© 2018CI1 TGrou1Gp1nrcc.u1nAliug1 htg - CIT | …...To uncover the general outlook, trends and...
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2018 CIT Voice of Middle Market Outlook © 2018 CIT Group Inc. All rights reserved. CIT and the CIT logo are registered trademarks of CIT Group Inc. 1 KEY HEADLINES FROM THE RESEARCH z Middle Market Executives Foresee Strong Growth in 2018 and Beyond z New Hiring Seen Likely, Despite Tight Labor Market z Middle Market Plans to Invest in Their Business — $500,000 or More for Many in 2018 Middle market executives today are more positive about their businesses and more optimistic about their prospects for growth than at any time in the last three years. Executives at middle market companies are more likely to say the health of their company is strong, that their company is better off today than a year ago, and that their company has experienced increases in sales, product demand, and customers over the past year. As a group, they are pleased with the current state of the economy on the local, national and global levels, and their perceptions on all three economic fronts have grown increasingly more positive since 2015. Middle market executives also foresee a brighter future, with a majority expecting growth over the next 12 months through geographic expansion within the U.S., product diversification, growing the scope of their products/services, and expanding into adjacent markets. Most middle market executives foresee additional hiring over the next 12 months, which may help accelerate growth. A large majority plan to invest more in their business in 2018 — primarily in equipment, new personnel, and technology. More than a third are planning to invest $500,000 or more this year alone. Despite their general optimism, middle market leaders do have concerns about the future. Data security and rising interest rates remain high on the list of worries for most middle market executives. Lingering economic uncertainty also remains an issue (though less so compared to 2016), and inflation is increasingly seen as a pressing concern (rising from 62% in 2015, to 71% in 2016, to 81% in 2018). To uncover the general outlook, trends and challenges for the middle market, The Harris Poll, on behalf of CIT, a leader in financing and advisory services to the small and middle markets, conducted an online survey from January 3 – February 2, 2018 among 304 middle market executives.
Transcript of © 2018CI1 TGrou1Gp1nrcc.u1nAliug1 htg - CIT | …...To uncover the general outlook, trends and...
2018 CIT Voice of Middle Market Outlook
© 2018 CIT Group Inc. All rights reserved. CIT and the CIT logo are registered trademarks of CIT Group Inc. 1
KEY HEADLINES FROM THE RESEARCH
zMiddleMarketExecutivesForeseeStrongGrowthin2018andBeyond
zNewHiringSeenLikely,DespiteTightLaborMarket
zMiddleMarketPlanstoInvestinTheirBusiness—$500,000orMoreforManyin2018
Middlemarketexecutivestodayaremorepositiveabouttheirbusinessesandmoreoptimisticabouttheirprospectsforgrowththanatanytimeinthelastthreeyears.
Executivesatmiddlemarketcompaniesaremorelikelytosaythehealthoftheircompanyisstrong,thattheircompanyisbetterofftodaythanayearago,andthattheircompanyhasexperiencedincreasesinsales,productdemand,andcustomersoverthepastyear.Asagroup,theyarepleasedwiththecurrentstateoftheeconomyonthelocal,nationalandgloballevels,andtheirperceptionsonallthreeeconomicfrontshavegrownincreasinglymorepositivesince2015.
Middlemarketexecutivesalsoforeseeabrighterfuture,withamajorityexpectinggrowthoverthenext12monthsthroughgeographicexpansionwithintheU.S.,productdiversification,growingthescopeoftheirproducts/services,andexpandingintoadjacentmarkets.
Mostmiddlemarketexecutivesforeseeadditionalhiringoverthenext12months,whichmayhelpaccelerategrowth.Alargemajorityplantoinvestmoreintheirbusinessin2018—primarilyinequipment,newpersonnel,andtechnology.Morethanathirdareplanningtoinvest$500,000ormorethisyearalone.
Despitetheirgeneraloptimism,middlemarketleadersdohaveconcernsaboutthefuture.Datasecurityandrisinginterestratesremainhighonthelistofworriesformostmiddlemarketexecutives.Lingeringeconomicuncertaintyalsoremainsanissue(thoughlesssocomparedto2016),andinflationisincreasinglyseenasapressingconcern(risingfrom62%in2015,to71%in2016,to81%in2018).
Touncoverthegeneraloutlook,trendsandchallengesforthemiddlemarket,TheHarrisPoll,onbehalfofCIT,aleaderinfinancingandadvisoryservicestothesmallandmiddlemarkets,conductedanonlinesurveyfromJanuary3–February2,2018among304middlemarketexecutives.
2018 CIT Voice of Middle Market Outlook
© 2018 CIT Group Inc. All rights reserved. CIT and the CIT logo are registered trademarks of CIT Group Inc. 2
The middle market is more confident—and more optimistic—about the state of their business than in the past and at its highest levels in three years. A large majority of middle market executives feel their company is performing better than one year ago, and more than 7 in 10 have experienced a clear rise over the past year in sales, demand, and customers. Likewise, most middle market executives feel positively about the economy (gradually increasing since 2015 and strongest now at the national level). When judging the strength of the economy, middle market executives rely on a wide variety of measures (including their company’s performance, the media, the government and their personal experience), but all things considered, they are more likely to turn to anecdotal and factual evidence from their local community rather than the government’s economic indicators.
Economic Outlook MiddleMarketExecutivesForeseeStrongGrowthin2018andBeyond
VIEWS ON U.S. ECONOMY
Amajorityofmiddlemarketexecutivesalsohaveamorefavorableviewoftheeconomytoday,steadilyrisingfrom2015and2016:
z BelievesU.S. economyisverystrong/strong:71%in2018;44%in2016;35%in2015
z Believeslocal economyisverystrong/strong:66%in2018;55%in2016;47%in2015
z Believesglobal economyisverystrong/strong:51%in2018;31%in2016;22%in2015
MORE THAN 8 IN 10 MIDDLE MARKET EXECUTIVES (84%,trendingupfrom76%in2016and71%in2015)rate the current state of their company as very strong/strong
MORE THAN 7 IN 10 MIDDLE MARKET EXECUTIVES SAY they have seen the following at their company over the past year
z �Inaddition,7in10middlemarketexecutives(70%)saythattheircompanyismuchbetter/betterofftodaythanoneyearagowhichisajumpfrom2015(57%)butholdingsteadycomparedto2016(69%)
Still,whenthinkingaboutthehealthoftheU.S.economy,theviewsofmiddlemarketexecutivesare,onaverage,influencedbysimilar—yetvaried—measuresthatarebothmicro-level,personalexperiencesandmoremacro-level,objectivedata
Influenced by government economic data, facts & figures20%
Influenced by their company's performance24%
Influenced by friends & family11%Influenced by colleagues11%
Influenced by personal experiences21%
Influenced by the media12%
Morethan6in10middlemarketexecutives(63%)feelthatthebestwaytojudgethestrengthoftheU.S.economyisthroughobservingtheeconomicstabilityoftheircommunity,friends,andcoworkers,notthroughgovernmenteconomicfactsanddata(37%,trendingslightlydownwardfrom39%in2016and41%in2015).
77% 76% 73%INCREASES IN THE NUMBER OF SALES
THE DEMAND FOR THEIR PRODUCTS/
SERVICES
THE NUMBER OF CUSTOMERS
2018 CIT Voice of Middle Market Outlook
© 2018 CIT Group Inc. All rights reserved. CIT and the CIT logo are registered trademarks of CIT Group Inc. 3
As in 2016, approximately 2 in 3 middle market executives whose workforce is expected to stay the same or decrease feel that the current demands on their company force employees to do more with less. However, in the coming year, more than 8 in 10 middle market executives expect that their workforce will expand, with the majority saying the increase will be between 1 and 10%. This outlook is stable compared to 2016 but remains more optimistic than in 2015, when 71% of middle market executives expected their workforce to increase. This boost in the workforce will be driven primarily by customer demand, but also a need to innovate and stay ahead in their industry. Whether or not their company is able to hire will ultimately be decided by a number of factors including the quality of the applicant pool, the health of the economy, and the available capital.
Size of the Workforce NewHiringSeenLikely,DespiteTightLaborMarket
WORK FORCE SIZE
ABILITY TO HIRE
Amongthosewhobelievetheirworkforcewilldecreaseorremainthesame,2in3middlemarketexecutives(67%)agreethatwhenitcomestotheircurrentworkforce,theyareexpectedtoaccomplishmorewithfeweremployees.
Among those who believe their workforce will increase... the reasons are:
1.Cautionsmallbasesize(n=lessthan60):Resultsshouldbeviewedasdirectionalonly
Thisoutlookisstablecomparedto2016(79%)butremainsmoreoptimisticthanin2015,when71%ofmiddlemarketexecutivesexpectedtheirworkforcetoincrease.
Formiddlemarketexecutives,thequalityoftheapplicantpool(39%)andcurrenteconomicconditions(34%)havethegreatestimpactontheircompany'sabilitytohire.Forabout1in5(18%),theavailabilityofcapitalalsoaffectstheircompany’sabilitytohire.
increased business demand/opportunities
the need to innovate to stay ahead in their industry
expansion to an adjacent market
new product launch
42%23%16%
10%
OVER THE NEXT 12 MONTHS...
81% of middle market executives believe the workforce at their company will increase
PRIMARY REASON
the increase will be between 1 and 10%
MORE THAN 2 IN 3 MIDDLE MARKET EXECUTIVES (67%1) SAY...
2018 CIT Voice of Middle Market Outlook
© 2018 CIT Group Inc. All rights reserved. CIT and the CIT logo are registered trademarks of CIT Group Inc. 4
More than 8 in 10 middle market executives can envision (at least somewhat) their company experiencing diverse growth in the coming year, including expanding to regions within the U.S., entering new but familiar business tracks, increasing theirproducts/services, and spreading into adjacent markets. In fact,the vast majority of middle market executives plan to makesome sort of investment in their business in 2018, running thegamut from equipment and technology to hiring. And, morethan 1 in 3 expect that investment to reach half a million dollarsor more. There isn’t much conviction—even diminishing over thepast year—that their business will be sold, acquired or part of amerger. However, there is some modest belief that their businessmay buy or acquire another company in the near- or long-term.
All that said, despite greater optimism, middle market executives share many more concerns about the rest of 2018. Data security, rising interest and inflation rates, and hiring/retaining talented staff continue to top the list of anxieties felt by more than 3 in 4 middle market executives. The majority of middle market executives (though less than in 2015 and 2016) also remain concerned about lingering economic uncertainty (69% in 2018 compared to 79% in 2016 and 77% in 2015). And, one growing worry among middle market executives compared to prior years appears to be the rising inflation rate (trending upwards from 62% in 2015, 71% in 2016, and 81% in 2018).
Growth Strategies and Obstacles MiddleMarketPlanstoInvestinTheirBusiness—$500,000orMoreforManyin2018
INVESTMENTS
Thevastmajorityofmiddlemarketexecutives(93%)saytheyplantoinvestintheirbusinessin2018,withmorethanathirdofmiddlemarketexecutives(36%)planningtoinvesthalfamilliondollarsormore.
Ofmiddlemarketexecutiveswhoareexpectingtomakeinvestmentsin2018,thetop areas for investments include:
Manymiddlemarketexecutivessayitisatleastsomewhatlikelythattheircompanywillbebuying/acquiringanothercompanyintheshortterm(overthenext12months,47%)orthelong-term(overthenext12to36months,58%).However,theyarefarlesslikely—andonthedeclinefromlastyear—tothinktheircompanywillbe:
z sold/acquired15%short-termand22%long-term,comparedto34%and38%in2016respectively
z part of a merger29%short-termand37%long-term,comparedto41%and44%in2016respectively
middle market executives’ top concerns aredatasecurity(87%),risinginflationrate(81%),theabilitytohiretoptalent(80%),risinginterestrate(80%),andabilitytoretaintoptalent(77%).
z Forthemostpart,middlemarketexecutives’concernshaveremainedonparwith2016,exceptforrisinginflationrate(upto81%thisyearfrom71%in2016and62%in2015)andcontinuingeconomicuncertainty(downfrom77%in2015and79%in2016to69%thisyear).
TYPES OF GROWTH
Themajorityofmiddlemarketexecutivesbelieveitisatleastsomewhatlikelythatthefollowingtypesofgrowthwilloccurattheircompanyinthenext12months:
Increasing range of products and services offered in current markets
83%
Entering other regions within the U.S.
85%
Expanding into adjacent markets
81%
Assuming responsibilities previously performed by customers
60%
Related diversification, entering into a new business that is familiar to their company
83%in2018trendingupwardfrom72%in2016and62%in2015
Assuming functionality previously performed by a supplier or distributor
66%
THINKING ABOUT THE NEXT 12 MONTHS
74% 59%54% 47%
Technology upgrades
Equipment upgrades
Hiring workforce
Marketing & advertising
Entering other regions outside of the U.S.
54%decliningfrom2016(65%)andnowonparwith2015levels(52%)
Unrelated diversification, entering into a business currently not related to the company
50%
2018 CIT Voice of Middle Market Outlook
© 2018 CIT Group Inc. All rights reserved. CIT and the CIT logo are registered trademarks of CIT Group Inc. 5
Methodology304interviewswereconductedonlinefromJanuary3-February2,2018averagingapproximately15minutesinlength.
Qualifiedrespondentswereage24+,employedfull-time,workinginselectedindustrieswithannualrevenuebetween$25millionandlessthan$1billion,companysizeof100tolessthan10,000employees,andamajorityofemployeesbasedintheU.S.aswellashavingoneofthefollowingtitles:
z Owner
z BoardMember
z ChiefExecutiveOfficer(CEO)
z ChiefOperatingOfficer(COO)
z ChiefFinancialOfficer(CFO)
z ChiefInformationOfficer
z ChiefInvestmentOfficer
z OtherC-levelexecutive
z Sr.VicePresident/VicePresident/Director
Dataforthemiddlemarketexecutiveswereweightedwherenecessarytobringtheminlinewiththepopulationofinterestasbasedonthe2015CITToplinebyRevenueClientReport,forthefollowingvariables:Title,Revenue,Industry,PercentageofEmployeesbasedintheUS,RegionofHeadquarters,andCompanyOwnershipstructure.
Percentageswereroundedtothenearestwholepercent.Differencesinthesumsofcombinedcategories/answersareduetorounding.
About The Harris PollTheHarrisPollisoneofthelongestrunningsurveysintheU.S.trackingpublicopinion,motivationsandsocialsentimentsince1963thatisnowpartofHarrisInsights&Analytics,aglobalconsultingandmarketresearchfirmthatdeliverssocialintelligencefortransformationaltimes.Weworkwithclientsinthreeprimaryareas;buildingtwenty-first-centurycorporatereputation,craftingbrandstrategyandperformancetracking,andearningorganicmediathroughpublicrelationsresearch.Ourmissionistoprovideinsightsandadvisorytohelpleadersmakethebestdecisionspossible.
Tolearnmore,pleasevisitwww.harrisinsights.com.
©2018CITGroupInc.Allrightsreserved.CITandtheCITlogoareregisteredtrademarksofCITGroupInc.
ABOUT CIT
Foundedin1908,CIT(NYSE:CIT)isafinancialholdingcompanywithapproximately$50billioninassetsasofMar.31,2018.Itsprincipalbanksubsidiary,CITBank,N.A.,(MemberFDIC,EqualHousingLender)hasapproximately$30billionofdepositsandmorethan$40billionofassets.CITprovidesfinancing,leasing,andadvisoryservicesprincipallytomiddle-marketcompaniesandsmallbusinessesacrossawidevarietyofindustries.ItalsooffersproductsandservicestoconsumersthroughitsInternetbankfranchiseandanetworkofretailbranchesinSouthernCalifornia,operatingasOneWestBank,adivisionofCITBank,N.A.Formoreinformationvisitcit.com
www.cit.com
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