Middle market companies survived the recession but now face an uncertain future, and an environment of mixed signals and uncertainty. And so many firms are paused at an economic crossroads unsure of which road to take: One road leads to the Growth Expressway, the other to the safety of the parking lot and wait and watch from the sidelines.
The parking lot looks attractive for business investors, owners and executives concerned about the anti-business rhetoric and anti-growth policies and regulations. Faced with the “Tax Cliff” in 2013, it seems more reasonable to protect assets and reduce risk. They ask, “Why add employees or buy new equipment or work to expand markets if the risk is not worth the reward?” Continued political gridlock only underscores this uncertainty and diminishes the appetite for investment and expansion.
The other route leads to the Growth Expressway. This scenic route is attractive to those optimistic about a growing economy and hopeful that government will find a way to create a pro-growth environment. The Growth Expressway is paved with comprehensive tax reform that is fair, flat, and transparent. And it is smoothed by the efforts of collaborative leaders, willing to work together to create smarter regulatory systems, reward risk, and encourage capital investment.
Growing a business involves constant assessment of risk and continuous investment in people, innovation and plants and equipment. Not all investments or ideas will succeed. Business leaders must weigh and measure risk versus potential group rewards. Environments filled with uncertainty and stalemate do not encourage investment and risk.
Obviously, most companies want to drive up the ramp to the Growth Expressway. Middle market companies want to make investments in people, innovation and the means of production to meet emerging-market needs, satisfy customers, reward investors, provide dependable employment and contribute to the health of their community. They look for political leadership that recognizes the difficulties of building and growing the business and the value that business brings to society.
The Association for Corporate Growth, a non-partisan, not-for-profit, non-lobbying organization, has more than 14,000 members who invest in 26,000 middle-market (“Main Street”) businesses that operate in the U.S. They invest in those businesses to build and grow them, create more value and, at some point, realize a return on that investment. But the key is growth — expanding markets, innovating and becoming more efficient.
This approach works: According to data from GrowthEconomy.org, private capital-backed companies grew net sales by 133 percent compared with 28 percent for all other companies, supporting an 81.5 percent growth in net jobs compared with 11.7 percent for all other U.S. companies and from 1995-2009.
Sitting at the crossroads, middle market investors and executives tend to think in less-partisan terms. Middle market companies accelerate in a pro-growth environment that reduces uncertainty, mitigates risk and rewards investment.
Gary A. LaBranche is President & CEO at the Association for Corporate Growth.