Scaling a Mid-Market Company - Strategies and Challenges
Introducing the Mid-Market in Australia
Australia's mid-market is a crucial component of the country's economy, accounting for a significant portion of employment and economic growth. According to a report by BDO Australia, as of 2021, there were approximately 48,000 mid-sized businesses in Australia, generating around AUD 820 billion in revenue and employing over 3.8 million people. These businesses are defined as companies with annual revenue between AUD 10 million and AUD 500 million.
According to McCrindle, mid-sized businesses in Australia are often family-owned or founder-led and tend to prioritise long-term growth and stability over short-term gains. They also exhibit a strong focus on innovation, a willingness to take risks, and a commitment to sustainability and social responsibility. However, mid-market companies face several challenges, including issues with funding and financing, a shortage of skilled workers and talent, and increased competition from established industry players. To address these challenges, mid-sized businesses in Australia are increasingly turning to technology and digital innovation to drive growth and stay competitive. This may involve investing in new systems and software, adopting new marketing and sales approaches, or partnering with other businesses to expand into new markets.
Cultivating an overarching company strategy should always be your starting point .
The Australian government recognises the importance of mid-market businesses to the country's economic growth and has implemented policies and initiatives to support their development. These include tax incentives for research and development, funding for export promotion, and the Entrepreneurs' Programme, which provides resources and support to mid-sized businesses looking to expand and grow.
The Australian government's Industry Growth Centres initiative has identified six sectors for growth and development, including:
Advanced manufacturing;
Cybersecurity;
Food and agribusiness;
Medical technologies and pharmaceuticals;
Mining equipment, technology and services; and
Oil, gas and energy resources.
Australia's mid-market is vital to the country's economy and will continue driving innovation, growth, and job creation. As the business landscape evolves, mid-sized companies must remain agile and adaptable to stay ahead of the curve and seize new opportunities.
Strategies for Scaling a Mid-Market Company
Mid-market companies looking to scale successfully can benefit from different strategies depending on their industry, target market, and overall growth goals. One action is investing in technology and digital innovation, as this can help companies streamline their operations, improve efficiency, and stay competitive in an increasingly crowded marketplace. For example, design firm IDEO used technology to scale its operations and expand globally, leveraging digital tools to collaborate across geographies, automate repetitive tasks, and build a more agile and flexible workforce. By doing so, IDEO grew its revenue from USD 30 million to over USD 100 million while maintaining its focus on creativity and innovation. IDEO's estimated annual revenue is now USD 792M per year, with current market cap of USD 168 billion.
An Australian mid-market company that used partnerships to grow is Aconex, a cloud-based project management software company. Aconex partnered with major players in the construction industry, Lend Lease, Laing O'Rourke, and Skanska to expand its global footprint and gain access to new markets. This strategy allowed Aconex to rapidly scale its operations and grow its customer base, ultimately leading to its acquisition by Oracle Corporation in 2017 for AUD 1.6 billion.
Zip Co has used partnerships to grow. In 2019, Zip Co announced a partnership with Amazon Australia, which allowed Zip Co's customers to use its digital payment platform on Amazon's Australian website. This partnership helped Zip Co expand its customer base and also provided a convenient payment option for Amazon's customers. Additionally, Zip Co has partnered with other well-known brands in Australia, Kmart, Target, and Officeworks providing payment solutions for their customers. Through these partnerships, Zip Co has increased its brand awareness and expanded its reach in the Australian market.
Another example is Infomedia, which provides software solutions to the automotive industry, specialising in parts and service information systems. To expand, Infomedia formed strategic partnerships with leading companies, including Suzuki Motor Corporation, Nissan Motor Company, and Volvo Car Corporation. Through these partnerships, Infomedia has been able to access new markets and customers while also benefiting from the expertise and resources of its partners. This has helped the company grow its revenue and market share within the global automotive industry.
What partnerships would benefit your company, grow revenue, and increase market share?
Common Challenges of Scaling a Mid-Market Company
Scaling a mid-market company can be a challenging and complex process. Businesses often encounter a range of common challenges along the way. One major challenge is developing and refining a scalable business model that can support growth and expansion over the long term. The Business Model Canvas (BMC), a popular strategic planning tool, can be a helpful framework for mid-sized companies looking to overcome this challenge. By using the BMC to map out the components of their business model, such as customer segments, value propositions, and revenue streams, mid-market companies understand how their business works and can identify areas for improvement and optimisation. However, implementing changes to a business model can be difficult and requires buy-in from stakeholders and careful planning and execution.
Have your leadership team complete the BMC (1hr should be sufficient), and then come together to share findings, identify opportunities and leverage your collective knowledge. Review and refine your BMC quarterly or as major initiatives take shape.
Another challenge of scaling a mid-market company is managing cash flow and funding growth. As companies expand and take on new projects and initiatives, they often require additional capital to support their operations and investments. However, accessing funding can be challenging, particularly for mid-market businesses that don’t have access to financing larger enterprises. To overcome this challenge, mid-sized companies may need to explore alternative funding sources, such as venture capital, private equity, or crowdfunding. Look for opportunities to optimise their cash flow and manage expenses more effectively.
Mid-market companies need to take a proactive approach to financing and cash management. It's critical to positioning your company for sustainable growth and success over the long term.
Key Takeaways
Scaling a mid-market company in Australia can be challenging but highly rewarding. Mid-sized businesses that can successfully navigate challenges, and leverage innovative strategies and technologies to drive growth, can unlock new opportunities and position themselves for long-term success. By investing in technology, pursuing strategic partnerships or acquisitions, and addressing common challenges such as cash flow and funding, mid-market companies can overcome obstacles and continue to grow and thrive in the years to come. Bringing this all together under an adaptive company strategy can allow mid-market companies to evolve with changing markets. As the business landscape continues to evolve and new opportunities emerge, it is critical for mid-sized companies to remain agile, adaptable, and focused on their long-term ambitions for success.
Forget someday. When it comes to your next big move, start tomorrow.