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Middle-Market Firms Help Bolster Economic Clout in U.S. Cities, Report

February 12, 2018, 07:42 AM
Filed Under: Economy

There is a reciprocal relationship between middle market firms and the metropolitan areas in which they operate, as uncovered by the Middle Market Power Index: Best U.S. Metropolitan Areas for Middle Market Firms from American Express and Dun & Bradstreet. Metro areas provide infrastructure and talent that attracts companies, and employees are drawn to certain metro areas by their perceived culture, quality of life, and opportunities. At the same time, middle market companies offer a critical foundation for metro areas looking to maintain or strengthen their economy.

The Middle Market Power Index series, which began in 2015, analyzes the characteristics and economic impact of middle market enterprises—defined as businesses generating between $10 million and $1 billion in revenues. This report, which is the eighth in the series, explores why certain metro areas are more conducive to middle market firms than others, and why the presence of a strong middle market matters. The report measures the condition of a metro area’s middle market sector including the number of middle market firms, their overall number of employees, their overall revenue generated, the average number of employees per firm, average revenue per firm, and revenue per employee.

“We hypothesized that there is an important relationship between middle market firms and the metro areas in which they operate, but the findings from this report really show how close and interdependent that relationship is,” said Brendan Walsh, Executive Vice President, American Express Global Commercial Payments. “When metro areas have a strong middle market presence and those firms are highly productive, they are able to rebuild faster, stay more competitive, and provide for a dynamic local economy.”

Middle Market Economic Impact on 25 Most Populous U.S. Metro Areas

New York City has the most middle market firms, which is an important contributor to its role as an economic powerhouse. The typical New York City middle market firm is larger than those in other metro areas in terms of average number of employees and average revenues. In 2017, New York City had the most middle market firms (7,925 of the nearly 180,000 in the U.S.), a higher than average number of employees per firm (395 compared to the national average of 293), and the highest total revenue generated (roughly $66M compared to $52M nationally).

These statistics are partially thanks to the sheer size of the New York metro area. When factoring in productivity however, which is measured by the amount of goods and services a worker produces and is a fundamental contributor to economic health, New York does not rank quite as high. With many more employees per middle market firm, yet only slightly higher average revenue per firm, New York ranks 16th for revenue generated per employee.

Several other metro areas have healthy economies and rank highly for productivity. The greater Houston area’s middle market firms generate the highest average revenue per employee – $215,107, which is nearly $40,000 higher than the U.S. average ($176,000) and nearly $100,000 higher than Orlando-Kissimmee-Sanford ($119,701) – which ranked the lowest for productivity.

The top five ranking metropolitan areas for productivity are:

  1. Houston-The Woodlands-Sugar Land, TX ($215,107 average revenue per employee)
  2. Los Angeles-Long Beach-Anaheim, CA ($203,734 average revenue per employee)
  3. Miami-Fort Lauderdale-West Palm Beach, FL ($198,902 average revenue per employee)
  4. Riverside-San Bernadino-Ontario, CA ($197,312 average revenue per employee)
  5. Philadelphia-Camden-Wilmington, PA, NJ, DE ($187,616 average revenue per employee)

Alternatively, the five lowest ranking metropolitan areas for productivity are:

  1. Orlando-Kissimmee-Sanford, FL ($119,701 average revenue per employee)
  2. San Antonio-New Braunfels, TX ($122,912 average revenue per employee)
  3. Detroit-Warren-Dearborn, MI ($137,454 average revenue per employee)
  4. Tampa-St. Petersburg-Clearwater, FL ($150,190 average revenue per employee)
  5. Baltimore-Columbia-Townson, MD ($150,787 average revenue per employee)

A full analysis of average revenue per employee, average revenue per firm, and average number of employees per firm can be found in the full report.

Where Middle Market Firms Shine Brightest

In addition to productivity, the report also ranks middle market dominance (a combined ranking of a city’s individual rankings for share of middle market firms, total employment, and total revenue), economic clout (a ranking based on the combined growth rate from 2009 to 2017 in terms of the number of firms and growth in employment and revenues), employment vitality (analysis of a metro area’s employment growth rate from 2009 to 2017 and the average number of employees), and diversity among minority-owned and women-owned firms (a ranking of the share and growth of these businesses).

While most large cities and their surrounding areas have diverse talent pools, university hubs, and the capacity to attract people from other states and countries, smaller metro areas also have a crucial characteristic that is generally not shared by their larger counterparts — affordability. This plays a role in these cities’ high rankings for metrics such as middle market dominance, economic clout, employment vitality, and minority-owned/women-owned businesses.

Some notable findings among these metrics includes:

  • Dallas – ranks high for four of the five categories: economic clout (2nd), employment vitality (4th), and diversity difference -- both minority (3rd) and women-owned businesses (3rd). It ranks low for middle market dominance (17th).
  • Detroit – ranks high for three of the categories: middle market dominance (1st), economic clout (3rd), and employment vitality (3rd). It has a split ranking for diversity difference -- having a low share of minority-owned businesses (20th), and a somewhat low share of women-owned businesses (11th).
  • Denver – ranks high for economic clout (5th), somewhat high for employment vitality (6th), share of minority (9th)- and women-owned businesses (6th), and somewhat low for middle market dominance (12th).

“The metro areas with the strongest middle market presence are in many cases not the most obvious,” said Nalanda Matia, Senior Director of the Econometrics Practice at Dun & Bradstreet. “It’s no surprise that New York leads the nation in many of the metrics we analyzed, but it was interesting to see how well geographies such as St. Louis and San Diego performed in middle market dominance. This can provide important guidance for similar markets as they evolve in the months and years ahead.”

Middle market firms are key to a resilient economy – whether it is Houston recovering from a natural disaster or Baltimore and Detroit reviving their economies – these firms have a natural advantage: they are substantial enough to have the human and capital resources needed to withstand hard times (averaging 293 employees and generating $51.6 million in revenues), yet small, agile and nimble enough to take advantage of new opportunities.

To read the full Middle Market Power Index, please visit

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