On Aon Podcast: How is the Middle Market Growing Amidst Challenges?

On Aon Podcast: How is the Middle Market Growing Amidst Challenges?
February 18, 2025 8 mins

On Aon Podcast: How is the Middle Market Growing Amidst Challenges?

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Aon experts discuss middle market trends.

Key Takeaways
  1. Aon experts explore trends in the middle market.
  2. Experts discuss the interconnection between talent, risk and technology.
  3. Experts examine how to scale technology investment for success.

Intro:
Welcome to the On Aon Podcast, where we dive into some of the most pressing topics that businesses and organizations around the world are facing. Today, we’re looking at middle market trends. Here’s today’s host, Don Ortegel.

Don Ortegel:
My name is Don Ortegel and I'm an executive vice president focused on mid-market growth strategies for Aon in North America. In today's On Aon episode, we're looking at the key trends in the area known as middle market. Aon recently released a report in partnership with the Ohio State University's National Center for the Middle Market, known as NCMM.

The report focused on the middle market's expected growth and growth challenges. With me today to discuss is Douglas Farren, Managing Director of the NCMM. Doug, thank you for being here today.

Doug Farren:
Hi Don, thanks for having me.

Don Ortegel:
In our discussion, we're going to walk through how we define the middle market and what we're seeing in workforce and technology. So let's get started.

Doug, I want to start with establishing a baseline. How do we define the middle market in today's business landscape? And what trends are we seeing?

Doug Farren:
Great opening question, Don. Here at the Center, for the last 14 years that we've been in existence, we define the middle market with a technical definition of businesses that have annual revenues between $10 million and $1 billion. So that is a technical definition. More practically, these are businesses that are bigger than startups, but smaller than enterprise companies. And we've been able to study lots of different characteristics and we know lots of things about them. For example, 90 percent of these businesses are privately held. Many of them run very lean. They're also very resilient and agile. So it's a very interesting set of companies and certainly they demand more attention and more support. And that's kind of what our center does.

The second part of your question was thinking about trends and this is a great time for us to have this conversation because we recently received our year-end 2024 data on the middle market and we're seeing really strong performance. So for example, revenue growth was at 12.1 percent for the year and employment growth was at 10.3 percent. So those are very strong numbers. Consistent with what we've seen over the last three or four years since coming out of the pandemic. I would add to that that larger middle market firms, and those are ones that we describe as a hundred million in revenue or above, are really driving a lot of that performance. Those businesses reported revenue growth of 13.5 percent and employment growth of just over 13 percent.

So again, they are the drivers of this performance that we saw throughout the year. Consistent patterns, as I mentioned, and as we even look ahead to 2025, we are seeing very good signs that are signaling a strong year ahead. So for example, very high levels of confidence in the U.S. and local economies, actually historically high since we've been measuring this.

Also, expansionary plans. These companies are telling us they're planning to invest in their businesses and drive growth. And they also feel like they are able to address some of the macroeconomic challenges that have been present for the last couple of years. So with that, they are projecting revenue growth at about 8 percent and employment growth at 9.5 percent. Now those are lower than what I just mentioned for 2024, but that's a typical pattern where we see very conservative projections that are typically outpaced by the actual performance.

Don Ortegel:
Wow, those are some really good facts and figures there, Doug, especially around the double digit growth and especially as we turn to 2025, right? Those are really kind of exciting numbers to think about.

Why don’t we shift now to our collaborative research. Can you give a brief overview of the insights from our report? Driving Growth, the Role of People, Risk and Technology in Middle Market Success.

Doug Farren:
Yes, we were very honored to partner with Aon on this project because one of the questions we get continually is these growth figures are great, but what is actually behind that growth? What is unique in middle market companies that help drive that that might make them different again from small business or large business? And so really what we did, we partnered together to look at primarily larger middle market companies, both here in the US as well as in Canada. So it really gave us more of a North American view.

And we focused on three areas, and you mentioned some of these, we found that there was this interconnected nature between talent, which is critical for all middle market companies. It's also something that most of them say they struggle with. But those who prioritize both attraction and retention and then developing that talent. We saw higher growth rates, not surprisingly. Second is risk and risk management. So from that perspective, those companies that viewed risk more strategically, that were proactive about managing it, that had tools and other things in place, rather than being reactive and defensive about it, also outperformed their peers. And then finally, we took a look at technology. Technology has been a growing factor for middle market companies over the last five or six years. And we found that companies that not only just, you know, pick the hottest or latest and greatest technology, but actually pick the ones that were right for their business and could be scaled appropriately were companies that that really kind of took off.

Now, with these three areas, while they were, again, the focus of the study, we also found that there were challenges associated with them. So from a talent perspective, to stay competitive, companies actually need to be doing things differently, right? They need to think about the benefits they offer, the packages that they can give to especially their highest performing employees and creating flexibility in their work environment. Those were some of the things that could present challenges. And then again, as I mentioned, from a risk perspective, being proactive, thinking about two of the biggest risks that we noticed, which were supply chain disruptions and cybersecurity. As I mentioned, with the influx of technology, cybersecurity has become a bigger challenge. And then finally, in the technology area, kind of staying ahead of those investments, being really strategic and planful about them and making sure that they're implemented in a way that's collaborative and across the organization, we saw as being really important factors for these businesses.

Don Ortegel:
Yeah, those are great insights, Doug. And reflecting a little bit back on what you were referring to in terms of the 2025 growth projections, those messages and those insights there could really be beneficial for companies and leaders as they fine tune their 2025 growth plans. So Doug, if you had to leave one message, one message with middle market leaders today to take away from the study, what would be the one key message?

Doug Farren:
Well, as I mentioned, there are many factors that help support middle market growth and our project focused on three of them, talent, risk and technology. I want to focus in on technology a little bit because there is a lot of talk out there right now. We think about things like AI coming in. But really, it's the fact that most middle market companies tend to scale their technology investments. In other words, they may not have the capital and the resources to just really go big. So they want to start with a technology that makes sense for them, making sure that it's scalable, that it can really help support the growth plans that that company has. And oftentimes what we hear at the center is these are great tools. Where do I start? So I think to that point, it's really important that these businesses think collaboratively across the organization, they get input from their teams, from their workforce, and that will really help ensure that the implementation of whatever platform it is that they choose to implement is both successful and sustainable as they move forward.

Don Ortegel:
Great. Well, Doug, thank you so much for joining us today. That's our show for today. Thank you all for listening. In the next months, we'll have more episodes on risk and human capital topics. Until next time.

Outro:
Thanks for tuning in to the latest episode of On Aon. If you enjoyed this episode don’t forget to subscribe wherever you get your podcasts. And be sure to visit Aon.com to learn more about Aon.

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