Three UNIGNORABLE Trends Facing Mid-Market Companies Despite Record Revenues, Profits, Investments, Wages
Middle market companies in the US have been firing on all cylinders since the beginning of 2018.
A record 72% of mid-market companies say that overall company performance has improved compared to a year ago. Additionally, the proportion of companies reporting year-over-year revenue growth (77%) and year-over-year employment growth (55%) are at the highest levels recorded in history. The growth rate for both revenues and employment is near peak levels, and nearly every industry reports faster growth than last quarter.
Global and local confidence levels have reached record highs, and investment plans have strengthened accordingly, with a larger-than-ever majority of leaders saying they plan to increase investment rather than hold cash in reserve.
As these companies continue to grow, talent remains the number one challenge. In one of the tightest labor markets ever (unemployment under 3% in some cities), finding and keeping people is becoming increasingly challenging, or seemingly impossible for some. Companies are increasing salaries, offering additional compensation, investing in training and development, and getting creative.
That, combined with rising healthcare costs, may be driving the growing concern over costs in the short term, as most expect to see an increase in their cost structure in next 12 months [Source: Q1 2018 Middle Market Indicator].
So what?!
Most of this is good news for the middle market, right? Of course. Growing revenue, profits, investments, and wages are all positive things because they help people keep their jobs, make more money, improve products and services, and ultimately, push the world forward.
However, there are three trends that we are seeing increasingly prevalent at these companies:
1. Increasing levels of backlog, or backorders, with no signs of slowing down
2. Increasing levels of inefficiency due to inability to prioritize growing responsibilities
3. Increasing uncertainty on how to scale the business with already over-utilized people
If any of these trends resonate at your company, know that you are not alone. These are all growing pains and are good problems to have. That doesn’t mean they should be ignored though. It simply means that to take the business to the next level of sustained growth, intentional plans need to be set in place and executed to ensure long-term success.
Increasing backlogs come when demand, or sales, are growing more than usual, but you’re trying to use the same methods or techniques of handling them. The same amount of inputs will not magically create more outputs, and thus, the backlog grows and grows.
The best ways to combat this would be to expand capacity. With talent too hard to find and keep, many companies are determined to figure out how to do more with less, using techniques such as automation, optimization, and forced prioritization ranking systems.
Next, as companies become busier due to growing demand, prioritizing becomes more challenging. And when individuals have more on their plate to handle, they inevitably become less efficient unless there is a pre-determined systematic approach that shows them how to prioritize.
The key to staying efficient is understanding how to prioritize the actions that are most critical to the business, and move the manual, tedious, time-consuming tasks into a state of automation or outsourcing.
Data analytics can help make this easier, too.
Third, uncertainty on how to scale a business with the current team is one of the most common conversations we hear today. Each person is wearing multiple hats, and whichever customer or manager screams the loudest gets their time. If a team is too focused on keeping up with the day-to-day fire fighting and responsibilities of their job, then who is planning ahead, and putting in the time needed to study, investigate, and implement the ways of the future? Companies are planning on increasing capital investments this year, but most leaders are worried on how it’ll actually get implemented.
These three trends are somewhat unique to a strong business climate but can occur during any kind of economy depending on the product or service and the need for it. What separates the companies that will continue to grow vs. the ones whose growth will ultimately become a limit is how their leaders will respond to these trends.
Fortunately, at AMEND, we get to help companies like this every day. That’s one of the many reasons I love what I do — because we are making a real impact, right away, something that can be felt and touched. We’re not about quick wins or moving the fastest (although we do move pretty fast). We’re about moving the farthest. We’re about creating lasting change. Transformation. From the inside out. Together.
If these trends describe something your company or another company is seeing, I’d love to hear your story. Chances are, you’re in good company.
To read the 1Q 2018 Middle Market Indicator, published by the National Center for The Middle Market, click here.
