Four Trends Bringing Prosperity and Resilience to the Middle Market
Many middle-market companies that survived the pandemic recession came through with flying colors, showing surprising levels of optimism and resilience, according to a 2021 survey of U.S. businesses from Umpqua Bank.
“They survived the first wave of the pandemic by becoming lean, getting by with less and understanding their customer base better,” says Richard Cabrera, Executive Vice President and Head of Middle Market Banking at Umpqua, the West Coast regional bank that conducted the survey.
The report defines middle market firms as those with annual revenues between $10 million and $500 million, a sector that is a major focus for Umpqua, the largest bank headquartered in the Pacific Northwest, with assets of $30 billion.
- Overarching optimism
Economic optimism among middle-market businesses has surged beyond pre-pandemic levels—a significant indicator of growth.
- A growth mindset
That optimism has businesses looking for opportunity in the next year, with about half saying they plan to increase real estate (47%), finance expansion (56%) or investigate acquiring another business (52%). “As companies have rethought their strategies and become more efficient, they’ve become even more positioned for success in the future,” Cabrera says. - Adaptiveness
Despite ongoing business model changes throughout the pandemic, more than three-quarters of businesses said they are prepared to make “significant” changes when it comes to their products and services, pricing models, digital capabilities or automation.
The survey also found that companies want to keep many of the changes recently put in place, such as digitizing new areas of operations to become more efficient, which 81% said they’ve initiated. Respondents also said they are becoming more flexible with employees. More than 70% said they’ll keep finding creative ways to support working parents. - Strategic partnerships and solutions
Middle-market businesses recognize that challenges remain, including labor shortages and ongoing supply chain disruptions. Three in 10 of those surveyed said that they’re unable to purchase supplies to run their business in a timely manner, and 88% said they’re experiencing some type of supply-chain challenge.
In response, businesses are looking at ways to manage these challenges, often looking to banks for innovative ways to finance their inventory. In addition, they’ve relied more heavily on technology and looked for ways to de-risk their supply chains.
Of these four drivers, adaptiveness played a key role in getting businesses to a more resilient place, Cabrera says.
“Companies discovered they can get by with a lot less labor than they had thought, partly by accelerating a transition toward automation and also by cross-training employees for additional skills and capabilities,” Cabrera says. “They’re also becoming more self-reliant and strategic with suppliers, rather than being overly reliant on distant vendors or suppliers, especially those overseas.”
Taken as a whole, Cabrera says, the survey reveals a strong middle market poised to thrive over the year ahead, even as Covid and related impacts pose continued economic uncertainty.
“Having seen this once before, there is now a sense of preparedness that businesses didn’t have in the first wave,” he says. “There is this resilience, adaptation and reinvention. All of those things have taken hold, and we really see them not only in this survey, but also in our customer base.”
