Exports feed growth of middle market companies

Exports feed growth of middle market companies

September 21, 2013

Middle market companies, in Louisiana and nationally, generate an outsized share of the country’s revenue, jobs and growth. But these firms, from $10 million to $1 billion in revenue, could be even more productive with policies that encourage exports.

The lack of coordination in export efforts is one of five major findings turned up during GE Capital and Slate’s Road Show for Growth. The six-month tour made stops Tuesday in Baton Rouge and New Orleans.

“While the middle market performance has been much better than the economy as a whole, the expectations are starting to moderate,” GE Capital Marketing Director Ian Forrest said. “You’re getting a sense that middle market firms are starting to look for growth in other places.”

Roughly 3 percent of U.S. businesses form the middle market sector. They generate $9 trillion in annual revenue and account for nearly 34 percent of total U.S. employment. GE Capital is using the road show to educate policymakers, business leaders and the public about the economic sector, not to mention get more business from it.

Forrest said the U.S. economy is growing at 1.5 percent to 2 percent a year. Meanwhile, Southeast Asia’s economy is growing at a much more appealing 7 percent to 10 percent. So understanding how to get to that market and operate in it and other quickly growing countries has become very important for middle market companies.

Boosting U.S. exports is good for businesses, workers and the national economy overall, according to Brookings, a nonprofit think tank. For every $1 billion in additional goods exports, roughly 5,400 jobs are created. And export-sector jobs pay 10 percent to 20 percent more than comparable non-exporting jobs.

Exporters generally grow faster than non-exporters. Small and medium-sized enterprise manufacturing exporters saw revenue grow 37 percent between 2005 and 2009. Non-exporting manufacturers saw revenue slip 7 percent over the same time period.

Brad McDearman, director of Brookings’ Metropolitan Export Initiative, said exports offer an opportunity for growth. But exporters now must navigate a fragmented system that isn’t set up to serve them.

The metro areas — the mayors, chambers of commerce and others in local and regional economic development groups — know the local firms and can bring them into the system.

But federal, state and local government agencies must be aligned and work together to coordinate all of these fragmented pieces that can support exporters. The government agencies need to make sure there is a solid referral system and an understanding of how it works.

That way a potential exporter doesn’t end up being sent from one agency to another to another. The company can quickly get information rather than waiting for three or six months and then abandoning exports altogether. And companies need on-the-ground assistance both domestically and abroad.

McDearman said much of the effort to expand exports has targeted SMEs, small- to medium-sized enterprises.

But middle market firms may offer the biggest opportunity. They’re often more ready to export and have the resources to do so. Some middle market companies may already be exporting to one or two markets but haven’t continued to grow. Others aren’t exporting at all.

“There’s low-hanging fruit with high potential for the company and the metros,” McDearman said.

GE’s Forrest said Baton Rouge and New Orleans were chosen for the six-month, 20-city tour because of Louisiana’s business climate. The state and the cities see the value in being able to attract and retain good businesses and to help them succeed. That’s different than other areas.

Other major takeaways from the GE Capital road show include:
• There is a real skills gap, especially in areas such as advanced or additive manufacturing — and not just along the Gulf Coast. In Detroit, Roush has been trying for more than a year to fill 150 jobs retrofitting Mustangs and Ford F150 pickups. Middle market companies need help solving those shortages.
• There appears to be a growing disconnect between middle market companies’ needs and the federal government’s solutions. Businesses, as well as individuals, want to see government solving problems.
• Health care is a real concern, as is confusion around the Affordable Care Act and its implications for business. There’s not a lot of clarity about the best tack for businesses. Forrest said companies are being more cautious about growth plans because of that.
• Cities are playing an incredibly important role in business success through a number of efforts, including tax policies improving access to skilled labor.

Political ideology is not as important as making sure that these businesses succeed so that they can create jobs and opportunities for residents of the city.

“It’s one of the encouraging trends we’ve seen on the tour,” Forrest said.

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