The Monitor catches up with Mike Pilot, GE Capital’s chief commercial officer, to discuss the lender’s “Roadshow for Growth.” The goal of the 20-city U.S. tour is to explore issues most critical to middle-market companies, connect with local community and government leaders and leverage a platform to share information and experiences.
As the United States began to rebound from the recession, GE Capital noticed that many middle-market companies significantly outperformed other segments within its portfolio. These companies powered through the recession in a much healthier way and actually grew revenue and added jobs, notes Mike Pilot, chief commercial officer for GE Capital.
“We wanted to understand why that was and who these companies were,” says Pilot. “The middle market has always been our target customer, and we are the largest lender in the space, but we wanted to know more about these companies and what role they played in the economy.”
Because middle-market companies are largely privately-held, little is known about them. Therefore, GE Capital embarked on a new initiative to learn more about these companies — how many of them there are, their role in the U.S. and global economy, their impact on jobs creation and their outlook for future economic growth. In 2011, GE Capital established the National Center for the Middle Market (middlemarketcenter.org), a research center at The Ohio State University’s Fisher College of Business that studies the middle-market sector.
“This allows us to put a face to this sector for the purpose of educating policymakers, academia and lenders on what these companies need in order to pursue further growth,” says Pilot. “We partnered with Ohio State because we wanted the Center to be based on academically sound research.”
Taking the Show on the Road
Through its research during the first year, the National Center for the Middle Market determined that there are roughly 200,000 middle-market businesses in the country — companies with $10 million to $1 billion in revenues. These companies comprise about three percent of the total population of companies in the United States, yet they deliver 1/3 of the economic output.
“They also comprise a third of the jobs in the country — a small percentage of companies represent a disproportionately high percent of GDP and employment,” says Pilot. “We also learned that during the dark times of the recession and the first year out of the recession, these companies grew employment by two million jobs at the same time that the economy generally shed about four million jobs.”
Pilot adds that the middle-market segment also grew revenues by five percent in the same time period where the economy was shrinking. “We uncovered a real growth engine; this is the group that creates the jobs and creates economic growth,” says Pilot. “We believe there are more discussions to conduct and studies to perform so we can better understand what we can do as stakeholders in the economy to help them be more successful.”
In October 2011, the Center presented its initial findings about the middle-market sector to more than 600 GE Capital customers at the National Middle Market Summit at Ohio State. Due to the popularity of this event, GE Capital decided to expand it to other cities and meet with individual mid-market business owners, political figures and educators to continue the dialogue throughout the year. As a result, in partnership with Slate Magazine, GE Capital created a six-month bus tour, known as the “Roadshow for Growth,” in which they are visiting with mid-market businesses in 20 major cities around the country and hosting a series of one-on-one discussions, middle-market events, town halls meetings and in-depth sessions with policy makers.
To help promote the Roadshow, GE Capital hired Slate as its media sponsor. Pilot says that Slate has a great distribution platform to get stories written, filmed and published on its website (roadshow.slate.com) and other channels.
“As our editorial platform, Slate Magazine has great political and academic connections around the country with respect to job growth and economic growth,” says Pilot. “It’s been a wonderful partnership so far.”
GE Capital and Slate are taking the bus tour through five regions of the country (east, southeast, midwest, southwest and west) and are hosting five major anchor events in those regions in Chicago, New York, Atlanta, Dallas and Los Angeles. Along the way, the bus tour is also visiting middle-market businesses in cities such as Kansas City, St. Louis, Indianapolis, Elkhart, Detroit, Cleveland and Pittsburgh. As the tour goes through each city, the data GE Capital and Slate present is customized to that local area.
“We release the data around their middle-market business community such as the number of jobs they represent and their employee and revenue growth,” he says. “In every city we visit, the numbers are consistent with the national numbers — a small percentage of mid-market firms deliver a huge percentage — more than a third — of economic activity and jobs. We release that data city by city as we go along.”
The tour culminates in Columbus, OH at the 3rd Annual National Middle Market Summit at Ohio State in late October where the information gleaned from the tour will be shared with hundreds of middle-market executives.
Key Issues Facing Mid-Market Businesses
Each region that the “Roadshow for Growth” visits focuses on a particular topic or issue facing mid-market businesses today: Advanced Manufacturing/Additive Manufacturing (east); Jobs and Job Creation (midwest); Competitiveness (southeast); Business Climate (southwest); and Global Growth (west). Along with these five topic areas, Pilot says that there are several other issues that come up regularly. One of those is the concept of regulation, particularly the Affordable Care Act (ACA).
“Mid-market businesses are feeling somewhat burdened and unsure of the impact of what this regulation is going to be as well as how to implement the requirements,” says Pilot. “It’s not just impacting companies like GE. It’s impacting everybody.”
Unlike GE Capital, many of these mid-market companies do not have the resources to deal with increased regulation. Pilot remembers a conversation with a manufacturer in Kansas City who was struggling with understanding how the ACA will impact his business and employees. While running his company 18 hours a day, in his spare time he had to work with his insurance broker to figure out what this legislation means and how to implement it.
“One particular concern for this manufacturer was whether he had to cut back his long-service employees to 30 hours per week,” says Pilot. “Those are the kinds of questions running through his mind. It’s very eye-opening to see firsthand the impact these pending regulations are going to have on mid-market size companies.”
Another concern for the middle-market sector is skilled labor. Mid-market companies have a difficult time hiring enough skilled people to keep up with the demand in their businesses. Through GE Capital’s research and the conversations from the Roadshow, Pilot says that it’s challenging for these businesses to find the skilled labor to operate the advanced manufacturing equipment that is required to be competitive today.
“You have to remember that these are the firms that survived through the tough times,” says Pilot. “They performed all of the belt-tightening and productivity-oriented adjustments to survive. Now they are in a great spot financially and structurally to capitalize on growth and to take advantage of markets that have been left underserved by those who didn’t survive. But they need that skilled labor to be able to expand quickly and smartly.”
According to Pilot, the goal of the “Roadshow for Growth” is simple — to explore issues most critical to middle-market companies, connect with local community and government leaders who are influential to their growth and leverage an editorial platform to share information and experiences.
“We also want to know what we can do as a society to help provide a better environment for them to thrive,” he says. “It’s a segment of the economy that has always been our core customer segment. We have always been a big player in this space, but it has been eye-opening for me and all of GE Capital to discover how meaningful a role, how large a role, these middle-market companies play in the American economy.”
GE Capital also hopes to expand the Roadshow from its current 20-city bus tour into even more local markets around the country. As GE Capital began to gain momentum in North America on its middle market initiative, it has also expanded to include developed markets where it conducts business — the United Kingdom, Italy, Germany, Australia, New Zealand, Japan and France. In every one of those locations, the dynamic is the same with fewer than five percent of the companies generating more than a third of the jobs.
“This isn’t only a phenomenon that happens here in the United States,” says Pilot. “It is true of all developed economies around the world as far as our experience and research shows. We’re hopeful we can continue to draw more attention to what we can do from a society, policy and access-to-capital standpoint to help these companies grow.”
Daniel Casciato is a professional business writer and Monitor contributor.
“We also learned that during the dark times of the recession and the first year out of the recession, these companies grew employment by two million jobs at the same time that the economy generally shed about four million jobs.”
“You have to remember that these are the firms that survived through the tough times. They performed all of the belt-tightening and productivity-oriented adjustments to survive. Now they are in a great spot financially and structurally to capitalize on growth and to take advantage of markets that have been left underserved by those who didn’t survive.”
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