Business leaders in the small- and mid-market segments are optimistic about the future, with 73 percent indicating the outlook for their business is strong, according to the Annual Business Pulse Survey by SunTrust. However, the survey also indicated that half of middle-market leaders “strongly believe” a recession will begin this year.
Decision-makers representing more than 500 U.S. small- and mid-market businesses participated in the annual SunTrust/Global Market Research study conducted earlier this year.
The study found that business leaders are focusing on three top priorities to increase their own competitiveness, including: evolving the skills of employees; cash management; and preparing for potential mergers and acquisitions. Indeed, 46 percent of those surveyed are highly concerned with attracting and retaining talent, while 93 percent are taking active steps to do so.
“Companies are becoming more employee-focused as the talent war continues and the unemployment rate remains at an all-time low,” says Jason Cagle, head of commercial banking for SunTrust. “Not only are they focused on attracting employees, but also on empowering existing talent. This starts with training employees to address the rise in emerging technologies. This is key to ensure businesses are able to compete for talent and are better positioned to handle changes in the economy.”
Those same national trends are also found here in Northeast Ohio, says Jim Geuther, market president of the Northern Ohio Region for SunTrust.
“Most of our conversations with business owners echo the themes of optimism,” says Geuther. “There are pockets of concern with regards to employment trends and trade policies. However, the majority remain optimistic and don’t see any systemic market or economic flaws, which would cause them to materially change strategic policies.”
Like businesses on the national stage, local business leaders are getting increasingly competitive when it comes to attracting and retaining employees. And most are actively involved in training their existing workforce to adapt to technological change.
“The pace of technological evolution is driving leaders to make technical training a critical priority in 2019,” says Geuther. “At a time of record-low unemployment, businesses must turn to internal development to attract, retain and develop the required talent.”
Geuther addressed some specifics from the survey to underscore his point:
Over half of respondents (54 percent) cited a lag in technology as a top barrier in achieving business goals, a 14-point increase from last year.
To adapt to the rise in automation and leveraging emerging technologies, more than three in four (77 percent) of business leaders plan to invest heavily in training that will empower their current workforce to acquire new skills and fill new roles.
Businesses will devote an average of 27 percent of their budget to technical training.
Nearly all companies are taking steps to hire qualified employees with various incentives, including: 45 percent increasing wages; 36 percent offering more flexible work arrangements; 31 percent training current employees to fill vacant positions; and 24 percent hiring more employees who need upfront training.
The survey also found that 23 percent of companies are offering additional recognition programs as an incentive and 17 percent are offering college loan repayment and/or college savings programs.
In addition, business leaders from companies reporting $5 million to $250 million in revenue also said that cash management will be a feature of the short-term strategy for many companies. Financial decision makers anticipated an increased need to build cash reserves in the upcoming year, with 37 percent planning to use excess cash to pay down debt and 35 percent planning to build up their own cash reserves in the coming year.
Already, 50 percent of survey participants say they have invested excess cash from Federal Tax Reform back into their businesses.
When looking at their long-term growth strategy, businesses are increasingly turning to Mergers & Acquisitions (M&A). The survey found that 28 percent of middle-market leaders have identified M&A as a top growth strategy, up from 26 percent in 2018 and 20 percent in 2017.
“While companies are continuing to focus on organic growth in the short-term, their leaders are planning to increase M&A activity over the next five years,” says Cagle. “They see that as a key way to accelerate growth in the long-term. Given the impending wave of retirements of baby boomer business owners, we see this as a critical moment for business leaders to look at M&A.”
“Because of our belief that all businesses will transition, we expect a continued increase of M&A activity for the next decade,” adds Geuther. “Whether due to a sale, retirement or the next generation taking the reins, we believe it’s critical to begin planning years in advance to ensure a smooth transition and optimal outcome.
“Regardless of whether a business owner is on the buy or sell side of a transaction, it’s critical to understand what’s required to prepare for and execute a successful process. SunTrust is fortunate to have invested deeply in business transition advisors, as well as industry and M&A experts who can provide guidance well in advance of an event.”
For its part, SunTrust’s business here in Northeast Ohio is thriving.
“We’re in the early innings of a long-term investment,” says Geuther. “The leading edge of the investment is attracting highly skilled teammates who are able to execute our value proposition, which is based on delivering advisory solutions.
“Having started our journey in mid-2017, we’re proud to now have 12 teammates across the state representing our company/brand (seven in Northeast Ohio). We’re deeply committed to our continued scale-up in Ohio, particularly since we’ll soon to be the sixth-largest financial institution in the nation (post-merger with BB&T). Our talent investments have been successful attracting a growing list of companies we’re proud to partner with as clients.”