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business men workingMiddle market or “mid-market” companies or firms are businesses that typically earn between $5 million and $1 billion in yearly revenue. This group of businesses makes up the middle third of the U.S. economy’s revenue and employs 25% of its labor force, with large and small companies making up the other two thirds of revenue and 75% of labor force.

How is the Middle Market Defined?

Some sources define middle market companies as $5 million to $500 million, while others define this group as $100 million to $1 billion. While the ranges can vary widely, these companies are defined as larger than small, main street companies (which earn less than $5 million) but smaller than large, multinational corporations, which are generally defined as earning more than $1 billion.

Alternatively, some business authorities define a company’s size not by revenue, but instead by the number of employees. Middle market companies often employ somewhere between 100 and 1,000 employees, although this number can swing depending on the business and industry.

But since this part of the U.S. market makes up such a very broad range, it’s difficult to define it clearly by revenue or employees. Nonetheless, these companies make up a significant segment of our economy’s businesses. They often feel invisible to the average consumer because they fall somewhere in between the mom and pop shop on Main Street and global companies with household names.  Companies in this part of the market are more likely to be found in your city’s industrial park – but they are doing important work and their economic impact cannot be understated.

Breaking It Down Further

Since there are so many companies that can fall within it’s range, the middle market can further be divided into three sub-segments: the lower middle market ($5-50 million in revenue), the middle market ($50-$500 million in revenue), and the upper middle market ($500 million to $1 billion in revenue).

Breaking the middle market down into these segments can be helpful since a company in the lower middle market segment is dramatically smaller than a company in the upper middle market segment. Those buying businesses in the lower middle segment will be different from buyers in the upper middle segment, and likewise, obtaining financing and investment will vary in each of these groups.

What Should a Middle Market Business Owner Pay Close Attention To?

Buy-sell agreements. Your company is big enough that a workable buy-sell agreement is necessary, and should be a top priority. Because many mid-market companies are large and complex enough to have more than a single owner, it is important to have an ownership transition plan in place in case a life event (such as retirement, death or disability) means one owner leaves the company.

Creating a Valuable Middle Market Company Brings Wealth To Many. Owners of middle market companies should focus on the wealth created by their business. Because these companies are typically fast-growing and enjoy relatively high revenue, the wealth created should be nurtured, managed and invested with the same focus and attention to detail as those business enterprises in the public markets.  The tremendous amount of wealth created in middle market companies is shared with many including shareholders, employees, suppliers, and service providers.

 

Middle Market
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Holly Magister, CPA, CFP

Holly A. Magister, CPA, CFP®, is the founder of Enterprise Transitions, LP, an Emerging Business and Exit Planning firm. She helps entrepreneurs assess, re-align, and accelerate their business with the intent of ultimately executing its top-dollar sale.
Holly also founded ExitPromise.com and to date has answered more than 2,000 questions asked by business owners about starting, growing and selling a business.
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Middle Market
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Middle Market
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While the ranges can vary, middle market companies are businesses that typically earn between $5 million and $1 billion in yearly revenue and employ somewhere between 100 and 1,000 employees.
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