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Value Creation Blog

Joining The Middle Market Is A Real Challenge

Posted by Josh Patrick

middle marketThis is the end of our series on the type of business you can own. 

The middle market is defined as businesses that employ more than 25 employees and have sales of $5,000,000 or more.  These are only about 300,000 businesses out of a total business universe of 28 million.  This means way less than 1% ever make it to this level.

There’s a reason for this:  Running a middle market company is much more complicated than running one with just a few employees.  No longer are you involved in every decision.  You will have had to develop a method for managing people who are managing others.  You will have had to put real systems in your company.

The most important thing is developing systems.

If you don’t have good systems you just won’t be able to join the middle market.  The business becomes much too complicated for you to “shoot from the hip.”  You aren’t going to be around to look over everyones’ shoulders.  Your employees are going to have to know what to do when you’re not there.

In my experience this is what keeps so many business owners who are traditional small businesses from making the leap to the next level.  Traditional small business owners have a hard time letting go.  They don’t want to have their employees move to the next level because they might make a mistake.

You have to allow others to make mistakes to join the middle market.

Owners of companies who have joined the middle market must learn that mistakes happen.  Owners have to admit that not only do owners make mistakes, but everyone makes mistakes.  If you must “punish” people who make mistakes you will never make the leap. 

Middle market companies all have managers who manage areas.  The bigger the company, the more complicated the management structure becomes.  You want to limit mistakes and you want people to learn from mistakes.  This again goes back to developing systems.  If you haven’t systematized delivering great service you can’t make this jump.

You have to make enough money to join the middle market.

Too many companies in this country don’t make enough money to grow.  Unless you find a way to have profits that are significant for your traditional small business you likely aren’t going to have the capital to grow. 

It’s nice to think that your bank will fund your growth, but the truth is most banks will only fund part of your growth.  A significant portion is going to have to come from internally generated profits.  Traditional small businesses that take the next step make enough money to afford to take the next step.  If you want to make the leap you have to ask yourself whether your profits will allow you to do so.

You have to learn that your business is not based on your personality.

Lots of smaller businesses are based on the personalities of the owner.  When you first started you were involved in every decision and probably knew every customer on a first name basis.

As you grow you have to give up this familiarity with all of your customers.  You will have to convert your customers’ loyalty from you to your company.  If you don’t do this, your business is likely not going to be able to grow.

You’ll need to develop a value proposition that is not based on your personality.  You’ll have to make sure that it’s no one’s personality but what the business does for customers that matters.  If you do this, you might have set the table for moving your business to the next level.

In my opinion, having a lower middle market business is just a blast.  You get to focus on what you do best and if you’re successful you’ll start to develop a business with real enterprise value.  If this is something you’re interested in, developing this type of business just might be for you.

The biggest change you’ll have to make to develop a lower middle market company is to become the General Manager of your company.  I’ve written a special report that talks about the four roles a private business owner plays in their company.  This might help you think about what you do in your business today and what you need to do in the future.  To get this report, click on the button below.


Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: business coaching, for business owners, roles

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