Deloitte Survey: Mid-Market Executives Anticipate Growth Yet Continue to Cite Government as Biggest Obstacle

Nearly half of mid-market companies expect revenue growth in next 12 months

Apr 25, 2013, 08:30 ET from Deloitte Growth Enterprise Services

NEW YORK, April 25, 2013 /PRNewswire/ -- After sustained economic turmoil, mid-market executives have a stronger footing and are taking the necessary steps to make the sector an engine for growth in the next year. However, while optimistic about their own growth, according to findings in Deloitte's "Mid-market perspectives: 2013 report on America's economic engine," they have lower expectations for U.S. economic growth.  The majority (57 percent) of respondents anticipate that over the next year the economy will grow less than two percent or not at all.

Mid-market executives that responded to the survey believe government budget challenges (69 percent), rising health care costs (60 percent), and high tax rates (53 percent) are the greatest obstacles to U.S. economic growth. These three issues were perceived to be greater obstacles to respondents this year than they were last year.

Interestingly, the housing market and European debt crisis were much less of a concern this year. Only 24 percent of respondents cited the housing market as an obstacle to growth, compared to 59 percent in 2012. Just 31 percent of respondents said the European debt crisis was an economic challenge, compared to 50 percent last year.

"This year's results highlight a potential economic inflection point, with most mid-market executives confident about their business prospects and taking the necessary steps to prepare for growth," said Tom McGee, national managing partner, Deloitte Growth Enterprise Services, Deloitte LLP. "In order for the economy to regain its momentum and allow businesses to fully prosper, the survey respondents want government to make meaningful progress on the issues that are creating uncertainty and hindering economic growth."

Companies are poised to grow

Companies have taken significant actions to grow their revenue, boost productivity and increase their competitiveness. As such, mid-market executives are somewhat optimistic about their own businesses. In fact, 46 percent expect to increase revenue this year.

  • Forty-three percent of respondents ranked sales as the area where they will be devoting the most time in 2013, far higher than any other priorities.
  • When asked to name their top growth strategy for 2013, mid-market executives singled out organic growth in domestic markets (32 percent), the development of new products and services (16 percent) and increased productivity (14 percent).

Government roadblocks 

Respondents are most challenged by the gridlock happening in Congress. The survey showed that mid-market executives are concerned with a myriad of issues such as health care costs and budget challenges. Respondents had specific views on the current tax rates.

  • Survey respondents are concerned over the potential effects of tax law changes to their bottom line, with 60 percent believing that the costs of tax compliance will rise in the coming year compared to 48 percent who believed it would rise in 2012.
  • When it comes to tax reform, mid-market executives are most supportive of lower corporate tax rates (35 percent), simplified tax code (35 percent) and lower individual tax rates (26 percent).
  • The survey also showed that a large number of respondents would like to see the rollback of health care reform (41 percent). 

The impact of a new realism

Companies are operating pragmatically with nearly half (43 percent) of mid-market executives deferring major investments due to the uncertain business climate. Those that are making investments are prioritizing according to their re-adjusted expectations.

  • Executives ranked hiring among the lower priorities for capital investment in 2013, with only 2 percent of respondents listing it as their top priority and just 7 percent listing it as their second highest priority.
  • Training was the number one most likely investment in talent in 2013 which may indicate that companies are taking matters into their own hands to address challenges with finding skilled workers.
  • Technology remains a high priority for capital investment, with almost half (46 percent) of mid-market executives ranking it as one of their top three investment priorities.

Research methodology

In March 2013, a Deloitte survey conducted by OnResearch, a market research firm, polled 525 executives at U.S. mid-sized companies about their expectations, experiences, and plans for becoming more competitive in the current economic environment. Respondents were limited to senior executives at companies with annual revenues between $50 million and $1 billion.

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SOURCE Deloitte Growth Enterprise Services