How the middle market is bouncing back

Defined as organizations with annual revenues between $10 million and $1 billion, the middle market is one of the most crucial sectors of the national economy.

Many mid-market companies serve as critical points in the supply chain and are responsible for a third of GDP and private sector employment. In fact, the middle market alone has created 30 million new jobs since the 2008 financial crisis, a number that is expected to continue to rise.

Like many segments of the economy, the middle market has been hit hard over the past 18 months, but has shown resilience and adaptability in the face of uncertainty.

New research from Capital One and Morning Consult has found that middle market financial decision makers are optimistic about what the future holds. The survey, which explored the outlook of 400 mid-market leaders, showed that 86% of companies plan to grow by March 2022, and only 2% plan to downsize.

While these data points indicate the mid-market is back on a positive trajectory, this powerful sector faces short- and long-term challenges and opportunities.

Acceleration of investment priorities

With the accelerating wave of digital transformation brought about by the pandemic, many mid-market companies are taking steps to implement new technologies and automate processes in order to grow and stay competitive.

This is reflected in their stated investment priorities: when asked where they are investing the most today, leaders identified cybersecurity, employee experience and wellbeing, data and analytics data, e-commerce and artificial intelligence among their top priorities.

When asked where they invest the most today, executives identified cybersecurity, employee experience and well-being, data and data analytics, e-commerce and artificial intelligence. .

The challenge then becomes the effective implementation of these technologies, as one-fifth of executives said technology integration is the biggest challenge keeping them up at night, more so than cash flow, inflation, taxes and labor costs.

Closing the impending skills gap

Behind these implementation challenges lies a skills gap among the middle market workforce. Leaders highlighted gaps in management and leadership, data analytics, machine learning, cloud computing and data science.

These skills gaps could be very disruptive, as more than a quarter of mid-market leaders have announced plans to invest more than half a million dollars in areas such as data and analytics. data, cybersecurity and artificial intelligence over the next 1-3 years. If they are unable to find talent to manage and oversee these technology investments, it will be more difficult to unlock value and ROI in these critical areas.

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To overcome this, the middle market is taking steps to diversify its talent pools, remove structural and cultural barriers to entry, and upgrade the skills of its workforce.

Nearly two-thirds of leaders (64%) said they invest in continuous learning, development and upskilling programs for employees. While this is an encouraging statistic, it will only solve part of the larger problem. Nearly half of respondents (47%) said their companies are also taking steps to partner with nonprofit and community-based workforce development programs to find and recruit new talent who may not have traditional work experience, but who bring essential skills to the workforce.

Retain employees

Great companies are fueled by great people, and for the middle market to succeed, leaders need their employees to be happy, engaged, and open to learning.

A major side effect of the pandemic has been the disruption of the workforce, with more than 4 million people leaving their jobs in October alone.

Mid-market companies were already focusing on employee experience and well-being before the pandemic, focusing on key areas such as salary increases, increased access to mental health resources and access increase in childcare and care for the elderly. Thirty-one percent of respondents said it was a top investment priority before COVID-19, with 30% now selecting it as a top priority. And almost a third (32%) identified it as one of the main drivers of expected return on investment through the first quarter of 2022.

Manage your finances with confidence

The middle market faces a myriad of challenges ranging from supply chain issues to workforce changes to increased digitalization. For companies looking to resolve these issues and other uncertainties, it is important to engage a financial institution for working capital that allows for greater flexibility and agility.

Businesses can also leverage their banking relationships to achieve growth-related goals and compete. Commercial banks can support the financial stability of businesses, provide broader market insights through their scale and sector specialization, and help improve business profitability by offering customized products and solutions.

As the middle market invests in these key growth areas and improves the skills of its workforce, I am confident that this segment will continue to support employees, drive innovation and growth, and create jobs at the future.

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