Fourth Middle Market Power Index Examines
Entrepreneurial Generations and Geographies of Middle Market
Firms
The burgeoning service economy is significantly outpacing more
traditional industry sectors in its rate of business growth among
middle market companies, according to the Middle Market Power
Index: Exploring Generational Changes in Middle Market Industries
from American Express (NYSE: AXP) and Dun & Bradstreet (NYSE:
DNB).
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While manufacturing and wholesale trade continue to remain key
industries for middle market companies, the index shows a gradual
shift in the industry composition of the middle market sector,
defined as those with revenues between $10 million and $1 billion,
with service businesses quickly gaining ground. Service businesses
formed in the last 10 years are showing ability to scale into the
middle market at a greater rate than more traditional industries.
The business services industry consists of a varied list of
enterprises such as public relations firms and advertising
agencies, management consulting, legal services,
landscape/architecture services, and interior design firms.
Over half (54%) of middle market enterprises are found in four
industry sectors: manufacturing (17%), wholesale trade (13%),
retail trade (12%) and business services (12%). Seventeen percent
(17%) of middle market firms in business less than 10 years are in
business services, indicating this sector plays host to our next
generation of businessmen and women, a trend that is likely to
continue as the Millennial generation further develops their
careers. Alternatively, only 5% of middle market firms in business
50 years or longer are in the business services sector.
“The fourth Middle Market Power Index report shows an important
evolution for the future of the middle market,” said Susan Sobbott,
president, Global Commercial Payments, American Express. “While
manufacturing and wholesale trade are still foundational pillars of
middle market companies, business services is an industry of choice
for the next generation of middle market entrepreneurs.”
“The increase in the number of service industry firms moving
from small enterprises into the middle market reflects what is
happening in the larger economy,” said Jeff Stibel, vice chairman
of Dun & Bradstreet. “While manufacturing continues to be a
critical piece of our economy, we are moving to a
technologically-advanced service economy and these younger middle
market firms are both driving growth and, importantly, creating
significant numbers of new jobs.”
U.S. Geographic Locations for the Next Generation of Middle
Market Firms
The youngest middle market firms, which potentially represent
hotbeds of entrepreneurial growth in the middle market, are more
likely to be found in the following four states, and the District
of Columbia. Nationwide, middle market firms that have been in
business less than a decade represent only 11% of the middle
market, while these states (and District) are home to an
above-average share.
- Texas (16%)
- Nevada (16%)
- Colorado (15%)
- District of Columbia (15%)
- Utah (14%)
Among states with a higher share of middle market firms that
have been in business for 50 years or more, two states stand out –
Iowa and Vermont. In Iowa, 49% of middle market firms have been in
business for 50 years or more, significantly above the national
average of 19%. In Vermont, a disproportionately low number of
middle market firms have been in business less than a decade – just
4% compared to the national average of 11%.
Tenure in Business is Not Indicator of Middle Market
Size
While middle market firms are defined as those with revenues
between $10 million and $1 billion, most (51%) generate revenues
between $10 and $19 million. But crossing the $10 million threshold
takes time – those that have been in business less than a decade
only make up 11% of the total middle market. On average, middle
market firms have been in business for 42 years.
Conventional wisdom has dictated that nothing beats experience
as a means of guaranteeing success, but the analysis shows that
while it takes time to grow into the middle market, more business
experience does not necessarily lead to increased firm size. Across
generations, the size of middle market firms does not change
substantially as businesses gain years of market experience. Middle
market firms in business for less than a decade represent 11% of
middle market firms, 12% of middle market firm revenues, and
provide 11% of middle market jobs. At the other end of the business
age spectrum, middle market firms that have been in business for 50
years or more represent 30% of middle market firms, generate 34% of
middle market firm revenues, and provide 35% of middle market
jobs.
Women-Owned and Minority-Owned Middle Market
Businesses
Overall, women-owned and minority-owned companies are just as
likely to be found in the middle market as are all
commercially-active business owners. Among firms that have been in
business between 10 and 29 years, women-owned and minority-owned
companies are even more likely to be prevalent. Overall, 5% of
middle market firms are majority-owned by ethnically diverse
owners, yet in the 10-29 year range, 8% are majority-owned by women
or ethnically diverse owners. These numbers complement the growth
into the middle market among women-owned and minority-owned
companies, which was identified in the third report of the Middle
Market Power Index series.
Study Methodology
The Middle Market Power Index report is based on an analysis of
19 million (18,950,877) firms from Dun & Bradstreet’s US
commercial marketing database between 2008 and 2014: the first a
virtual census of all of the commercially-active businesses in the
United States (defined as firms that have obtained a D-U-N-S®
number and that sell and receive goods and services and utilize
credit transactions in their business); the second their credit
scoring archive database, which collects and models business
commercial activity and business financial strength. All subsidiary
and business establishment data are combined; only enterprise-level
data (top of the business family tree, or Ultimate D-U-N-S®
number firms) are reported. Additionally, public sector entities
are excluded.
About Dun and Bradstreet
Dun & Bradstreet (NYSE: DNB) grows the most valuable
relationships in business. By uncovering truth and meaning from
data, we connect customers with the prospects, suppliers, clients
and partners that matter most, and have since 1841. Nearly ninety
percent of the Fortune 500, and companies of every size around the
world, rely on our data, insights and analytics. For more about Dun
& Bradstreet, visit DNB.com.
About American Express Global Corporate
Payments
Through its Global Corporate Payments division, American Express
offers a suite of B2B and T&E payment solutions that help
organizations streamline processes and transform them into
opportunities for savings, control and efficiency. American Express
can help your organization increase working capital flexibility and
strengthen relationships with suppliers. For more information,
visit us at business.americanexpress.com/us and
linkedin.com/company/american-express-global-corporate-payments.
About American Express
American Express is a global services company, providing
customers with access to products, insights and experiences that
enrich lives and build business success. Learn more
at americanexpress.com and connect with us
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M BoothRyan Walker212-388-7677ryanw@mbooth.comorAmerican
ExpressMelissa Filipek212-640-8658melissa.j.filipek@aexp.comorDun
& BradstreetHeather Herndon310-919-2290hherndon@dandb.com
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