The Economy

CFOs of Middle Market Firms See Recovery in 2021

"For some companies, growth may mean a return to pre-pandemic financial performance, but most believe the deepest hardship is over."
Matthew HellerJanuary 12, 2021

Most CFOs of middle market companies believe the worst of the coronavirus crisis is over, with those in industries such as technology, life sciences and health care particularly optimistic about growth in 2021.

As of September 2020, nearly three in four middle market companies had received pandemic relief assistance from the government, led by the retail, technology and manufacturing sectors.

But the 2021 BDO Middle Market CFO Outlook Survey found that 60% of respondents expect an economic recovery this year, 56% see a revenue increase, and 63% forecast growth in profitability.

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In the year-ago survey, 81% forecast a revenue gain.

“For some companies, growth may mean a return to pre-pandemic financial performance rather than reaching new records, but most believe the deepest hardship is over,” the report said.

BDO noted that “life sciences companies are pivoting production and resources to develop COVID-19 therapeutics, technology companies are investing to enable better remote work collaboration, and apparel retailers are meeting the increased demand for facemasks and athleisure.”

“Middle-market companies will prioritize technology in 2021 as they ensure their ability to meet changing demands, bolster security, and safely enable work-from-anywhere eligible employees,” the consulting firm said.

According to the survey, 59% of CFOs plan to increase IT spending in 2021 and 27% said investing in technology and infrastructure is their top priority.

Nearly half of CFOs said the pandemic has resulted in faster decision-making in their organization, which they are using to pursue growth opportunities that will further the middle market’s path to recovery, and one third said it has improved workforce culture and unity — even in a remote environment.

Thirty-nine percent of respondents reported that the pandemic had accelerated digital transformation and 43% will increase or establish permanent remote work options.

“Many companies will find themselves managing a more geographically dispersed workforce, which may create some challenges in collaboration but also open up new areas for talent recruitment,” BDO said.

The top threats identified by middle-market CFOs include a prolonged economic downturn, competitive pressure, supply chain disruption, and falling behind on technology or innovation.