The National Center for the Middle Market (NCMM) announces that the overall outlook from middle-market executives has improved since March, with just 13 percent of executives believing the coronavirus (COVID-19) pandemic will have a catastrophic impact on their companies, as compared with 25 percent who felt that way in March.
As part of its upcoming 2Q Middle Market Indicator, the NCMM surveyed 1,000 financial decision-makers at middle-market firms from June 1-12, 2020, and compared the results to a COVID-19-specific survey that was conducted in March. Key findings include:
- While revenue is down, executives anticipate it will turn positive, projecting 2 percent revenue growth over the next 12 months. In December 2019, the forecasted growth was 4.9 percent.
- Nearly two-thirds (65 percent) of middle-market companies sought COVID-19-related financing of some form, with 33 percent seeking support from the federal Paycheck Protection Program (PPP)and 25 percent receiving it. Existing credit, long-term loans and private equity followed behind PPP loans as top funding sources.
- Executives predict it will take an average of 6.4 months to return to full capacity once the pandemic is brought under control; in March, that estimate was four months
- Uncertainty remains the most difficult challenge in the current environment
Comparing end-of-2019 responses to now, middle-market companies planning to enter new markets decreased from 50 percent to 37 percent. Plans to open new plants or facilities have also decreased from 24 percent to 13 percent. “Things are looking less ominous than they did in March — less ominous, but more arduous,” said Thomas A. Stewart, executive director of the NCMM. “While fewer middle-market executives fear catastrophe, more see the road to recovery being long, rocky and hard to predict. But the middle market led the country out of the Great Recession, and owners and executives are telling us they’re determined to lead again.”
Companies are also wrestling with very specific short-term problems, the most pressing of which are cash, supply chains and customer experience. More than 60 percent say cash is at least somewhat of a problem, with 23 percent saying they are not managing cash issues very effectively. Similarly, 27 percent say they are not managing supply chain very effectively, and 16 percent report not managing their customer experience very effectively.
The survey found that middle-market companies are operating at an average of 67 percent capacity, with significant variations by industry: construction at 80 percent; and retail at 56 percent, for example. As companies recover from the pandemic, more than 80 percent report they are likely to make significant and long-lasting changes in the ways they operate to ensure the health and safety of employees and customers. “The ever-resilient middle market is leading the American economy in recovery,” said NCMM Managing Director Doug Farren. “The lessons learned in the past few months are likely to reverberate in strategic planning and capital expenditures for years to come.”