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Episode Summary
You’re running a company between $10M and $1B, you’re a third of the private sector, and almost nothing written about business is actually written for you. Big company research assumes a public shareholder. Small business research assumes you’re a startup looking for an incubator. You’re neither. You’re 31 years old on average, mostly private, and either family-owned, PE-owned, or held by a few partners who said “let’s start a company.” Nobody is sitting at the table with you with real benchmarks. Tom Stewart runs the National Center for the Middle Market at Ohio State’s Fisher College of Business, and for seven years he’s been quietly building the data set that’s been missing. We got into the DNA of middle-market growth (the seven drivers that actually move the needle), the three owner profiles (investor, innovator, efficiency expert), and the working capital study where 75% of owners said they were doing great and at least half were way wrong. We closed on the m&a numbers that should stop every owner in their chair: 45% of sellers weren’t planning to sell when the phone rang.
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## Top 10 Takeaways- You’re not too small to matter. You’re a third of the private sector with a muted voice and no benchmarks.
- Without benchmarking data, “satisfied” just means you don’t know what better looks like.
- Middle-market companies pay their bills 16 days before they get paid on average. That’s cash you’re loaning out for free.
- A formal growth strategy and the discipline to translate it into budgets and goals drives 14% of your growth.
- Your growth identity is one of three: investor, innovator, or efficiency expert. Know which one you are before you decide where the $100 goes.
- One HR person per 75 employees means your “training and development” is mostly admin. Career pathing beats formal training anyway.
- Retaining profitable accounts plus salesforce effectiveness is a single sentence you can hand your reps next quarter.
- 70% of middle-market buyers and 90% of sellers are inexperienced. Two amateurs across the table is the default, not the exception.
- 45% of sellers weren’t planning to sell when the call came. If you’re not deal-ready before the phone rings, you’re negotiating from behind.
- Fit and fitness are different problems. Fit is culture and identity. Fitness is whether your books, governance, talent, and operations can survive diligence.
Sound Bites
“These companies are too big to be exempt from regulations and too small to buy a congressman of their own. They’re kind of the forgotten middle child.” (@TBD) — Tom Stewart
“75% said that on a five-point scale they put themselves in the top two box, we are satisfied with how well we manage working capital. At least half of them are way wrong.” (@TBD) — Tom Stewart
“They’re not satisfied, they’re satisficed. I like to go home on Friday knowing all my bills are paid. It feels like a safe place. And yet it’s like they’re driving a car getting 25 miles to the gallon when they could be getting 40.” (@TBD) — Tom Stewart
“21% of the buyers were not expecting to buy something, but a deal showed up. The lawyer called and said hey, do you know that Joe’s for sale. So they were not only inexperienced but unprepared.” (@TBD) — Tom Stewart
“Would you buy a house without an engineer looking at it? You don’t want to hire a lawyer when the cops are at the door.” (@TBD) — Tom Stewart
About This Episode
Tom Stewart is the Executive Director of the National Center for the Middle Market at Ohio State’s Fisher College of Business, a research collaboration with SunTrust Banks, Grant Thornton, and Cisco Systems. Before the NCMM, Tom was Chief Marketing and Knowledge Officer at Booz & Company (now Strategy&/PwC), Editor and Managing Director of Harvard Business Review, and a member of Fortune’s board of editors. He’s the author of three books on intellectual capital and knowledge management. The NCMM is the first serious research engine focused specifically on companies between $10M and $1B in revenue. This episode covers their DNA of Middle Market Growth model, their working capital benchmarking work, and their m&a study on Middle Market deal readiness.
Resources Mentioned
- National Center for the Middle Market — The research engine behind every study referenced in this episode. — middlemarketcenter.org
- DNA of Middle Market Growth — The seven-driver, three-profile model. — Available at middlemarketcenter.org
- Middle Market M&A Study — The buyer/seller readiness research with the 45% number. — Available at middlemarketcenter.org
- Tom Stewart on LinkedIn — Thomas A. Stewart
- Daseke — Flatbed trucking company referenced as the peer-network roll-up example
- New Era, Whiting, KegWorks — Buffalo-area middle-market companies referenced as examples
- ADP — Source for the “one HR person per 75 full-time employees” benchmark
Connections
Phase + Module:
- Module 5 — Predictable Revenue — Salesforce effectiveness and retaining profitable accounts as growth drivers
- Module 6 — Transferable Margins — The working capital, KPI, and operational accountability layer
Milestones:
- Milestone 13 — Strategic Plan — Formal growth strategy as a 14% growth driver
- Milestone 17 — Operational KPIs — Benchmarking, working capital, and the discipline to know where you actually stand
- Milestone 15 — Revenue Systems & Forecasting — Salesforce effectiveness and account retention as a system
Concepts referenced:
- Cash Conversion Cycle — The 16-day gap between paying bills and getting paid
- Value Gap — The space between what owners think their business is worth and what it actually is
- Three-Statement Model — The Gap accounting vs. tax accounting tension in m&a diligence
- The Four Value Levers — Growth, margin, risk, and capital efficiency mapped to the seven NCMM drivers