Estimated reading time: 4 minutes
Middle-market companies, often overlooked in the shadow of their larger counterparts, are the backbone of thriving communities. They drive job creation and fuel the prosperity that positively impacts local economies across the country. Moreover, middle-market companies account for one-third of the United States economy,1 which is a testament to their importance and impact.
Balboa Capital developed a comprehensive overview of the middle market industry to provide our blog readers with insights, information, and trends relating to this business segment.
Size of the U.S. middle market.
The U.S. middle market boasts a remarkable size. As of 2024, there are approximately 200,000 middle-market companies in the United States2 that operate in various business industries, including professional services, construction, retail, technology, manufacturing, wholesale trade, and healthcare.
These companies employ nearly 48 million workers and have combined annual revenues of more than $10 trillion.3If the middle market industry were its own country, it would be the fifth-largest economy in the world.4
Size of middle-market companies.
Middle-market companies are a class of businesses that fall between large corporations and small businesses in terms of revenue, employee count, and market share. They have annual revenues ranging from $10 million to $1 billion and are segmented into the following three categories:
- Upper middle-market companies ($500 million to $1 billion in annual revenue)
- Core middle-market companies ($50 million to $100 million in annual revenue)
- Lower middle-market companies ($10 million to $50 million in annual revenue)
Mid-market companies employ between 100 and several thousand employees and are often privately owned within a specific business industry or niche.
Challenges mid-market companies face.
As the bridge between small startups and large corporations, middle-market companies face resource constraints, as well as intense competition from brick-and-mortar and online businesses. However, these obstacles are manageable. Middle-market firms have the agility and entrepreneurial spirit to adapt to changing market conditions, outmaneuver rivals, and seize opportunities.
By leveraging technology, cultivating talent, and embracing a culture of continuous improvement, mid-market organizations can unlock new avenues for success, gain market share, and achieve a competitive advantage.
The role of technology in mid-market business growth.
As mid-market businesses navigate the ever-evolving digital landscape, they find that technology is no longer a luxury but a necessity for staying competitive and meeting customers’ and clients’ demands. These companies can streamline operations, enhance customer experiences, and drive sales revenues by leveraging innovative tools and solutions. From cloud-based software-as-a-service (SaaS) platforms to data analytics to online marketing, the array of digital capabilities available to the middle market is truly transformative. Budget constraints can limit investment in software, hardware, or a technology refresh. That is why equipment financing is an option for mid-market companies to consider, as it preserves working capital.
Middle-market business financing.
Access to capital is the key that opens the door to growth and success for middle-market companies. Whether it’s a commercial business loan to fund expansion efforts, purchase inventory, or navigate seasonal fluctuations, or it’s funding to finance capital equipment, the right financial support can make all the difference.
Middle-market companies look to commercial banks and business lenders to procure the financial resources they need to thrive. It is advantageous for mid-market CEOs, CFOs, and controllers to select a bank or business lender that is experienced and well-versed in commercial business lending. This can ensure they receive customized funding solutions that align with their specific growth goals.
Investing in middle-market companies.
Publicly traded middle-market firms fall into the small-cap or mid-cap stock category. Small-cap and mid-cap companies typically have more growth opportunities than large-cap companies, making them a viable investment option for individual and institutional investors alike.
Investors can purchase middle-market firms’ stock or exchange-traded funds (ETFs) focusing on small-cap or mid-cap companies. There are a number of indices that evaluate the financial performance of small-cap and mid-cap stocks and ETFs.
Mid-market growth trends.
The National Center for the Middle Market reported that revenues in revenues increased for 83% of middle-market companies at an average rate of 12.4% in 2023.5 In addition, 59% of middle-market companies increased the size of the workforce at an average rate of 9.6% in 2023.6 Innovation also remained strong in the mid-market sector last year. 51% of companies reported that they introduced a new product or service.7
The future of the middle market is bright, and the companies that embrace the transformative power of scaling, technology, talent development, and strategic partnerships will be the ones who lead the charge in 2024 and beyond.
Sources:
1, 2, 3, 5, 6, 7 – https://www.middlemarketcenter.org/Media/Documents/MiddleMarketIndicators/2023-Q4/FullReport/NCMM_MMI_YEAR-END_2023_012524.pdf
4 – https://hbr.org/2021/03/the-middle-market-is-stressed-but-resilient
Balboa Capital, a Division of Ameris Bank, is not affiliated with nor endorses The National Center for the Middle Market or Harvard Business Review. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.