We work closely as Operating Partners with lower middle market companies (EBITDA <$15m) to Create Value. To transform visions into remarkable businesses. Owner/Operators are always surprised when we break down the marketplace.
For your joy and edification, I’ve summarized the landscape of US firms across all sectors from the latest US Census data with some takeaways and implications:
▶️ There are 6.3m firms that run a payroll.
▶️ There are 30.4m firms regarded as non employers (small businesses with no payroll).
▶️ That gives a grand total of 36.7m enterprises.
▶️ Only 84,000 employ 100 people or more!
▶️ That means 6.2m firms employ 99 people or less (98.7%)
▶️ Within that number, 4m firms employ 4 people or less (63.9%)
▶️ About 1.6m firms employ 5 to 19 people (26%)
▶️ The 6.3m firms in total employ 120m folk.
▶️About 42m people are employed by the 6.2m firms with less than 100 employees
▶️About 40m people are employed by the 2000 firms with 5000 or more employees
▶️The balance of 38m employees are employed by the 100 to 5000 employee firms
Conclusions
▶️Very few firms scale beyond a few employees (which of course is fine other than risky)
▶️Rarity in terms of size of firm kicks in around 100 employees although there are very few companies that scale beyond 20 employees
▶️In our experience there is a correlation between size of firm and safety.
▶️Smaller firms lack economies of scale which can capsize the boat when revenue drops (for whatever reason)!
▶️Safety lies in some level of scaling where positioning and operational excellence have a chance of creating a remarkable, sustainable business.
▶️As you build a great business it’s always worth knowing where you are on your sector’s curve and your position relative to the market.
Always available for a chat at Ian@TPPBoston.com.
Current strategic focus – Private company owners looking to exit in the next 2 years with EBITDA > $5m. Services here.
