Despite comprising only 1% of the total number of commercially active firms1 in the country, middle market companies have led national job growth over the past five years, employing nearly 53 million workers – more than double the number employed by this segment in 2011. Middle market firms are also contributing $9.3 trillion to the U.S. economy, according to the Middle Market Power Index from American Express (NYSE: AXP) and Dun & Bradstreet (NYSE: DNB).
Using Dun & Bradstreet's proprietary database of commercially active U.S. firms, the latest report in the Middle Market Power Index series analyzes the characteristics and economic impact of middle market enterprises—defined as businesses generating between $10 million and $1 billion in revenues—focusing on growth trends over the past five years.
According to the report, while the total number of all commercially active firms declined between 2011 and 2016, the number of middle market firms nearly doubled, with an increase of 87%. Middle market firms generate just over one in four dollars (26%) of U.S. business revenues and employ more than one in four workers (27%) in the private sector. Since 2011, middle market companies have outpaced both smaller businesses (less than $10 million in revenues) and the largest companies (more than $1 billion in revenues) in both employment and revenue growth.
"Over the last five years, middle market companies have led the way in economic growth," said Brendan Walsh, Executive Vice President, U.S., American Express Global Commercial Payments. "This report highlights the often overlooked economic might of these companies, which contribute over $9.3 trillion to the U.S. economy and are growing faster than any other sector."
"Middle market firms continue to have an outsized influence on the U.S. economy," said Jeff Stibel, Vice Chairman of Dun & Bradstreet. "These firms have led the charge hiring Americans and now employ nearly 53 million people. The middle market plays a pivotal role in our rapidly changing economy."
Middle Market Geographic Concentration
Middle market companies are headquartered across the country. However, the ten states in which middle market firms comprise a greater than average share of companies include: Illinois (1.5%), Wisconsin (1.5%), Michigan (1.3%), New Jersey (1.3%), Indiana (1.2%), Kansas (1.2%), Massachusetts (1.2%), North Dakota (1.2%), New York (1.2%) and Ohio (1.2%).
In addition to these ten states, higher than average percentages of middle market firms are also found in Washington, D.C. (2.1%), Puerto Rico (5.8%), and the U.S. Virgin Islands (3.6%).
While there's been an 87% increase in the number of middle market firms nationally over the past five years, four states saw the number of middle market enterprises more than double during that timeframe:
- Ohio (+106%)
- Texas (+106%)
- Michigan (+103%)
- Indiana (+102%)
According to the report, there are seven states in which middle market companies are under-represented compared to the national average:
- Florida (0.5%)
- Colorado (0.6%)
- Louisiana (0.6%)
- Montana (0.6%)
- Arizona (0.7%)
- New Mexico (0.7%)
- Oregon (0.7%)
Middle Market Firms Owned by Women and Minorities
Roughly 6% of all commercially active firms are majority women-owned, compared with 7% of middle market firms that have majority women -ownership. Looking at minority ownership across all commercially active firms, only 2% are minority-owned, compared with 5% among middle market firms. Thus, in terms of gender and ethnic diversity, firms that are women-owned are just as likely to be found in the middle market as in other business size groups, and minority business owners are more likely than average to be found in the middle market (revenues of $10 million to $1 billion).
Potential for Further Growth in the Middle Market
Among the 18.9 million firms with less than $10 million in annual revenue, there are roughly one million that generate revenues between $1 million and $9.9 million, signifying the greatest potential to approach the middle market. These firms make up 5% of the population of commercially active small businesses, generate $2.8 million in revenues and employ 28 workers on average. These small businesses that have reached $1 million or more in revenue are more likely to be women- or minority-owned (10% and 6%, respectively) and also more likely retail trade or construction businesses than any other business size group.
Industry Trends among the Middle Market
Middle market firms span all industries, but are more likely to be found in the manufacturing sector (18% vs. 3% overall), followed closely by wholesale trade (17% vs. 4% overall). Twelve percent of middle market firms are found in retail trade, compared to 11% of all commercially active businesses in the country. Within the services sector, both educational services and health services are home to 6% of middle market firms, respectively. Altogether, nearly 60% of middle market firms are found in these five industries.
American Express and Dun & Bradstreet will release subsequent Middle Market Power Index reports, which will explore other areas of opportunity unique to middle market firms.
This report is based on an analysis of all of the U.S. firms in Dun & Bradstreet's commercial databases of over 19 million (19,096,462) businesses between March 2011 and March 2016: (1) 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); (2) 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.
Among the 19 million commercially active U.S. businesses in 2016, 182,578 firms have between $10 million and $999 million in revenue and are thus defined as middle market enterprises. Additionally, 17.9 million commercially active firms in the D&B database have less than $1 million in revenues, and in this analysis are referred to as small firms; just under 1 million (964,600) have between $1 million and $9.9 million in revenues, and are referred to as “nearing the middle market;” and 3,025 firms generate $1 billion or more in revenues.
About Dun & 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 Commercial Payments
Through its Global Commercial Payments division, American Express offers a suite of payment and lending products that help businesses and organizations of all sizes gain financial savings, control and efficiency. Global Commercial Payments provides solutions for travel and everyday business spending, cross border payments, global currency solutions, and business financing. To learn more about Global Commercial Payments visit business.americanexpress.com.
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 on facebook.com/americanexpress, foursquare.com/americanexpress, linkedin.com/company/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.
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