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  September 27th, 2016 | Written by

U.S. Middle Market Firms Surging

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  • The manufacturing, wholesale trade, and business services sectors include most middle market U.S. firms.
  • The service industry continues to lead middle market growth in the U.S.
  • Technology is guiding the future of manufacturing in the U.S.

The growth of U.S. middle market firms—companies between $10 million and $1 billion in revenues—is outpacing the national average, with an 87-percent increase in number of firms, a 103-percent surge in employment, and a 100-percent rise in revenue since 2011, according to the latest Middle Market Power Index: A Detailed Look at Top Industries from American Express and Dun & Bradstreet.

An industry sector analysis of this middle market growth can help uncover larger economic trends, which have implications for workforce development and economic investments. Within the sectors that include most middle market firms—manufacturing, wholesale trade, and business services—several industry subcategories are fueling the growth in number of firms since 2011. In business services, the legal subsector has grown by 284 percent; in manufacturing, industrial, commercial, or computer equipment increased by 163 percent; and in wholesale trade, durable products advanced by 160 percent.

The previous Middle Market Power Index: Fueling the Nation’s Economic Growth found that middle market companies are powering the U.S. economy; as much as 53 percent of the net new jobs over the past five years have come from middle market companies. The latest report found that the subcategories experiencing the strongest employment growth are generally also undergoing the strongest revenue growth. Two areas in particular, legal services and durable products, have led their industries in all three measures, indicating these are becoming more prominent in the American economy.

“Middle market firms are leading business growth in the United States, outpacing both small and large-sized firms,” said Jeff Stibel, vice chairman of Dun & Bradstreet. “More specifically, the service industry continues to lead middle market growth in terms of revenue, employment and number of firms, reflecting the larger trend in the U.S. moving from a manufacturing-based to a service-driven economy.”

As the economy becomes more service and technology focused, it stands to reason that the younger firms entering the middle market are not going to be producing the same products or services as companies that were founded over 50 years ago.

Manufacturing is one industry where this generational difference is particularly strong. While it remains a foundational sector regardless of firm age, the types of products being manufactured differ between younger and older middle market firms. Middle market firms that have been in business for 50 years or more are much more likely than their youngest counterparts (those in business less than 10 years) to be making fabricated metal products—17 percent versus 10 percent. The youngest middle market manufacturing firms are instead much more likely than those in business 50 years or more to manufacture either electronic equipment or components (11 percent versus five percent) or chemical products (12 percent versus five percent). The shift in types of products being manufactured suggests how demand for certain goods has changed over time.

Although manufacturing is the most prevalent middle market industry, business services is seeing significant gains as well. Middle market firms that have been in business 10 years or less are more likely to be in business services (15 percent) compared to those that have been in business 50 years or more (five percent).

“Middle market companies are not only driving the national economy in terms of revenue and employment growth, but the most transformative middle market industries are shaping the overall direction of our economy,” said Brendan Walsh, Executive Vice President, U.S., American Express Global Commercial Payments. “The success of younger manufacturing companies in the middle market is a key indicator of how technology is influencing and guiding the future of the industry, while the growth of business services as a focus for younger middle market companies reflects the strengthening knowledge economy.”