46%
Operates more like smaller
businesses, despite revenues
$10-50M $50-100M $100M-$1B$100M-$1B
Consistent business practices;
project strong growth
Resemble multi-nationals
34% 15% 51%51%
80%
$9.3T revenue
195,00 firms
40.7 million employees 39%
9%9%
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The Middle Market is diverse and complex
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Middle Market DiversityOwnership Structure
Local/Regional National Global
FamilyOwned
Private
Public
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Geography
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Geography
Industry
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Middle Market Growth Champions
A unique subset we can learn from
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Middle Market Growth Champions
Distinguishing Characteristics
Sharper customer focus
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Middle Market Growth Champions
Distinguishing Characteristics
Broader geographic vision
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Middle Market Growth Champions
Distinguishing Characteristics
Invest in innovation
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Middle Market Growth Champions
Distinguishing Characteristics
Strong management
culture
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Middle Market Growth Champions
Distinguishing Characteristics
Superior talent management
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Where are we today?
Quarterly release of Middle Market Indicator (MMI)
MMI = forecasted revenue growth for the next 12 months
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• National Survey Of C-Level ExecutivesWhat…
• 1,002 financial decision makers in Private and Public Organizations with $10 million-<$1 billion in Gross RevenueWho…
• Field Period: June 8-19, 2012When…
• Self Administered Online SurveyHow…
• Past year growth• Anticipated growth• Confidence in economy• Challenges to growth• Detailed corporate profiling
Insight Areas
Research Methodology
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The Middle Market continues to be an engine of growth and job creation.
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Financial Performance – Total Middle Market
Middle Market Performance & ProjectionsPast Year Reported Gross Revenue Next 12 Month’s Revenue Outlook
Q1 6.9% 70% Firms Reported Growth 16% Firms Reported Decline 5.2% 69% Firms Reported Growth
9% Firms Reported Decline
Q2 6.1% 62% Firms Reported Growth 16% Firms Reported Decline 4.8% 61% Firms Expect Growth
6% Firms Expect Decline
The proportion of firms indicating growth in YOY revenues is lower in the 2nd Quarter
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• Growth is strongest among larger firms than smaller organizations.
• Those in the $50mm to $100mm segment are growing at a slower pace than their peers.
Base: Total Respondents
By Revenue Segment
$10M - <$50M $50M - <100M $100M – <$1B
2Q 1Q 2Q 1Q 2Q 1Q
(574) (558) (163) (186) (263) (258)
Mean Total growth 5.8% 6.0% 5.3% 6.5% 7.0% 8.3%
Past Year Financial Performance– Gross Revenue
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Past Year Financial Performance– Gross Revenue
Manufacturing, Retail Trade, and Healthcare lead the way while Construction remains a laggard.
By Industry
Services Manufact-uring
Wholesale Trade
Retail Trade
Construc-tion
Financial Services
Health-care Other
2Q 1Q 2Q 1Q 2Q 1Q 2Q 1Q 2Q 1Q 2Q 1Q 2Q 1Q 2Q 1QBase Total
Respondents (169) (157) (172) (176) (66) (66) (44) (47) (67) (63) (178) (168) (81) (53) (223) 272)
Mean Totalgrowth 8.5 7.2 7.3 9.8 5.1 6.9 4.5 7.9 6.5 1.6 7.5 7.4 5.1 9.3 6.1 5.6
Q2 Manufacturing, Financial Services and Services lead the way while Retail Trade has become the laggard.
Q1
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Previous Year Employment Growth – Total Middle Market
1.5% Total Growth
Increase
Stayed The Same
Decrease
Despite headwinds, the middle market continues to add jobs at the same rate as the 1st quarter.
2.0% Total Growth
2Q Total 1Q Total
Stayed The Same
Increase
Decrease
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Previous Year Employment Growth – Revenue Segment
Employment growth is stronger among midsized Middle Market Firms.
By Revenue Segment$10M - <$50M $50M - <100M $100M – <$1B
2Q 1Q 2Q 1Q 2Q 1QBase: Total Respondents (574) (558) (163) (186) (263) (258)
Total Growth (Mean) 1.7% 1.2% 2.5% 0.7% 2.2% 2.3%
Q2
Q1Employment growth was stronger among larger Middle Market Firms.
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Previous Year Employment Growth – Industries
2Q: Jobs grew most in:ServicesFin. ServicesManufacturingHealthcareConstruction
Total MM
2Q 1QBase: Total Respondents (1000) (1002)
Services +4.8% +2.0%
Manufacturing +2.6% +3.4%
Wholesale Trade +0.7% +0.5%
Retail Trade -0.4% +1.7%
Construction +1.1% -2.7%
Financial Services +3.6% +1.6%
Healthcare +1.9% +3.5%
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Employment Growth – Future Outlook 2Q Only
One third of middle market firms expect to add jobs over the next 12 months.
By Revenue Segment
$10M - <$50M $50M - <100M $100M – <$1B
Base: Total Respondents (574) (163) (263)Mean Total Growth 1.8 1.5 1.8
By Industry
Services Manufact-uring
Wholesale Trade
Retail Trade Construction Financial
Services Healthcare Other
Base: Total Respondents (169) (172) (66) (44) (67) (178) (81) (223)
Mean Total Growth 3.5 1.5 1.5 -0.1 2.9 2.0 2.2 2.2
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But going forward, there are headwinds…
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Confidence: By Geography
Confidence in both the Global and US economies is dramatically lower than in the 1st quarter.
Global Economy
US Economy
Local Economy
2Q 1Q 2Q 1Q 2Q 1QConfident
Somewhat confident
Somewhat not
confident
Not Confident
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Key Challenges – Total Middle Market
Highly/Very Challenging
2Q 1QThe cost of health care 90 92The cost of doing business 89 88Ability to maintain margins 85 86The uncertainty of how government actions will impact my business 85 81Ability to pass on increased commodity costs 79 75Ensuring compliance with regulation 75 69Ability to expand into new markets domestically 75 -Effectively managing through external change 73 76Ability to attract, train and retain talent 70 77Ability of your organization to innovate new products, services or processes 67 76Increased domestic competition 66 68Corporate tax issues 65 59
Healthcare costs and other margin pressures are most challenging to MM Leaders. Regulation and uncertainty of government actions are also key issues.
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Leaders are far more likely to hold an extra dollar as than in Q1.
Actions Likely with Additional $ - Total Middle Market
Hold Cash
Invest It
2Q Total
Hold Cash
Invest It
1Q Total
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The MMI – Middle Market Indicator
Goal: To provide an ongoing measure of the strength of the Middle Market that is predictive of growth, reliable in its reporting, and enhances NCMM’s thought-leadership reputation
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MMI Q1 = 5.2%MMI Q2 = 4.8%
MMI: Predicted Revenue Growth for the next 12 months
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The health of the Middle Market is vital to
overall U.S. prosperity
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National Center for the Middle Market
Research & Influence Corporate Outreach & Growth Accelerator
Student Learning & Experience
Become the nation’s thought leader in the Middle Market
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Research
Corporate Outreach
Student Activities
GrantsMiddle Market Indicator
White PaperExecutive Education
Growth Champion CEO Series
Middle Market Career FairFisher Invitational featuring a Middle Market Firm
www.middlemarketcenter.org
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www.middlemarketcenter.org
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in collaboration with
Greater Cleveland Middle-Market ForumJuly 24, 2012