Mid-size companies expect growth despite economic hurdles
As part of a weekly partnership with KEYT, co-managing editor Jorge Mercado spoke with KEYT anchors Scott Hennessee and Beth Farnsworth to discuss this story. The link to the interview is here.
Despite economic challenges and regulatory hurdles, Santa Barbara-based Aptitude Medical knows it’s on the cusp of hitting its potential, and it’s that knowledge that keeps the company optimistic.
Many other companies are in the same boat, at least, that’s what a recent study published by Bank of America found.
The study, released on July 27, was Bank of America’s first-ever Mid-Size Owner report. It found that despite economic challenges, 75% of mid-sized business owners expect their revenue to increase and 71% are planning to hire over the next 12 months.
The study is based on a survey of more than 300 mid-sized business owners with $5 million to $50 million in annual revenues and focuses on their business and economic outlooks.
“This is also consistent with a lot of companies on the Central Coast,” Greg Bland, a senior vice president, and senior relationship manager at Bank of America, told the Business Times.
“The majority in our market are optimistic and they’re seeing growth opportunities to continue to grow their business.”
Bland has been with Bank of America for 39 years, spending the majority of his time working on the Central Coast and covering the entire tri-county region.
In 2022, four out of five middle-market companies reported revenue growth. The largest middle market businesses, those with annual revenues between $100 million and $1 billion reported the strongest growth (13.2%).
Lower middle market companies, with annual revenues between $10 million and $50 million, as well as core middle market companies, with annual revenues between $50 million and $100 million, saw year-over-year growth rates of 11.6% and 11.9% respectively.
Bland noted that the majority of the companies along the Central Coast represent middle market-sized companies.
“The bread and butter of companies in the Central Coast is those mid-sized businesses,” Bland said.
One of those mid-sized businesses is Aptitude, which works in the healthcare industry, having developed a platform, Metrix, which is capable of developing over-the-counter molecular diagnostics capable of delivering lab-quality results in 15-30 minutes.
CEO and co-founder of Aptitude, Scott Ferguson, told the Business Times “Funding is harder to get and costs are going up.”
“We also see a number of companies releasing a lot of people to manage costs and what we want to do is grow at a sustainable rate so that we can avoid those problems,” he said.
But, like the study, Aptitude is still growing.
Aptitude just began generating revenue not too long ago. Although the company did not want to disclose, it said that it expects to hit that $5 million to $50 million range very soon.
Like the study, Ferguson said the company is also expecting to hire more to its staff of 40-plus employees.
Given that Aptitude is in the healthcare space, that’s one reason why they specifically are optimistic about continued revenue growth because the need they are filling is an emerging area.
But, there are also different challenges.
For example, software companies are focused on continued revenue growth and could take on heavy losses in their first few years as they try to adopt a bigger market share and impress investors.
But Aptitude, which works in an industry that is heavily regulated before products go to market, requires a very significant upfront investment before even one dollar is generated.
“You have to build a lot of infrastructure and once you get products through regulatory, you still have to be able to sell,” Ferguson said.
That’s where the opportunity to access government money, both federal and state, helps a lot. On April 26, Aptitude was awarded as much as $54 million from the Biomedical Advanced Research and Development Authority to fund its platform capable of developing over-the-counter molecular diagnostics capable of delivering lab-quality results in 15-30 minutes while approaching the cost of antigen tests.
“Those opportunities are helpful for us to bridge the gap and have a successful transition,” he said.
“The whole thing with this industry is that it’s extremely challenging. You have multiple compounding risks… market risks, regulatory risks… all we can do is try our best to do good decision-making and grow at a pace that doesn’t jeopardize the success of the company because we are in it for the long haul.”
Bland noted that having a lot of successful mid-size businesses is “very important to our economy.”
“And not just for this area, but throughout the country,” he said.
There are nearly 200,000 U.S. middle market businesses and they represent one-third of the private sector gross domestic product, employing approximately 48 million people.
Bland noted it is particularly important for areas like the Central Coast, however, because as big employers leave the area, those thriving mid-size businesses can fill the economic needs such as jobs and a county’s total economic growth.
For example, a company like Aptitude has no plans to leave even as it continues growing.
“We love Santa Barbara so we are going to make it happen here,” Ferguson said.
It also has no intention of giving up before it reaches its goal, no matter the obstacles at play.
“We have an understanding that what we are doing is rare and important. We are solving an important problem in healthcare that we think has no great solution right now,” Ferguson said.
“There are economic needs, health needs, and we know that we are barking up the right tree and the question is how we get there.”