5 Reasons Why You Need to Know the Mighty Middle Market

Most everyone understands the concept of a small business. It’s the coffee shop down the street. The independent insurance agent next door. Or the local landscaping firm your family has used for years. On the other end of the spectrum, when you hear the words “big business,” your mind goes immediately to one of the behemoths, like Walmart, Amazon, or Apple.

It is in the middle where things get fuzzy. You may have heard the term ‘middle market,’ but your mental picture of these mid-sized organizations may not be quite as sharp. In large part, this is because the middle market has been historically overlooked by policymakers and the media. After all, just 3% of U.S. companies fall into this category. 

The National Center for the Middle Market exists to rectify that oversight. The Center defines middle market companies as those with annual revenues between $10 million and $1 billion. The total number of these organizations is relatively small—there are approximately 200,000 middle market businesses across the country compared to nearly 31.7 million small businesses —but their impact is anything but minor. In many ways, it is the mighty middle market that drives the overall U.S. economy.  

Here are a few key reasons why it’s worth gaining a better understanding of the U.S. middle market. 

1. Middle market companies provide one-third of U.S. private sector jobs. When it comes to employing America’s workforce, middle market companies are more than pulling their weight, representing just 3% of all U.S. businesses, but providing 33% percent of jobs in the private sector. These companies are continuously adding new jobs, and historically at a faster rate than both their larger and smaller peers. Furthermore, the jobs these businesses create are sustainable. The average age of middle market businesses in the U.S. is over 30 years, and as established organizations, they are less likely than less mature companies to destroy jobs by going out of business. The recent global crisis further proves their resiliency: employment in the middle market is recovering more quickly and to a greater degree than in other economic segments. Overall, it is middle market companies that keep Americans working in good times and bad. 

Historic Year-Over-Year Employment Growth Rates for Middle Market, Small, and Large-Cap Businesses 
2. The middle market represents 33% of private sector GDP. In addition to outproducing jobs, middle market companies produce more than their fair share of the country’s marketable goods and services. These businesses are doing a disproportionate share of the heavy lifting, supporting their local and regional economies while driving the economic health of the entire nation. Indeed, if the U.S. middle market were its own country, it would represent the fifth largest economy in the world. 

3. Historically, the U.S. middle market enjoys aggressive year-over-year revenue growth. Middle Market companies resides at the intersection of scale and agility, priming them for growth. Collectively, the companies generate more than $10 trillion in annual revenues. And, for the majority of middle market businesses, revenues are consistently going up. Between 2012 and 2019 (pre-COVID), the average rate of year-over-year topline revenue growth for the middle market was 7.0%, and the rate of growth has typically significantly surpassed that of the S&P 500. While revenue growth rates plunged during the pandemic, they have since surged back to above-average levels. 

Historic Year-Over-Year Revenue Growth Rates for the Middle Market and S&P 500

 4. Middle market companies operate in and support the success of virtually every industry in every region of the country. The 200,000 businesses that make up the middle market are a diverse bunch. While most are privately held, the businesses are representative of all ownership types including family-owned businesses and private equity-backed companies. These companies can be found in all geographies and all industries, and they are particularly prominent in the Midwest and in the manufacturing, retail, and business services sectors. Most middle market companies are not household names, but some enjoy significant regional recognition. Many major league sports teams fall into the sector. Other well-known middle market organizations include Tootsie Roll Industries, Jeni’s Ice Cream, and the outdoor clothing company Patagonia. 

5. Middle market businesses succeed despite facing unique challenges. The might of the middle market is all the more impressive when you consider the many factors that are not necessarily in their favor. These companies, despite being major employers, face talent challenges more acutely than larger businesses, especially those middle market companies that lack significant brand awareness. Because they typically have fewer resources to dedicate to recruiting, they must be more innovative and effective in their efforts to attract and retain qualified talent. Resource constraints also hamper digitalization and globalization efforts. In these areas, too, middle market companies must be selective and strategic in choosing where to invest.

Externally, middle market companies are often at a disadvantage as well. They are usually too big to take advantage of government programs aimed at supporting smaller organizations, but too small to have the resources for researching and leveraging other available sources of support. In addition, public policies and regulations can be more limiting for mid-sized organizations, presenting additional obstacles to overcome. 

While many of these challenges are formidable, there is an upside. The need to invest resources wisely often drives innovation and better ROI. The lack of girth translates into greater efficiencies, more nimbleness, and increased responsiveness. All of this serves these organizations well and has contributed to the long-term success of this powerful segment. 

All stakeholders have a role to play in encouraging the growth and vitality of the mighty middle market. 
The U.S. middle market has demonstrated its resiliency and outsized contributions to the U.S. economy time and again. While the executives leading these organizations are clearly capable, they also need and deserve support. Policymakers, economic development organizations, the media, and the advisors and companies that serve middle market businesses all have important roles to play in ensuring these companies remain successful. That begins with increased understanding of both the economic criticality of the segment as well as the unique challenges it faces. 

As the leading source of knowledge, leadership, and innovative research on the U.S. middle market economy, the National Center for the Middle Market facilitates greater stakeholder awareness by serving as a trusted source of data-driven content and insights, interactive tools, programming, and networks and communities. Find out how you can partner with the Center through sponsorship opportunities or contributions to our work.