While rising wages, higher business costs and the potential for higher interest rates may impact mid-market businesses in 2017, there’s strong growth potential for those organizations that can meet the challenges and increase efficiencies.
James Cassel, co-founder and chairman of the investment firm Cassel Salpeter & Co. in Miami, Fla., said that recruiting and retaining talent will be a major challenge in 2017. He said not only will companies pay more for labor, but they’ll also see increases in healthcare and business costs, along with possibly higher borrowing costs.
Cassel recommended that mid-market companies take a number of steps to make improvements in 2017. First, he says companies should evaluate their health insurance policies and consider shifting a larger portion to employees. While there is still much uncertainty about the future of the Affordable Care Act and the state of the health industry, premiums are likely to continue rising. Many companies are raising deductibles, and there are reports that self-insurance has become a growing option for companies with more than 25 but less than 1,000 employees. While these plans are not for every company and can carry more risk, they do offer flexibility and lower costs.
To grow, Cassel suggested mid-marketers also consider paying higher wages and giving raises, not only to attract talent, but to ensure they don’t lose the workers they already have. Cassel said that with a better economy, more employees will expect raises and will be “more likely to make a move in pursuit of the best offers.” Some large companies, such as Walmart, have indicated that voluntarily raising wages has paid off by strengthening their workforce. Walmart CFO Brett Biggs told analysts at a conference in March that higher wages were making a difference that he could ‘see’ and ‘feel’. “It pays off in a number of areas: [for instance], clean, fast, friendly store scores go up,” said Biggs.
Cassel said another key to growth in 2017 will be cutting waste and increasing productivity. Mary Josephs, founder and CEO of Verit Advisors, said that middle-market companies still have “relatively engaged workforces” that can be tapped for ideas on how to better innovate and make processes more efficient. Because mid-market companies are growing and can offer advancement, employees aren’t as scared that boosting productivity will only eliminate their jobs. “Many giant companies lack the trust and find it difficult to hear these ideas from their workers,” said Josephs.
Meanwhile, EY said that mid-market companies can also boost growth by harvesting analytics to identify products and processes that have potential. Cassel added that companies that can grow faster than inflation and increase their organic growth should be in a good position to absorb increased costs they may encounter in 2017. “Indeed, by giving some thought to these issues and taking the right steps now, you can help ensure your business grows in the coming year,” he said.