For middle-market companies, 2017 can be summed up as a year of strong growth in both revenue and employment. This is according to the Q4 2017 Middle Market Indicator (MMI) recently released by the National Center for the Middle Market (NCMM).
The proportion of middle-market businesses reporting improved year-over-year company performance is at its highest level (71%) in the six years of the survey.
Companies ended the year with a year-over-year revenue growth rate of 7.6%—second only to the rate reported in 1Q’17. While the employment growth rate fluctuated throughout the year, leaders report a 5.2% increase in employee headcount for 2017, and over half of firms added people to their rosters.
Overall, the year was the strongest year for middle market employment growth in MMI history. Confidence levels are at near record highs to close the year, and a large majority of CEOs CFOs and business owners prefer investing extra cash as opposed to saving it. However, these same middle market business leaders are no strangers to challenges.
They are increasingly concerned about how to maintain the profitable growth they have experienced in recent years and how to keep up with changing market conditions. In particular, half of firms say they struggle to find and retain the talent they need to achieve the positive growth they seek.
They are becoming more and more sensitive to the cost of doing business, particularly as it relates to healthcare and the expenses associated with finding and keeping the right people on board. As CEOs, CFOs and business owners look ahead to 2018, they are optimistic.
In the short term, sales and demand expectations have eroded slightly. However, more CEOs expect to find a more favorable business climate in the next three months, and nearly a third plan to expand their workforces in the first quarter of 2018.
Over the course of the year, companies project a healthy 5.4% rate of revenue growth. Employment is anticipated to grow more slowly: 43% of businesses expect to add workers this year and expect growing their workforces by 3.7%. These somewhat muted expectations may be a result of the shrinking size of the labor pool as the economy nears full employment: a solid majority (81%) say their workforce is just about the right size for current market conditions.
While all industry segments experienced growth in 2017, business services, construction, and financial services firms have grown the most rapidly. With the exception of construction, all industries have slowed the rate of hiring slightly. Upper middle market companies, with revenues between $100 million and $1 billion, have slowed their employment growth rates the most notably this quarter. However, after two consecutive quarters of reporting decreases in year-over-year revenue growth, the largest middle market businesses once again report the fastest rates of revenue growth for 4Q’17
Three-quarters of middle market firms report increases in revenue over the past 12 months. After falling from an all-time high at the beginning of the year, the rate of revenue growth has accelerated the past two quarters. To close out 2017, companies report a year-over-year revenue growth rate of 7.6%, up from 6.9% at the end of 2016 and almost a full point above the six-year average revenue growth rate of 6.7%. Middle market companies of all sizes are growing their revenues faster than the historical average. In 2018, most middle market companies (62%) expect revenue to continue to grow. They anticipate a healthy revenue growth rate of 5.4%—a percentage that has fluctuated somewhat this year, but that is consistent with what companies anticipated at the close of 2016. Middle market companies with annual revenue of $50 million or more are more optimistic than the lower middle market regarding growth in the year ahead.
If you are a middle market business owner or CEO within the San Francisco Bay Area or Silicon Valley, in need of an experienced part-time CFO to help your company scale effectively, while improving cash flow and profit margin, our highly skilled outsourced CFO services provide direct access to high-quality expertise in a cost-effective manner.
CFO Growth Advisors (CGA) specializes unique and highly effective growth strategies that are tailored to help companies grow more quickly and efficiently while improving sales & profit growth. Contact us to learn more.
#middlemarketcompanies #CFOsurvey #Q42017 #2016 #revenuegrowth