The Middle Market Growth Puzzle

Posted on: December 5th, 2017

There are more than 200,000 middle market companies in the US. Middle market companies form a significant chunk of the dynamic and powerful US economy. Many mid-size companies are surging ahead and are planning to grow and become the next big company. What are the important factors for middle market companies to grow? For a middle market company to grow, flawless alignment of key scale-up factors is the key. Traditional growth elements are innovation and competitive advantage that give a company its edge. At a broader level, middle market companies need the right people, the right amount of capital to invest and the right plan to make hay. Due to their relatively small size, middle market companies get a huge boost when these three factors are aligned. Human resources and capital resources are two key factors that unlock outsized growth for aspiring middle market companies. These two factors consistently are listed as two of the top growth barriers in both the US and the UK for middle market companies.

Having the Right Team

In a small company or a startup, technical expertise and skills are very important. In a middle market company, growth is driven more by people with general business knowledge of how to sell and how to service a customer. A growing middle market company needs people that can sell and forge strong customer relationships, setting the stage for a long term sales relationship. They need operationally skilled people who can manage the complexities of higher volume and financial executives who can employ financial controls.

Having the Right Amount of Capital

Raising the right amount of capital is key. The right amount of capital means having enough funding for growth capital, working capital as well as a contingency reserve. Companies grow in a non-linear fashion and often invest in capacity ahead of volume growth. This results in more short term losses until volume absorbs the new cost structure. With the right amount of capital, middle market companies can pursue their plans with a high degree of confidence, unencumbered by the stress of ordinary short term losses that characterize most growth runs.

Having the Right Plan

A growth company requires a good growth plan. The plan must have actionable steps that can be mapped out according to a timescale. The plan must also be set up in a way that it captures data points that can be measured and benchmarked. Most plans will not unfold exactly according to the projection. Care should be taken to make sure the company has extra time and extra resources, when the inevitable delay strikes.

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