Who is the middle market in Australia and why should we care?
For so long we have talked about the middle market, SMEs, SMBs and anyone that didn’t fit a definition of big business. Definitions vary according to economic pundits and research data sources, showing a lack of clear consensus as to what the middle market actually is. The Australian Bureau of Statistics (ABS) and the Australian Tax Office (ATO) have differing views depending on employee numbers, annual turnover and taxation contributions. The ABS likes 20 to 200 employees as a medium business delineator while the ATO likes $10M to $250M income as the delineator for the same businesses. Others economic pundits like $5M to $500M turnover as a middle market definition.
The BDO Mid Market Report in its aim to aggregate as much information as possible, has defined the middle market as “ businesses with an annual income between $10 million and $250 million. This definition is based on data used by the Australian Taxation Office (ATO) and their delineation of revenue as well as research by the Australian Graduate School of Management. “
One thing all of the above can agree on, is the capacity of the Australian middle market to power all of their industry segments to account for 18% of net tax and 23% of total income for Australia. They should be considered an engine room with largest players in this market being wholesale companies, construction companies, manufacturing and retail trade, making up 56% of the total middle market with total income of $645B. Yet the largest profit makers belong to just 9% of companies in the middle market, being financial and insurance based companies. With 39% of middle market profit, finances and insurance at just 9% of the total numbers has the greatest sway when it comes to awareness and influence.
Having agreed upon the potential for income and growth within the middle market engine room, there are even more reasons to care and identify the potential of this ever growing group. One of the major advantages the BDO report pointed out was the ability to remain agile in the face of technological and economic changes. In fact the BDO report pointed out that, “ in a changing economic market, middle market players have the advantage of being nimble and agile, not subject to hierarchical structures in the way larger companies are. This enables them to respond quickly and innovative to the changing market. “ There is no longer a need to be enterprise size to be entrepreneurial or have the capability to innovate within your market. In fact, innovation becomes the lever used to implement future technologies, more efficient processes and grow the bottom line. Not being hampered by legacy corporate structures the middle market players become the petri dishes of change and have the ability to test concepts and ideas with the capacity to test and implement them without the need for upper management confirmation.
Having established the middle market makeup and its potential for growth and innovation, the opportunities for technology companies like Fintechs, Regtechs and Suptechs are unlimited and not bound for the constrictive nature of the enterprise boardroom. So for the future of business growth within Australia, we should know the middle market and care because their engine room is only going to grow and that helps us all.