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Exploring Canada’s Middle Market: Challenges, Opportunities, and the Path to Growth
693 Plays2 months ago
In today’s episode, we welcome Sarah Steele, Senior Director at Visa Commercial Solutions, to discuss new research on Canada’s middle market. Sarah shares compelling insights into economic confidence, growth trends, and the distinct challenges Canadian middle market companies face. From adopting digital innovations like AI and automation to leveraging cross-border partnerships with U.S. businesses, she offers practical strategies to overcome hurdles such as limited resources, high costs, and fear of the unknown. Join us as we uncover how these businesses can unlock their full growth potential and thrive in a rapidly evolving economic landscape.
Sarah is an award-winning payments professional, with over 20 years of experience leading product strategy, complex projects, and thought leadership. Her accomplishments and experiences are varied, spanning consumer and B2B clients, front and back office, consulting and product management. Currently, as Senior Director of Small & Middle Market Business Products, Sarah is responsible for go to market strategy and roll-out Visa’s products, platforms, and resources in North America.
VISA Commercial Solutions, a division of VISA, helps connect businesses to a secure, global network of platforms, products, and services—no matter where you are on your business journey.
Download the latest research report at www.middlemarketcenter.org.
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Transcript
00:00:04
Speaker
Welcome
Podcast Introduction
00:00:05
Speaker
to The Market That Moves America, a podcast from the National Center for the Middle Market. The center is the leading source of knowledge, leadership and innovative research on the middle market economy. Throughout our podcast, we will feature middle market leaders and stakeholders to hear their real world perspectives on trends and emerging issues.
00:00:24
Speaker
Canada
Canada's Middle Market Research Highlights
00:00:25
Speaker
is the world's eighth largest economy, with nominal GDP over $2 trillion. dollars But just as in other parts of the world, there's a thriving middle market in Canada. And new research from the NCMM takes a look at these companies for the very first time. Today's episode will feature a Toronto-based expert from Visa Commercial Solutions, who will talk about insights and advice from this groundbreaking study.
00:00:51
Speaker
Welcome to
Doug Farron's Research Focus Announcement
00:00:52
Speaker
The Market That Moves America. My name is Doug Farron, Managing Director of the National Center for the Middle Market, located at The Ohio State University Fisher College of Business.
00:01:03
Speaker
On today's episode, we are very excited to talk about a relatively new area of exploration for NCMM, which is looking at middle market companies in Canada. And in order to approach this topic, we were thrilled that our partners and friends at Visa were kind enough to help support a new study ah that we recently completed, looking for the first time at Canada's middle market.
Introduction of Sarah Steele
00:01:34
Speaker
Joining me today is an expert from Visa Commercial Solutions, and we're going to chat a little bit more about the research and about ah just broader topics related to the Canadian middle market as well. But Sarah Steele is joining us today. Sarah is the senior director of small middle business and middle market products for North America at Visa Commercial Solutions. Welcome, Sarah. Thanks, Doug. It's great to be here with you.
00:02:03
Speaker
I'm really excited to chat about the middle market today. Great. I'm as excited as well. As I mentioned, this is ah this is a new area of research for us. So we're we're really thrilled about the the chance to look at these businesses.
Sarah Steele's Role and Experience
00:02:17
Speaker
So before we start, can you tell us, Sarah, a little bit about your current role at Visa Commercial Solutions and then maybe a little bit more about your background in general?
00:02:26
Speaker
Yeah, sure. um So in my role at Visa, I'm responsible for small business and middle market products for North America, as you mentioned. um I'm actually based in Toronto, Canadian, born and raised. I've been at Visa for over 10 years in quite a variety of different roles, and including strategy, consulting,
00:02:47
Speaker
um I've been supporting commercial solutions for over five years. um And prior to Visa, I was at Citi in their global transaction business. So lots of experience with payments. And I would say I'm extremely passionate about B2B, including the middle market. So um yeah, got lots of great experience and excited to chat with you today.
00:03:09
Speaker
Great, so why don't we start with first, um tell me a little bit about Visa Commercial Solutions motivation to study the middle market.
Visa's Interest in Canada's Middle Market
00:03:18
Speaker
So we've been working together for the last three plus years on the US middle market, but what was the motivation around looking at Canada?
00:03:28
Speaker
Yeah I mean Canada is a really important market for Visa. We do know that it's similar to the U.S. um and that the middle market in Canada is a huge contributor to the economy. But there isn't as much research available for the segment in the Canadian market and we wanted to gain a deeper understanding. So we're excited to partner with the National Center for the Middle Market and bring um specifically the MMI or the middle market indicator to Canada to the forefront for the first time.
00:04:01
Speaker
um we you know We also hear directly from our clients in the Canadian market. That is a really important segment for them. um Traditionally, you know some perspectives are that the middle market has been underserved and under-recognized, but we wanted to shine a spotlight here and get a better understanding of what's what's really going on with Canadian companies specifically. yeah um Yeah, that fits perfectly into our mission as well, so we we're glad that we could do it.
00:04:29
Speaker
Yeah, for sure. And and can in Canada, just to set some context, when you look at the StatsCan data, medium businesses represent just under 2% of total businesses, but contribute 16% to the Canadian GDP and employ over 17% of private sector employees. So despite its size, really important to the economy. um And you know we want to understand and serve and support growth in this segment.
00:04:58
Speaker
Sure.
Optimism and Performance of Canadian Companies
00:04:59
Speaker
What were some of the highlights of the research for you as you kind of read through the data and then obviously the the finished report. Was there anything in there that kind of confirmed your your understanding already or things that might have surprised you. Yeah. And and it's interesting because I guess stating restating the obvious. This is our our first report ah for the NCM and visa together on Canada middle market. And so when we looked at The data and the insights, a lot of the comparisons that we drew were from what we know about the US middle market. And so in that context, there were a few things that stood out. um Firstly, there was a lot of optimism in the Canadian data and insights, a little more than what we saw in the recent study in the US. Are Canadians more optimistic in general? I'm not sure, but um
00:05:55
Speaker
There were a few interesting insights that pointed to potentially why we saw some of that. um And a couple things, so middle market companies in Canada perform just as well or slightly better than their US counterparts. parts and And when we say perform, we were talking about some of the questions about year-over-year revenue growth. Another indicator was when you looked at the different levels of leaders at um at these companies, it was strong confidence at all levels, which was a little bit of a contrast. And then the third thing that I thought was really interesting
00:06:34
Speaker
um is that Canadian middle middle market companies felt that they were faring better at the time of the survey than a year ago, a little bit better than then in the US. So, some interesting things to dig into.
00:06:49
Speaker
Yeah, certainly. those Those are some of the key insights that that we noted on our side as well. um Just from your, well, obviously being a Canadian and living in Canada and all of your professional experience, what are some other maybe similarities or differences that you would note between US s and Canadian midsize companies?
00:07:11
Speaker
outside of the data. I think some of the stats that you shared are are super relevant because we see kind of a similar makeup within the broader economy. But just in the way that they're structured or how they operate or how they're led. Are there any other things that that you've seen throughout your career? I mean, I think that there are there are definitely a lot of similarities. um But when you look at the Canadian market,
00:07:36
Speaker
um Canada is smaller just like that's a fact we're about a tenth the size of of the US market and that holds true across many different metrics. um But when you looked at how that overlays with some of the insights in the report I thought it was one of the really interesting things that I ah thought was fascinating was how when you look at the contrast between what we call I guess the lower middle market like that the 10 million to 50 million revenue band versus the core middle market versus the upper middle market those highest revenue middle market companies which would be over 100 million and up to a billion
00:08:21
Speaker
um In Canada, we saw that it was the smaller middle market companies that had the strongest growth in revenue versus last year. um And the exact opposite was true in the US. so you know In Canada, maybe due to the smaller scale of the economy, we're seeing those smaller companies really you know outperforming versus some of their other middle market peers, and the exact opposite was true um in the U.S.
00:08:52
Speaker
yeah What are some of the challenges that you either, again, referring to the research or just from what you've seen, what are the challenges that Canadian middle market companies face as they think about growing their businesses or scaling or, uh, yeah, just what are some of those headwinds that they might encounter? Yeah. I
Challenges in Canadian Middle Market
00:09:13
Speaker
mean, and this shouldn't be a surprise to our listeners.
00:09:17
Speaker
inflation, rising costs of supplies, um you know pressure on margins, that really rose to the top and probably not different from our U.S. counterparts or what we're seeing, frankly, globally. um That's really something that is front and center for Canadian companies, too, and they're probably Because of the large amount of cross-border that happens with Canadian companies and Canada's big reliance on the US economy, you know that can sort of translate to um you know a little bit more
00:09:54
Speaker
uncertainty with exchange rates and so on um So that sort of economic indicators are are definitely front and center and and big concerns. ah The second one on the list was really about talent. And again, we I know that we've uncovered that insight through other waves with the MMI in the US, but they're just it continues to be a struggle, and it's a struggle in Canada too, that they don't have enough people to meet their needs.
00:10:24
Speaker
And we saw that digital skills gap has had a negative impact on canadian companies even more than us companies in some cases. um And then the last thing that I'll mention is, you know and we can I'm sure we can talk about it more, but digitization and AI seem to be big opportunities um that Canadian middle market companies could specifically really use to take them to the next level to find more efficiencies. um So those are some of the really interesting challenges that I think we uncovered here.
00:11:00
Speaker
Yeah, talent has been at the forefront of the US middle market for almost a decade now, based on how we've been tracking it. And I'm sure with a smaller population, that might even be more of a problem for Canadian companies. Would you agree with that? Yeah, I think so. ah and And certainly, I think that would depend a lot on location i think there are pockets where there are a lot of high talent employees where it might be a bit easier to um close that gap or to face that challenge head on but you're absolutely right you know like there's still a lot of competition for highly skilled workers
00:11:37
Speaker
from some of the largest enterprises, and even from the US. you know In Canada, we talk about the brain drain, which is a phenomenon where US companies are competing for Canadian talent, too, and in many respects. so um It's certainly something that is seems to be top of mind, too, as we see in this research.
00:11:55
Speaker
Yep. I definitely want to um get into the technology and digital innovation piece a little bit. But but before we do that, again, thinking about this research and and perhaps some of your own experience, are there any other unique factors that you think are specific to Canadian companies that help them grow? So kind of the flip side of the challenges. and what What are you seeing from that standpoint?
Importance of Digital Transformation
00:12:23
Speaker
Yeah, I mean, one of the interesting things, and it's consistent with other trends too, is that investing in digitization, you know, I mean, we've been talking about digital transformation for many, many years. um And it's seen as important. So when we asked in the survey, um you know,
00:12:42
Speaker
to recognize how important it was to drive growth and gain efficiencies. Certainly it's seen as very important, um but we did see that compared to some of the U.S. middle market counterparts, Canada seems to be a little bit behind in terms of actually taking that desire to digitize a business and turning that into a reality. um So I thought that was something that's almost an opportunity that middle market companies can really help to accelerate their growth if they did make some of those investments that they recognize are important. Yeah, what what are what why do you think that is? Are there like deterrence or barriers that prevent them from from adopting more so than their US counterparts? Are there other challenges that they face when it comes to technology?
00:13:36
Speaker
Yeah certainly seems that way and and we saw that in the data here um and the the list was long. There were some. I would say ah common culprits that we would expect to rise it to the top like cost and resources and time, um you know holding back investments, but also just some perception challenges like companies feeling like it's already too late or that they're ah they're intimidated by the process. So you know those are things that we we don't want to see. So hopefully, um you know when you think about
00:14:12
Speaker
the the ecosystem and all the players that are out there, whether it's FIs or technology companies, to support that there are ways that we can articulate to middle market companies that it's not too late. um It's never too late to invest in that ah technology.
00:14:30
Speaker
Yeah, that seems like the mantra that we use here in the at the NCMM um when we refer to middle market companies, we often say that they have big company opportunities, but small company resources. And oftentimes that holds them back too, because they've got to run the show and and keep all the trains running and so to speak. and Oftentimes, some of these investments and like transformation opportunities just become less of a priority for them. yeah Certainly, it appears a big opportunity. I do want to follow up, though. How does Visa think about digital and maybe supporting these companies specifically as we think about payments technology? You mentioned, you know there's obviously, we have cross-border implications when
00:15:17
Speaker
payments are going between the U.S. and Canada. But are there other ways that that visa helps these companies think about their payments technology? Yeah, for sure. I mean, it's such an important segment. But if we're honest with ourselves, I think all um players in the ecosystem can do a better job of articulating and building purpose built solutions for the middle market.
00:15:42
Speaker
you know When you think about the landscape, the comparatively the vast number of small businesses, there's so many solutions in that space. But the middle market has more complex needs than what is typically provided there. And at the same time, some of the enterprise-type solutions you know They can be overly complex, um they need to be more intuitive um and less onerous to implement. So what I would say about how Visa thinks about this segment really, you know at at the heart of it, it's our core card solutions, but really amplifying things like virtual cards and how virtual cards can help unlock
00:16:24
Speaker
um you know Very onerous payment types and how they can turn them into digitally seamless payments. you know We have a virtual card engine which is powered by APIs and some great user experiences to really make digital payments and reconciliation seamless. you know We're thinking all the time about embedded payments. So bringing that payment experience into the tools and applications that businesses are using every day.
00:16:51
Speaker
And then other sort of value added services like harnessing the power of data to give the middle market companies insights and control um to facilitate those safe and secure payments. So those are some of the really key things that we're always thinking about.
00:17:08
Speaker
Yeah, so so connecting some of the dots here from our the last few minutes of conversation, is there an education process that needs to take place to kind of show these companies that, hey, look, using these platforms, yes, you may have to invest and you may have to spend some time to learn how to leverage them fully, but ultimately, and in the long term, they will save you time They will be more accurate. They will give you better insights, so on and so forth. is ah Is that a process that these companies have to go through? Yeah, totally. And and the flip side of that, too, I mean, I think of this as an opportunity for those who are servicing the middle market, too.
00:17:48
Speaker
you know to make it easier to understand what that ah ROI is of adopting you know this digital capability to automate your payables or this digital technology to streamline your accounting platforms or and so forth. So it it comes with both ah from both sides that you know we can help Some of those middle market market companies get over some of the perceived hurdles by really making it clear to them how these digital solutions are there to really help them grow and actually help them be more efficient and make more money and grow their business.
00:18:29
Speaker
Yeah, yeah, that makes a ton of sense. um Any other things that Visa Commercial Solutions is doing in particular to help companies maybe even just think more generally about not just payments but digital, like that it needs to be the future? Yeah, yeah I mean, it's like, it's so simple. And part of it is really that We're constantly investing um in a really advanced technology that is all about making things simpler and making
00:19:01
Speaker
um all payments you know easy and seamless and frictionless, including for middle market companies in Canada. So we've
Visa's New Commercial Solutions Hub
00:19:10
Speaker
you know we've made some exciting announcements recently. And one example is, you know we're building a new commercial solutions hub, which is all about making it easy for financial institutions, fintech providers, as well as the underlying businesses.
00:19:25
Speaker
to digitize and plug into a centralized platform that's easy to onboard. So it's really all about almost taking a consumer-like experience and bringing it to the middle market and you know opening up the ecosystem to players across the board so that things aren't so siloed and fragmented. Yeah. now um So, as we wrap up here, Sarah, one last question for you. ah If if ah there's middle market companies in Canada who might be listening to our conversation, what do you think they should take away from the study or advice that you might give?
Strategic Advice for Canadian and US Companies
00:20:04
Speaker
And then part two would be U.S. companies who may either partner with Canadian middle market companies as as suppliers or customers. um you know what what What should they know or or what are some of the takeaways they might have?
00:20:18
Speaker
ah Good questions. okay so Starting from the Canadian side, a couple of key takeaways for middle market companies. I guess I would say just stay focused on digital transformation and whether that's you know adoption of AI tools, um leveraging ways to bring automation and digitization into operations, processes, payments, technology, and lean on your trusted partners, you know your financial institution, your technology providers. There's a lot that they're doing ah to improve every day. and We didn't even get into AI juggling. There's a whole section and in the report about AI. and yeah that could be it's That could be its own podcast. That's right. There's a little teaser in there. um And then I guess um from the US side, you know, i I mean, I think most US companies already know that Canada is the largest trading partner for the US. There are significant relationships between Canadian and US companies. So continue to partner and invest with your Canadian buyers and suppliers. I mean, we could probably have a whole other podcast on cross border, Doug. and yeah
00:21:29
Speaker
and dig in there um and and check out the report. But maybe I'll turn it around to you, Dick. You're our middle market expert based in the U.S. What did you take away? Yeah, one of the reasons we were so excited to work on this together with Visa was that um for for many years we've been looking at you know maybe some of the untapped opportunities that US middle market companies can take advantage of to to further support their own growth and and scaling. And certainly technology, as we've talked about a lot a lot today, AI within the last 18 months you know is presenting a new and exciting opportunity as well. But international it is
00:22:14
Speaker
for us, a huge opportunity for these businesses. And and yeah as we've continued to do various studies over the years, most recently, earlier this year, we did a study on global supply chain management in the middle market for U.S. companies. And what we found is that, you know,
00:22:33
Speaker
Despite the opportunity, many of them just don't participate in cross-border. So it's a huge opportunity. and And part of the reasons we touched on today, it's just, you know do they lack the expertise? Do they have the resources? um Maybe fear of the unknown, fear of failure, like things that may exist in their minds you as the the leadership teams might be viewing them as significant challenges. But the reality is, and as we have uncovered over the years, there's a lot of support available out there. Even with US s government, I mean, there are commercial services teams that can really help
00:23:12
Speaker
middle market companies stand up these processes and make introductions. And as you mentioned, you know, from a risk standpoint, Canada and then Mexico, even you know geographically, of course, they're very close, but would make the most sense as a place to start.
00:23:28
Speaker
So yeah, I would echo your comments. Like if you are already working with Canadian partners, just continue to build that relationship. And if if you haven't done so, I would say, you know, don't be afraid of exploring those because there could be some really good opportunities on both sides of the border to help drive growth.
00:23:48
Speaker
100% well said, Doug. and And I would add that there are Canadian government resources in the BDC and the EDC as well to help facilitate all of those things. So between what's available in the US and Canada, I think lots of potential to explore.
Closing Remarks
00:24:05
Speaker
Excellent.
00:24:06
Speaker
Well, I want to thank you for your time. This has been a really wonderful conversation. And I yeah i would just, again, invite listeners to, if you haven't seen the report, um you can download it at our center website, which is middlemarketcenter dot.org. And Sarah, again, want to thank you for your time and insights today. Doug, it was a pleasure. Thank you for having me. OK, thank you. And we'll talk to everybody again soon.
00:24:34
Speaker
Thank you for listening to The Market That Moves America. Never miss a new episode by subscribing anywhere podcasts can be found. You can also subscribe to our email newsletter at middlemarketcenter dot.org.