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Mid-Market Companies Report Impressive Performance Despite Headwinds

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Mid-Market Companies Report Impressive Performance Despite Headwinds

Middle market companies are showing remarkable saying power and resilience in the face of economic and governmental turmoil, according to a report issued today by Deloitte.

In its fall survey of US middle market executives, Deloitte reported that sales at mid-market companies are trending higher, with 58% reporting higher revenues over the past 12 months, up from 44% in the spring 2013 survey. Profits are also up, with more firms reporting higher earnings (44% vs. 35%) and gross profit margins (40% vs. 30%). Almost one-half of mid-market companies say they have realized productivity increases in the past 12 months, and 41% report higher cash balances compared to 34% in the spring.

"The economy continues to operate with great levels of uncertainty and yet mid-market companies in general are performing well and their executives have an increasingly positive outlook."

"The economy continues to operate with great levels of uncertainty and yet mid-market companies in general are performing well and their executives have an increasingly positive outlook. This is a true testament of this segment's resilience," said Tom McGee, Deputy CEO, Deloitte LLP and leader of Deloitte's mid-market practice, Deloitte Growth Enterprise Services and Deloitte's mergers & acquisitions services practice. "Our findings indicate that despite headwinds, mid-market companies are well poised to take advantage of a potential uptick in the economy." 

Hiring on the rise

As the performance of mid-market companies continues to improve—with 58% of executives anticipating revenue growth over the coming 12 months—staffing up for growth is one of the key priorities.

In fact, hiring in the mid-market defies the sluggish improvements in the general labor market, as mid-market companies record significant increases in full-time hiring: One-half of mid-market executives say their full-time workforce has grown over the last 12 months, compared to 34% who said so in the spring.

Moreover, looking ahead, over half of mid-market executives expect their full-time workforce to grow in the next 12 months.

Emerging focus on global growth opportunities

The U.S. continues to be far and away the largest contributor to growth for mid-market companies. More such companies, however, are looking beyond US borders for growth, according to the survey.

Additionally, a higher number of mid-market companies, 61% compared to 55% in the spring, say at least some of their revenues over the past year came from outside the U.S.

The biggest problem?  The US government

Despite the strong performance of mid-market companies, there are ongoing challenges that continue to be top of mind for executives both for their own businesses and the economy at large. Moreover, the majority of these challenges are coming from a common source: the federal government.

Specifically, mid-market executives pinpoint government budget challenges, rising healthcare costs, and high tax rates as the primary obstacles to their business prospects and to U.S. economic growth.

"Despite improvements in sentiments around budget challenges and tax rates, factors related to the government continue to be a main concern for the majority of mid-market executives," says McGee. "Furthermore, it appears that mid-market executives link the threat of rising healthcare costs to the passage and implementation of the Affordable Care Act."

When asked about what would be the most impactful measure the U.S. government can take to help mid-sized businesses grow over the next 12 months, 41% of respondents said rolling back healthcare reform. 

Read the entire report here...

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