Article by Caroline Hong, which appeared in the April 2013 issue of the My Business magazine and also on MSME news network.

Mid-market sector the new sexy M?

Jeff Immelt CEO of Global GE in Sydney talking about The Power of 1%

Not long ago I attended a business luncheon where everyone was asked the question, “What would you do if you were PM for a day?”. While there were plenty of impressive and lengthy answers in the room full of men and women in business attire, I didn’t hesitate to harp on these things as the priority points for Australia: Education, Health and SMEs, and that education is a necessity, not a luxury.

Teachers have one of the toughest jobs in the country. We have to make sure we have the best educators and education systems in the world in order to remain globally competitive. Health is essential for anyone to remain productive and active in the workforce or community life. While many Australians now have access to a relatively healthier life when compared to many other countries,  the increasing cost of healthcare and the implications of the ageing population will continue to challenge how our healthcare budget is spent, to ensure a healthy and productive nation.

SMEs are the backbone of our nation and they hold the key to our country’s prosperity. While the Australian Bureau of Statistics and the SMEAA define ‘small’ to mean 1-19 employees and ‘medium’ to mean 20 to 199 employees, the bigger corporations and financial institutions define SMEs differently – by annual revenue measures.I recently attended a mid-market summit in Melbourne as a guest of GE, which highlighted for me the massive contribution that the mid-market sector makes to the wider Australian economy.  It is also the most resilient sector, more so than small and large businesses.

Aaron Baxter, Head of Commercial Finance GE capital A&NZ, said, “Creative thinking, adaptability and resilience have always been what has allowed the mid-market to thrive even in times of adversity. The Mid-Market contribution is now forcing policy makers to take notice and seek to better understand the drivers and need of this important sector.”

The mid-market businesses are defined as businesses with annual revenues from $10m to $250 million. $10m – $20 million at the small end and $50m – $250 million in the larger end. If mid-market businesses succeed, Australia succeeds because mid-markets contribute to 37 per cent of business revenues, 3.2 million jobs and 21 per cent of total deposits and borrowings. It makes sense for such an important sector, which accounts for one in every four jobs despite making up only 1.4 per cent of all businesses.

While there has been a lot of noise in the media about large business, and occasionally about small business, there are some interesting key highlights about the often unrecognised mid-market sector that are which are worth:

• The mid-market remains a key driver of the Australian economy, showing more resilience than small and large businesses.
• Mid-market resilience is being driven by relatively optimistic expectations of growth over the next year. This could be short-lived if conditions remain tough.
• Managing costs and cash flows have become higher priorities than they were a year ago.
• Mid-market businesses are more focused on capital resourcing than talent management in general. CFOs are more debt averse.
• Businesses are looking to support on access to capital for special projects at reduced rates, reduced government regulations and tax incentives on technology upgrades.
• Increased concerns about government regulations are more so among the larger end of mid-market in WA and Victoria.
• Multi-speed economy with the smaller end of the mid-markets showing more optimism and the larger end showing greatest decline in optimism over last year.
• Wholesale industry is the only sector to improve in outlook during 2012, while retail trade also has a stronger outlook than most industries.

All this brings me back to why the SME Association of Australia exists. The ‘M’ word is often unrepresented and it is not too late for policymakers to recognise the importance that this sector contributes to the success of our country. Australia must find ways to make it easier for the ‘M’ sector to remain in business, grow and prosper. They want the same thing – less regulation and more business friendly policies.

With acknowledgement and thanks to MyBusiness http://www.mybusiness.com.au

You can also subscribe for the digital edition on http://mybusiness.realviewdigital.com/

My Business is the official publication of the SME Association of Australia  http://www.smeaustralia.asn.au

Contact Dr Caroline Hong Consulting: carolinehong@carolinehong.com.au

Contact Dr Caroline Hong, CEO of SMEAA: caroline.hong@smeaustralia.asn.au

Twitter: @CarolineHong   Twitter: @SMEasnAU

Facebook: Caroline Hong’s page

www.facebook.com/CarolineHongAustralia

Phone: +61 410474898