Mid-market companies saw strong revenue and employment gains in the fourth quarter, and they’re confident about 2015. Middle market companies finished the fourth quarter of 2014 with a bang, and they expect strong growth to continue in the coming year. But concerns about global growth and the continued high cost of health care are lingering worries that could dampen prospects in 2015.That’s according to the National Center for the Middle Market, which released its most recent quarterly survey of C-suite executives at such companies on Tuesday.
“The main message of the fourth quarter…is that the U.S. middle market had a remarkably strong year,” the report says. “Every industry experienced growth, some at varying points of the year and others at varying rates.”
The National Center for the Middle Market defines mid-market companies as ones that have between $10 million and $1 billion in annual revenue. There are some 200,000 such companies, employing about 50 million people in the U.S.
Middle market companies have added employees at roughly twice the rate of large and small companies, or 5 percent, compared to 2.2 percent for their larger and smaller peers, the report says.
Nearly three quarters of mid-market companies reported revenue growth in the fourth quarter of 2014, compared to less than two-thirds for the fourth quarter in 2013. The companies surveyed reported mean revenue growth of 7.2 percent in the fourth quarter, compared to 5 percent for the same quarter a year earlier. (The mean is a mid-point, as opposed to an average.) Revenue dropped two-tenths of a percentage point, however, from 7.5 percent in the third quarter of 2014.
Headwinds
Looking forward to the next 12 months, mid-market companies expect employment and revenue growth to slacken a bit, forecasting a 4 percent growth in hiring, and a 6 percent growth in revenue.
Sixty-eight percent of company executives said they plan to invest in their businesses, an increase of 4 percentage points from the same quarter a year ago. Twenty percent say they plan to hold onto cash, a 4 percentage point decrease from the fourth quarter of 2013.
The top five challenges executives see are: the cost of health care, cited by 77 percent; the cost of doing business, cited by 84 percent; the ability to grow revenue, a concern for 82 percent; and the ability to retain margins, for 80 percent. More than three quarters of respondents expect the ability to retain and attract top talent will be difficult.