What is a Middle market Company? Middle market companies play a key role in the global economy. They act as a bridge between small businesses and large corporations. This unique position allows them to be flexible and adapt quickly to changing trends and customer needs. In fact, in 2023, 77% of middle market companies saw improvements in their performance. They reported an average revenue growth of 12.4%. In the U.S., middle market companies are those with annual revenues ranging from $10 million to $1 billion. This range may vary based on the industry. There are about 200,000 middle-market companies in the U.S. Most of them are privately owned or closely held. These companies generate over $10 trillion in annual revenue collectively. It is important to note that there is no single standard to define middle-market companies. Their size can be measured in different ways, such as by their assets, annual revenue, net income, or number of employees. Middle-market Firms Explained As mentioned earlier, there is no single, universally accepted definition of a middle market company. Historically, companies have been classified based on their annual revenue. According to the Harvard Business Review, middle market businesses typically generate between $10 million and $1 billion in annual revenue. Some sources set the lower revenue limit at $5 million or as high as $50 million. Other methods of defining middle market firms include: Total Assets: Some analysts classify companies based on their overall asset value. Number of Employees: Another common measure is the number of employees. Middle market companies often employ between 500 and 1,500 people. Businesses with fewer than 500 employees are usually considered small businesses. · Economic Impact of Middle Market Companies Middle market companies play a crucial role in the U.S. economy as it contributes significantly to employment and revenue. Jobs: These companies are responsible for approximately 48 million jobs. Revenue: Middle market firms generate about $10 trillion in annual revenue, which accounts for one-third of the total private-sector income in the U.S. Despite their importance, many of these companies remain relatively unknown to the public. · Growth and Sector Involvement Middle market businesses are growing rapidly and making a significant impact on job creation. Employment in this sector is growing at more than twice the national average. These companies are primarily involved in service industries such as business services, healthcare, and education. They are also active in retail, wholesale trade, construction, and manufacturing. Characteristics of Middle Market Companies Middle market companies are in a unique position, located between small businesses and large corporations. They have several key characteristics that set them apart: 1. Operational Dynamics Middle market companies typically have more developed management structures than small businesses. This allows for better organization and decision-making. 2. Growth Trajectory Middle market firms often experience significant growth. They do this by expanding their market share, introducing new products, and exploring new markets. 3. Financial Structure These companies use a variety of financing options to grow. They may rely on private equity, debt financing, venture capital, and retained earnings to fund their operations and expansion. 4. Performance Indicators Unlike small businesses, middle market companies focus on more complex metrics to measure success. One common metric is EBITDA (earnings before interest, taxes, depreciation, and amortization), which helps assess profitability. Main Challenges Faced by Middle Market Companies Middle market companies, while full of growth potential, face several challenges that can limit their success. Here are some of them. a. Access to Capital Securing enough financing is often a challenge for middle market companies. Banks may be reluctant to offer large loans because they view these companies as riskier than larger businesses. Companies can overcome this hurdle by exploring alternative funding options and build strong relationships with lenders. Some alternative funding sources include: Private equity Venture capital Mezzanine financing b. Competition These companies often face tough competition. Factors like market saturation, new competitors, and changing consumer preferences can make it difficult to stand out. To stay competitive, middle market firms should: Identify what makes their company valuable to target customers. Invest in research and development to create new, innovative products. Focus on providing excellent customer service to build loyalty and satisfaction. c. Operational Efficiency Middle market companies can sometimes struggle with operational inefficiencies that slow down their growth. Common issues include outdated systems and limited automation. Companies can overcome this hurdle by: Automating repetitive tasks to boost employee productivity. Investing in modern IT systems to improve data management and streamline processes. d. Impact of the COVID-19 Pandemic The COVID-19 pandemic hit middle-market companies especially hard. Many executives believed the pandemic would negatively impact their revenues in the coming years. Even beyond the pandemic, companies still face challenges in maintaining customer relationships and managing employee productivity. Ongoing struggles include: Customer Relationship Management: Maintaining strong customer relationships continues to be a challenge for many companies. Workforce Disruption: Keeping employees engaged and productive remains a significant issue for many middle market leaders. e. Regulatory Compliance Middle market companies must navigate complex regulations, which can be overwhelming. Staying informed about industry-specific regulations, tax laws, and governance standards is essential to avoid legal risks. Partnering with legal and compliance experts can help businesses ensure they stay compliant and protect their interests. f. Representation in Policy Discussions Middle market companies often have less representation in policy and economic discussions compared to large businesses or small businesses. Large corporations (being publicly traded) have lobbyists and regularly report financial information. Small businesses have associations to represent their interests. Middle market companies, on the other hand, are more decentralized and less transparent. Their products and services may only be well-known to their direct customers, which makes it harder to advocate for their needs at higher levels. What are the Funding Options for Middle Market Companies? Middle market companies often face challenges when trying to raise capital for expansion or investment. Compared to large public companies, they usually find it harder to secure funding, and they tend to pay higher interest rates on debt. While there are lenders that specialize in middle market businesses, like boutique investment and commercial banks, these companies still have to deal with higher costs. This is often due to the additional transaction costs involved in due diligence and marketing, which make lending to middle market firms more expensive than lending to larger companies that benefit from economies of scale. · Business Development Companies (BDCs) as a Funding Source One common funding option for middle market companies is Business Development Companies (BDCs). BDCs are similar to closed-end investment funds and are often publicly traded on major stock exchanges. While investing in BDCs can carry some risks, they also offer the potential for high dividend yields. · Requirements for BDCs To qualify as a BDC, a company must meet certain regulations under the Investment Company Act of 1940. Specifically, the company must: Be a U.S.-based business. Register its securities with the Securities and Exchange Commission (SEC). BDCs must also invest at least 70% of their assets in private or public U.S. companies with a market value of less than $250 million. These companies are often in their early stages of growth or are trying to recover from financial difficulties. In addition to providing funding, BDCs are required to offer managerial support to the businesses they invest in. How to Invest in Middle Market Companies? Investing in middle market companies can be rewarding, but it requires careful planning and strategy. Here’s a simple guide on how to approach these investments. 1. Conduct Research and Due Diligence Before investing in any middle market firm, it's important to do thorough research. You should analyze the company's financial health, market position, and the strength of its management team. This helps you understand the potential risks and rewards of your investment. 2. Identify Investment Opportunities To find the right companies to invest in, use industry trends, professional networks, and market insights. Here are a few tips: Watch for trends like GDP growth, employment rates, and interest rates, which can help you spot promising sectors. Join industry groups and networks to connect with professionals and learn about potential investment opportunities. Regularly read industry reports to keep up with sectors that are expected to grow. 3. Investing Through Funds Most middle market companies are not publicly traded, but some can be found in small-cap or micro-cap categories. Small-cap companies have a market value of less than $2 billion, and micro-cap companies are even smaller. You can invest in middle market companies through various funds, including: Exchange-Traded Funds (ETFs): These funds track small-cap indexes like the Russell 2000 or Russell Microcap Index. Mutual Funds: Some mutual funds focus on small-cap stocks, providing another way to invest in middle market companies. 4. Assess Risk and Return Middle market investments can offer high returns, but they also carry risks. Economic changes and competition can impact a company’s performance. It’s important to find a balance between the potential rewards and the risks you are willing to take. Assess the financial stability, market volatility, and competition in the industry before making decisions. 5. Consider Business Development Companies (BDCs) Another option is investing in Business Development Companies (BDCs), which provide financing to middle market firms. BDCs are required to distribute at least 90% of their profits to shareholders, meaning they often offer high dividend yields. BDCs are regulated investment companies (RICs) and do not pay corporate income tax on profits before they are distributed. This allows for higher returns to investors. 6. Understand Investment Structures Middle market companies offer various investment options, each with different risk and return profiles. These include: Equity investments: Buying ownership stakes in the company. Debt investments: Lending money to the company for interest payments. Hybrid instruments: A mix of both equity and debt. Understanding these options will help you choose an investment strategy that fits your goals and risk tolerance. 7. Negotiate Terms Successful investing in middle market companies often requires strong negotiation skills. Aim to get favorable terms that align with your goals and minimize risks. Here’s how to negotiate effectively: Clearly define your investment goals, such as the expected returns, growth targets, and exit plans. Propose deal structures that match both your needs and the company’s objectives. Highlight how your investment can add value to the company. Middle Market vs. Main Street Main Street refers to small businesses with a limited number of employees and moderate revenue. These businesses typically operate on a smaller scale. The middle market, on the other hand, includes larger businesses with more employees and revenues in the tens to hundreds of millions of dollars. These companies are often considered between small businesses and large corporations. Middle market companies would typically be classified as small-cap or micro-cap stocks if they were publicly traded. They can carry more risk than larger, more stable companies. However, middle market businesses also offer greater growth potential and flexibility, which can lead to higher returns. Frequently Asked Questions? How to Decide if You Should Invest in Middle Market Companies? Investing in middle market companies can offer significant opportunities, but it’s important to consider several key factors before making a decision. Industry Dynamics: Research the industry in which the company operates. Look for trends, growth opportunities, and the regulatory environment. This will give you insight into how the industry may impact the company’s success. Growth Potential: Look at the company’s past revenue growth and future projections. This will help you understand how the company has performed and whether it has the potential for continued growth. Risk Tolerance: Middle market investments can be riskier compared to larger companies. Assess your own risk tolerance before investing. If you prefer stable, low-risk investments, middle market companies may not be the right choice. Investment Objectives: Ensure your investment goals align with the company’s growth prospects. Your investment strategy should match your financial goals, whether that’s long-term growth or short-term returns. What Is Middle Market Insurance? Middle market insurance is designed to meet the specific risk management needs of middle market businesses. These businesses often face a variety of operational, asset, and liability risks. Middle market insurance helps protect companies from unexpected events while balancing costs and providing extensive coverage. It offers a safety net according to the needs of businesses that are larger than small businesses but smaller than large corporations. What Is Middle Market Banking? Middle market banking serves the financial needs of companies in the middle market. These banks offer a range of services aimed at helping businesses grow and manage their finances effectively. Key Services in Middle Market Banking: Loan and Credit Facilities: Banks provide various types of loans, such as term loans, working capital loans, and revolving credit lines. Treasury and Cash Management Solutions: They offer tools to help companies manage their cash flow. This includes services like automated clearing house (ACH), wire transfers, and remote deposit capture. Mergers and Acquisitions (M&A) Advisory: These banks offer strategic advice to help middle market companies find, evaluate, and execute mergers and acquisitions. Middle market banking supports companies in growing their operations, managing capital, and achieving long-term financial health. What Is Middle Market Private Equity? Middle market private equity involves investment in companies valued between $50 million and $500 million. These businesses are generally well-established, making them less risky than smaller, startup companies. Private equity firms investing in this sector provide funding to support growth, improve business operations, or help with strategic changes. What Is the Lower Middle Market? The lower middle market is a specific part of the middle market, with companies valued between $10 million and $100 million. These smaller firms are often attractive targets for mergers and acquisitions due to their size and growth potential. What are Examples of Middle Market Investment Banks? Middle market companies are often served by smaller investment banks, known as middle-market investment banks. These banks provide a range of services, including investment banking and commercial banking, but focus on mid-cap firms rather than the largest corporations. Examples of middle-market investment banks include: BMO Capital Markets RBC Capital Markets SunTrust Follow our blog for more informative articles.
YouTubers who don’t use hashtags are missing out on massive opportunities to make their videos easily searchable. Whether your content is promotional, educational, or informational, the core objectives usually remain the same — more viewership. Adding the right tags to your YouTube videos boosts their searchability. YouTube tags? Didn’t we use the word “YouTube hashtags” above? Yes, we did, and this is another misconception, especially among YouTubers in their learning phase. YouTube Hashtags and tags are two different things. In the text to follow, you will explore · What are YoutTube hashtags and tags · How do they work? · What are their benefits, or why should you use them in your YouTube videos? · Difference between YouTube hashtags and YouTube tags. What are YouTube Hashtags? YouTube hashtags are keywords or phrases that help users search or find videos related to a specific category or topic. YouTube hashtags have a hash symbol (#) before the words or phrases with no space between the words. Users can click on YouTube hashtags to explore videos relevant to a specific hashtag. YouTube hashtags are technically a part of YouTube SEO; adding hashtags to your videos boosts their reach by a great deal. They also allow YouTube search engines to categorize your content more precisely. For example, a user looking for DIY ideas will search #diy on the YouTube search bar, and the search engine will come up with all relevant videos. Image Source Why Use YouTube Hashtags? Just like Twitter, LinkedIn, Instagram, or Facebook, YouTube hashtags are beneficial in different ways. Here are some of them; 1- Hashtags help YouTube Categorize your videos better Adding relevant hashtags in your YouTube videos gives more clarity to YouTube. It adds more details to the type of content you have shared in your video, ultimately boosting the chances of high searchability. 2- YouTube hashtags help users find your content easily YouTube users search the content of interest through hashtags and let the platform provide the best possible results. When you add relevant hashtags to your videos, the chances of users stumbling on your videos increase. 3- Help you organize your own videos Many brands use hashtags to organize videos into a playlist. You can also categorize your videos by a theme or topic with the help of hashtags. 4- Improve ranking chances As mentioned earlier, hashtags improve the relevancy of your videos which brings more viewership to your channel. It ultimately enhances your ranking in the YouTube algorithm and search results. How to add Hashtags on YouTube? Adding hashtags to your YouTube videos is simpler than you could think. There are two common ways to add hashtags; you can add them in · Video title · Video description If you intend to add hashtags in the title, it is better to do thorough title and keyword research. Also, adding fewer hashtags in all your videos will be better. You can add your hashtag while writing the title of your video, and it will appear in the title by itself. Image Source Here is a classic example of using one or fewer hashtags. Sprout Social, a YouTube channel, uses specific hashtags for a playlist or video series. The channel has used one hashtag, #SproutChat at the start of every title with an additional description to follow. Image Source Similarly, you can add hashtags in the video description. Where exactly to put the hashtags depends on you. However, many brands prefer adding hashtags at the end of the description after the video summary, keywords, sources, and links. Image Source The hashtags you add in the video description will appear in two different places; 1- In the description 2- On the top of the title (YouTube picks the first three hashtags and puts them above the video title) Most importantly, the ideal number of hashtags per video should be between 3–5. What are the Top YouTube hashtags in 2023? The best hashtags for YouTube vary greatly for different industries. For example, the education industry will have different trending hashtags, while fashion and beauty hashtags will vary. Here are some of the best hashtags for YouTube for some industries You can find your industry-relevant hashtags by following your competitors. Additionally, you can follow the latest trends in your industry or use hashtag generators like vidIQ or keywordtool.io What are YouTube Tags? YouTube tags, just like YouTube hashtags, are keywords or phrases you can add to your videos before uploading them. These tags work as descriptors, and the core objective of the YouTube tags is to help the YouTube algorithm to understand the nature of your content and categorize it accordingly. Just like hashtags, many YouTube users search for their desired content by entering a keyword or phrase. If your video has a relevant tag, YouTube will push it to the top searches. Tags also play an important role in indexing on YouTube or even on other search engines like Google. How to Add Tags to YouTube Videos? You can add tags to your YouTube videos in a few simple steps; 1- Open your YouTube channel and select content from the menu 2- Hover over the video from your channel you want to edit and click on the pencil icon 3- Click on the Show more option on the video details page 4- Add the tags you want; you can only use up to 500 characters 5- Click the “Save” option in the dashboard How do YouTube Tags Help Your Videos? Currently, YouTube is the second biggest search engine in the world; Google stands first. Optimizing your videos on YouTube is necessary, just like optimizing your websites, blogs, or other content on Google. The most important thing is that properly optimized YouTube videos not only rank higher on YouTube searches. They can also appear in the top searches on Google. Adding highly relevant tags helps you amplify your YouTube video’s reach. Another good thing about tags is that they help you organize or find your own content if you want to do self-reference tagging. Choosing the right length and the right number of tags in a video is also crucial. The best tag length for SEO purposes is 2–3 words. Of course, keeping every tag to this limit is almost impossible, and it also depends on your content type. In fact, when you target a particular audience, even 1 to 2-word tags might work. Research says that shorter but unique tags generate more views. Secondly, adding too many tags to the video will also give the YouTube algorithm a tough time. It will rather confuse YouTube as to what exactly your content is about. Ideally, 5–8 YouTube tags will do fine. What are the Best Tags for YouTube videos? The best tags for YouTube videos are the ones that help YouTube understand your content better. For instance, using tags like “coffee,” “health,” or “benefits” won’t help YouTube. Instead, writing something like “coffee health benefits” will make things easier. It is not only a complete phrase but is also 3-word long. It is not compulsory to keep the tag length to 2–3 words; you can make it 5 or even more. Here is an example with the title “Top 5 passive income ideas in 2018”; Image Source In the example above, there are a total of eight tags, and all of them give a clear message. YouTube Hashtags vs. YouTube Tags? YouTube hashtags and tags may serve similar purposes, but they have several differences. What Is The Best Time To Post On YouTube? The question may sound odd, but posting your YouTube videos at a suitable time can reach maximum users immediately. In other words, the best time to post on YouTube is when the maximum number of users are online. A social media trends report says Fridays and weekends are the best for YouTube posting. It is obvious; only a few people have enough time to browse YouTube during work days. The same goes for the kids and students; they get free time on weekends. Similarly, the best time to post YouTube videos is between 12–3 pm, 3–6 pm, and 6–9 pm. Conclusion YouTube hashtags and tags are and should be a mandatory element in YouTube marketing strategy. They help YouTube and Google understand the nature of your content and boost YouTube videos’ reach. Hashtags are mostly short-lived and serve a specific purpose. In comparison, tags are suitable for long-term SEO. Moreover, adding too many tags are not a good YouTube SEO practice. Try to keep the tags short, and 5–8 tags will be enough. Similarly, trending hashtags will give your videos a massive boost. Lastly, try posting on YouTube on Fridays and weekends between 12 pm to 9 pm.