The 2020 UHY Middle Market Survey collected responses from middle market business leaders, including over 250 CEOs, CFOs and other senior leadership. Respondents were located across the country in industries including manufacturing, professional services, healthcare, technology, energy, and more, and the survey took their pulses on a range of topics. Last year was an eventful one, marked by a global pandemic, social unrest and a Presidential election. While it may seem intuitive to assume which issues are on the forefront of middle market business leaders’ minds as a result of 2020’s aforementioned events, we sought to collect and analyze hard data to know for certain.
The results of the survey highlighted several key findings, most notably involving the anticipated challenges facing businesses in 2021. A major theme in our analysis is the discrepancy between what business leaders recognize as critical concerns and what they have the bandwidth and financial security to prioritize. The uncertainty that has marked much of 2020 has bled into these survey results, making it clear that the middle market still stands on shaky legs even as we have entered the next fiscal year.
Chief concerns in 2021
Even before the SolarWinds breach came to light in mid-December 2020, it was no surprise that the subject of cybersecurity provided significant findings as we examined the survey responses. The Covid-19 pandemic sent a flurry of businesses into a sudden remote work environment in the early spring of 2020, and many of those businesses were technologically unprepared for the work-from-home model. Suddenly, the issue of cybersecurity needed to be considered from a whole new perspective.
Findings from the survey regarding cybersecurity issues did not paint a clear picture, however. One third of survey respondents reported having a cyber breach in 2020. A cyber breach being defined as any security incident that results in unauthorized access to data, applications, services, networks or devices by defeating underlying security controls. And while the majority of respondents did not experience a breach in 2020, 51% do anticipate a cyber threat in the near future.
Despite the number of business leaders who reported either having had a cybersecurity breach or being wary that one may occur in the future, “cyber threat prevention” was consistently ranked as the lowest priority among a list of ten items business leaders planned to prioritize investing in as they looked ahead to 2021. What can be made of these somewhat contradictory results regarding cybersecurity? A potential explanation lies within the other key findings of the survey.
The top two anticipated challenges that respondents reported having were “Talent Recruitment” and “Sales Growth” (with 41% and 33% respectively). Despite having presumably adjusted to working from home and the economy picking up from its initial fall, these results indicate that businesses still have a tight hold on their purse strings.
While the threat of a cybersecurity attack seems plausible to over half of survey respondents, recruiting human capital and improving sales, two factors that make or break a business’ ability to continue running, still take priority. Essentially, middle market business leaders have a long laundry list of concerns as they look towards 2021 and they are prioritizing based on survival.
Other survey results support this analysis: 76% of respondents said they were not considering expanding their operations internationally—a move that would ordinarily have the potential to help middle market businesses with their international business strategy, but somewhat intuitive considering the travel restrictions imposed by the global pandemic.
Where Do We Go from Here?
These findings provide us with critical insight into the challenges faced by middle market businesses after a year marked by a global pandemic and social unrest. They also provide information that will assist middle market CEOs across America as we return to a somewhat “normal” environment with vaccine distribution aiding parts of the economy that have shut down return to life.
While there is no true one-size-fits-all approach that can meet the unique needs of each middle market business, leaders across the board need to examine not only their anticipated budgets and allocation of funds for the rest of 2021, but also their financial planning strategies and methods. Are their accounting services as efficient as possible? Are they taking advantage of the available, secure, consolidated financial software available? The chaos and uncertainty of 2020 has clearly bled into 2021 and an agile financial software system will help leaders remain organized as both their business needs and the economy change.
While leaders cannot prepare for every possible situation and scenario, having the foresight to make themselves as financially agile as possible will help them weather a variety of storms and adjust the sails accordingly.