There’s been increasing attention on middle market companies (an under-defined group, but somewhere in the $5M to $1B revenue range) as the unsung heroes of the US economy. This relatively small group of 200,000 is responsible for 35% of the employment and 40% of GDP. With over 27 million total businesses in the US of which 6.2 million hire employees, it’s safe to say that the middle market is doing it fair share and then some.
The middle market may be small in number, but it’s a feisty and diverse cohort of highly productive businesses. These companies, in some way, have been vetted by the size they have grown to. You don’t just stumble into $10 million of revenue; it means there’s something distinctive in your products, services, or business model that makes it scalable and capable of growth. Being $10-million-in-revenue-successful likely means you’ve got the chops to get to $50 or $100 or $500 million. The middle market is where high performance economic engines have self-selected, raised their hand, and said “I’ve demonstrated the potential to grow, innovate, and create jobs.” This is the time to support them.
But, despite these staggering statistics middle market firms do suffer from a lack of support and attention. Politicians sing the praises of small businesses that enrich our communities and extend them direct assistance via the SBA. Large corporations enjoy the benefits from the Wall Street finance machine and use their substantial resources for lobbyists and influence. Middle market firms don’t get these benefits and it’s hurting them not just domestically, but in the global market place.
It’s becoming harder for middle market firms to rely on domestic customers. Like their Fortune 1000 counterparts, they need to become globally competitive and need support to do it. Succeeding in places beyond US borders is becoming a necessity not just for these firms but also to the US’s success in maintaining global competitiveness. Mid-sized companies face many challenges when it comes to exporting and expanding internationally; lack of resources, unknown market risks, and complications with currency exchanges are detrimental road blocks.
Large corporations have dealt with similar issues over the past 30 years in their own struggle to adapt to a riskier global economy; one tool they used was Wall Street. Wall Street innovations gave US companies an advantage over foreign competitors by providing the most sophisticated tools for raising capital, hedging market risk, and trading currencies.
The challenge to Wall Street now is to extend these advantages down to the middle market. Can we find a way to take all that sophistication and financial innovation that has worked so well for big corporations and pull it down to the companies that are now the growth and job leaders? It will not be easy and will certainly require some new innovations especially around understanding and benchmarking middle market business risk; however it’s also a path to domestic growth and maintaining US global competitiveness. As we have made the case earlier, it’s time to challenge Wall Street to make this happen.