I had the fortunate opportunity to attend the O’Keefe Middle Market Forum where O’Keefe Advisors provided the results of its annual survey of middle market companies. The survey focused on recapping 2016 and also looking ahead for 2017.
There were a number of interesting items that came out of the survey I think you’ll be interested in. Those items that stuck out to me and my takeaways are:
- Looking back at 2016, over 75% of the companies surveyed met their revenue goals, with over 83% hitting their goals due to existing clients, and 65% hitting their goals based on sales made from new clients. Interestingly, new products and mergers and acquisitions did not contribute to revenue goals. What I find interesting is high percentage of new clients that helped meet revenue goals. To me, this indicates the market and the economy is still expanding. Hopefully this trend continues into 2017.
- For the 25% that did not meet their goals, 83% attributed it to existing clients, 30% to new clients and 3% to regulatory issues. My takeaway, is the failure to satisfy your existing clients can have a significant impact on your bottom line, and cannot be made up by simply going after new client. [perfectpullquote align=”right” cite=”” link=”” color=”” class=”” size=””]My takeaway, is the failure to satisfy your existing clients can have a significant impact on your bottom line, and cannot be made up by simply going after new client. [/perfectpullquote] My takeaway here is, the failure to satisfy your existing clients can have a significant impact on your bottom line, and cannot be made up by simply going after new client. But I found most interesting that only 3% said regulation affected their business. This seems contrary to news coverage that blame regulation for the slow economic growth.
- Issues in 2016 that affected sales the most were 1. capacity, and 2. a shrinking quality labor pool. Finance and access to capital was not a factor. My takeaway here is that the low interest rates are making expansion easier and easier. However, there is and will continue to be a lot of pressure on finding quality people. This pressure will likely lead to higher wages; a simple supply and demand issue. As well, with the Fed likely to hike interest rates in the near future, financing costs are likely to increase in 2017.
- Looking ahead to 2017, many businesses feel health insurance costs, global unrest and domestic politics were going to be the biggest issues they confront. While health insurance costs continue to be a factor, I was surprised that companies have not yet managed to take this into full account in operating their business.
- Middle market companies said the hiring outlook remains strong for 2017 with 94% either increasing their employment level, or at least keeping it the same. Further, 71% said they were going to increase their capital expenditures. All of this bodes well for metro Detroit. But again, the low supply of skilled labor may put a downdraft on expansion.
- But it’s not all good news. Sectors in 2017 that will have a lot of pressure on them will be retail (as we’ve already seen and heard in the news), healthcare and agriculture. Bright spots for 2017 include non-automobile manufacturing, technology and business services, and construction and building materials industry. With the slowdown in brick-and-mortar retail, I believe commercial real estate (including power center, strip malls, and some regional malls) may be highly impacted.
How was your 2016? Do you agree with these survey results? And where is your business headed in 2017? To take a look at the survey results yourself check them out here.
I have more details on the survey if you want to discuss further. Call me 248-455-6500 and or email me [email protected], and we can talk.
