Middle market executives identify key growth drivers

This article was published on Forbes.com in March 2021.

Despite the challenges of the past year, many business leaders have already begun making plans to seek out growth opportunities that differ—in some cases—from what’s driven past growth for their companies.

In late 2020, Forbes Insights surveyed 1,001 mid-market executives on behalf of Capital One. The survey focused on steps that executives were taking to become more resilient and agile, two qualities that more than 80% of leaders said were critical to their firms’ growth. 

It also uncovered executives’ expectations for drivers that may impact their companies’ future growth.

More than half (54%) of surveyed leaders reported that a favorable regulatory/tax environment would drive future growth for their businesses, compared to 47% who shared that this was a key driver of growth to date.

This especially rang true for executives in commercial real estate, in the public sector/municipalities and in the telecom industry. Just 16% of commercial real estate leaders reported that favorable regulatory and tax environments contributed to growth to date; 48% shared that they expect it to drive growth in the future. 

According to the survey results, corporate development—defined as mergers and acquisitions, joint ventures and partnerships—will continue to play a role in future growth. Overall, 51% of executives reported that corporate development was a key driver in their companies’ prior growth; 49% identified it as a key driver moving forward. 

Executives in healthcare and life sciences are likely (75%) to agree that corporate development will be a significant driver of future growth, as are those in manufacturing (69%), technology (68%) and retail/consumer products (65%).

Meanwhile, just one in five commercial real estate leaders expect corporate development to play a role in the future, and 6% of executives in the public sector/municipalities anticipate these types of activities (i.e., public-private-partnerships) will be a growth driver.

When revenue is factored in, an even more sizable discrepancy emerges: Fewer than half of executives at companies posting between $100 million and $499 million annually expect corporate development to play a role in future growth, while more of their peers (60%) at larger companies hold the same view.

Executives also reported that organic growth—through operations and marketing—will continue to be a driver of growth overall, but will play less of a role than it has in the past. Sixty-two percent of surveyed executives shared that organic growth was a key driver in the past, while 49% said it would continue to drive growth moving forward.

This trend held true across most industries. Executives in the professional services industry (53%) were more likely to agree that operations and marketing contributed to growth-to-date, but that dropped to 25% when asked about organic growth’s role in the future. Similarly, 58% of commercial real estate leaders shared that organic growth was a key driver of growth-to-date, while a third said it would drive future growth.

Additionally, executives at larger companies with $500 million or more in revenue anticipated marketing and operations would play a greater role in the future (63%) compared to their peers at companies with $100 million to $499 million in revenue (46%).

According to the survey, 40% of leaders expected equity or debt issuance would drive future growth, up from 36% who reported it was a key driver of growth to date.

The industries in which equity/debt issuance would play a higher role in future growth compared to growth to date were healthcare and life sciences, technology, manufacturing and retail/consumer products.

Whether they’re prioritizing organic growth, corporate development, or debt or equity issuance, or preparing for changes to the regulatory and/or tax environments, executives will find that building the right relationships can help smooth the path forward as they look to grow. More than a quarter of surveyed executives said they are improving relationships with external banks and other partners to achieve agility in their balance sheets and cash flows, which can ultimately lend itself to more growth opportunities.

 

---

The information contained herein is shared for educational purposes only and it does not provide a comprehensive list of all financial operations considerations or best practices. This information does not represent any commitment, financial obligation, advice, opinion, guidance or recommendation, whether formal or informal, of Capital One, National Association, or any of its officers, directors, employees, advisors, attorneys, consultants, affiliates or subsidiaries (collectively, “Capital One”). Nothing contained herein shall give rise to, or be construed to give rise to, any obligations or liability whatsoever on the part of Capital One. 

Capital One does not provide, endorse, or guarantee any third-party product, service, information or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.