By John Kostrzewa
The Providence Journal, R.I.
WWR Article Summary (tl;dr) A new study by the credit reporting agency Dun & Bradstreet and American Express analyzed the change in commercial enterprises in the United States from 2011 to 2016 as the country emerged from the Great Recession. The report found that the number of “mid-size” companies with revenues between $10 million and $999 million doubled. It also found that while these “mid-size” companies made up only 1 percent of all U.S. businesses, they contributed $9.3 trillion to the economy.
They’re called gazelles — companies that survive the start-up phase, get on their feet and start to run, fast.
They create wealth and jobs — in big numbers — as they grow quickly and attract other companies in related businesses, forming clusters that become the bedrock of local economies.
The importance of gazelles is made clear in a new study by the credit reporting agency Dun & Bradstreet and American Express that analyzed the change in commercial enterprises in the United States from 2011 to 2016 as the country emerged from the Great Recession.
The report found that the number of companies with revenues between $10 million and $999 million doubled. It also found that while the mid-size companies made up only 1 percent of all U.S. businesses, they contributed $9.3 trillion to the economy, accounted for 53 percent of total job growth over the five-year period and employed one in four workers in the private sector.
Those numbers underscore that mid-size companies, led by the gazelles, have made an outsized contribution to the U.S. economy.
They are also a source of hope as the economy turns.
In an interview, Nalanda Matia, Dun & Bradstreet’s director of econometrics solutions, said that recent indicators signal that the U.S. economy is slowing, but mid-size companies seem to be in the best position to continue to grow.
“In an agile way, the mid-size companies are not being affected the way smaller businesses seem to be struggling and large corporations are showing very slow growth,” she said.
The national study also broke down data from the states.
Here’s Rhode Island’s profile:
56,702 firms with less than $10 million in sales.
649 firms with $10 million to $999 million in sales.
17 companies with more than $1 billion in sales, including the state’s four Fortune 500 companies, CVS Health Corp., Textron, United Natural Foods and Citizens Financial Group.
The study found the number of mid-size firms in Rhode Island grew 71 percent from 2011 to 2015, while the number in the country grew 87 percent. That ranked Rhode Island 42nd in the country. Only eight states had a lower percentage of growth.
In New England, Connecticut led the way with an increase of 86 percent and only Vermont, at 67 percent, had a lower percentage gain than Rhode Island.
Matia, the Dun & Bradstreet analyst, said the data showed that Rhode Island lagged the pack, yet the study didn’t analyze why
Rhode Island trailed most other states in the growth of mid-size companies.
Anyone who lives or works here and has seen the state show up near the bottom of many economic rankings knows the answer.
The state’s public education system has failed to train students for the jobs that companies need to expand. And there are still too many unskilled or unemployed workers who were laid off from declining industries and have not been retrained for jobs that are available.
On top of that, Rhode Island’s business climate has slowly improved in the last few years, but companies are still being held back by state and local tax burdens and rigorous regulations that take time and money to meet. Smaller firms struggle to expand into mid-size operations because of the government and workforce restraints.
Based on the study of mid-size companies, Matia said that the state could make it easier for Rhode Island businesses to grow by focusing on three key areas.
The first involves providing easier access to credit. “States that make credit more available seem to do better in moving small companies into the mid-size range,” she said.
States also benefit when they focus on the economic sectors that play to their strengths. The study showed that advanced manufacturing, an industry in which Rhode Island has a long history, is one area where many states have increased their numbers of mid-size companies.
The third idea is diversity. Matia said that during the five-year period covered in the report, many of the smaller firms that grew into mid-size companies were owned by women or minorities. She said there was room for further expansion in those two categories that could expand any state’s economy.
Rhode Islanders should pursue all three paths to grow the state’s stable of mid-size companies.
Here’s another fact from the study worth paying attention to: the average mid-size firm in 2016 has $30.8 million in revenues and 288 workers.
Those are the type of gazelles that Rhode Island needs to nurture.
John Kostrzewa is the Journal’s assistant managing editor/business, commerce and consumer issues.