Small and Middle Market Businesses Like Their Growth Prospects

In spite of the heavy toll businesses nationwide faced last year, optimism at small and middle market companies has now surged past pre-pandemic levels, Umpqua Bank says in its fourth annual Business Barometer Survey. Many of these companies report being well positioned for growth in the year ahead, despite headwinds that include supply-chain issues and hiring challenges.

Not surprisingly, most businesses have made major strategic adjustments in response to the pandemic. Nearly all middle market companies surveyed by Umpqua Bank (96%) and most small businesses (65%) say they’ve made “significant changes” to multiple areas, including supply chains, staffing models, company culture and vision, brick-and-mortar operations, and products and services. 

These changes, though, reflect more than temporary pivots in order to survive. According to the report, about half of those surveyed, including 71% of middle market companies, expect to keep most or all of the changes made. 

In addition to reporting transformational shifts in operations and strategy over the last year, middle market companies, in particular, are embracing the expectation of continued challenges and the need for ongoing adaptation. And while growth is expected among both small and middle market companies, intense disruptions related to supply chains and competition for workplace talent pose considerable challenges.

“Businesses of all sizes made significant changes over the past year in response to the pandemic. As a result of increased efficiencies and diversification, many have emerged more optimistic and poised for growth as the economic recovery continues,” said Richard Cabrera, EVP and head of middle market banking at Umpqua Bank. 

“Leaders have realized their organizations’ capacity to pivot and adapt, and the pandemic has challenged them to think more strategically and in greater detail about their larger purpose and value to the marketplace,” he continued. “This bodes well for the immediate future and will also make them better prepared to adapt to the next disruption.”

Cabrera added that disruptions—whether macro-economic, geopolitical, or technological—have become a constant reality over the past several years, “and none has been more impactful than the pandemic,” said Cabrera. “The data mirrors what we see on the ground with our customers—businesses are starting to accept this reality. While the last year has been difficult, many businesses have tapped into strategic and creative energy that’s changing their mindset from one of resistance to embracing the need for continual change.”

In the face of these shifts, the state of the commercial real estate sector may be less dire than commonly assumed, Umpqua Bank reported. Forty-seven percent of middle market companies are looking to expand their real estate footprint. That figure is most pronounced within the manufacturing, finance and insurance industries.

Taken together, the small and middle market community serve as a bellwether for the economy. Middle market businesses alone account for $6 trillion of the U.S. private-sector GDP and provide 44 million jobs. The strength and resiliency of these businesses are critical to economic well-being and recovery, says Umpqua Bank.