The Pitcher Partners network has released its first independent national research report, canvassing the trends, challenges and opportunities faced by mid-market businesses across the nation.
The Pitcher Partners Business Radar: Understanding the businesses that drive Australia’s economy report is an independent research report conducted with strategic growth consultancy Forethought.
The research canvassed 400 businesses using both quantitative and qualitative research to further understand the mindset and unique challenges of businesses in the middle market.
“We hear anecdotal evidence from our clients every day, but we wanted to create more robust data to make sure we understood what is top of mind for business owners, as well as what is happening in the broader market,” explains Gavin Debono, an advisory partner at Pitcher Partners Melbourne.
Mr Debono says the mid-market is typically overlooked by policymakers.
“Governments generally focus on helping small businesses to succeed or collaborating with the top end of town. We believe it is a mistake to ignore the needs of the mid-market.”
Often described as the engine room of Australia’s economy, the mid-market produces just under 25% of Australia’s revenue ($625b) and contributes one-fifth of the country’s net tax take. Mid-market businesses typically employ between 20 and 200 people with an annual revenue between $2 million and $500 million.
While these metrics may help to define which businesses fit in this segment of the market, mid-market businesses are defined by their attitude. Businesses in this sector typically have a growth mindset and can quickly adapt to change and capitalise on new opportunities.
“Mid-market business owners typically have skin in the game. They are confident with what they have to offer, and leaders within their own industry,” says Mr Debono.
The report identified four stages of the business lifecycle: seed, growth, mature, and transition. These stages reflect the range of businesses Pitcher Partners works with, including start-ups, family businesses, and private unlisted and listed companies at various stages of maturity.
Regardless of the business lifecycle stage, business owners and decision makers need to make time to objectively review the business as steady growth can be a precursor to complacency. As the pace of change has become faster, there isn’t as much time to course correct if something goes wrong.
Businesses need to constantly look ahead, making sure they can see around corners and anticipate their next move. The report found that businesses are highly attuned to micro trends affected their businesses but are less likely to pay heed to macro events.
“The broader economic effects of COVID-19 and the bushfires began to occur as we were finalising the Pitcher Partners Business Radar,” says Mr Debono.
“These events really align with the findings of the report. It hammers home how important it is to have a plan in place so that your business is prepared to respond to the unpredictable.”
One surprising result from the report was that mid-market business owners don’t consider themselves as ‘innovative’. This is despite the fact many of them have created and developed solutions either directly for their customers, or internally to create greater value.
“Innovation has been increasingly associated with tech disruptors or businesses that create an entirely new market,” explains Mr Debono. “However, what we’re seeing is that mid-market businesses are doing ‘innovation-in-action’.”
“Rather than sitting back to think about being innovative, many of these businesses are simply forging ahead and creating solutions – many of which could easily be white labelled and commercialised.”
On the other hand, the report identified some of the challenges that mid-market business owners are facing. Attracting and retaining the right people was one of the most common challenges nominated.
“Proactively up-skilling and cross-skilling your workforce will keep your business competitive in the future, especially as emerging technologies drive change in supply chains and processes,” said Mr Debono.
In family businesses, managing the dynamics between family and non-family employees was a key challenge. Both family and non-family employees said they felt the effects of complex family structures were apparent in both the day to day decisions made in workplaces, and in future business and succession planning.
Succession was also front of mind, particularly those in the mature and transition stages. Debono says rather than thinking of succession as having an exit plan, businesses should think about being ‘opportunity ready’.
“This means the business needs to be in a constant state of excellence, so that when opportunities – be they sale, acquisition, merger or other chances for growth – present themselves, your business is in a peak financial position to capitalise on them,” said Debono.
Mature stage business told us they want to ‘find internal efficiencies to cut costs’ in the near term, and ‘gain access to new markets’ over the next 12 months. However, many businesses aren’t using data and analytics to its full capability to further improve and grow.
To do this, businesses must be able to access the right information. With the fast-paced nature of commerce, informed, data-driven decision making can be the difference between success and complacency.
“Many of our clients use us as a sounding board for their ideas. Often, they need us to identify and assist with government grants, or strategies to access overseas markets,” says Mr Debono.
A key mistake that mid-market business owners tend to make is not taking the time to discuss their business with like-minded leaders or advisors.
The report found business owners often experience professional loneliness. They believe their business requires a full focus, leaving little time to make connections with leaders facing similar challenges.
Debono says the best thing for the business is to collaborate, and to think ahead.
“Acknowledge where your business might be exposed to threats and think of how you can address them – is it a knowledge problem, skills problem or an issue of people and culture?”.
“Across all types of challenges – including people, technology, succession and government regulation – the opportunity comes from being able to take a step back, look objectively and have the courage to acknowledge problems and ask for help,” said Mr Debono.
Access to the report via this link.