C-level pioneers and business development leaders, look west: Texas is one of the most middle-market-friendly states in the country. The state outperforms the national average in every major middle market indicator.
The National Center for the Middle Market recently released the 4Q 2013 Texas Middle Market Indicator, revealing that the nearly 10,000 Texas-based middle market companies beat the national average in revenue growth over the past 12 months (6.5 percent vs. 5 percent nationally) and expect to do so in the next 12 months (5 percent vs. 4.3 percent).
Middle market employment growth in Texas also outpaced the national average over the past 12 months (3.2 percent vs. 2.5 percent) and is expected to continue that edge over the next year.
Of course, economic growth cannot happen without capital investment, and middle market CEOs in Texas are planning to invest in new jobs and equipment in higher numbers than those in the average state (66 percent vs. 64 percent).
The state's pro-business climate is reflected in the outlook on the economy among CEOs. While Texas CEOs are somewhat more confident about the national economy than the middle market average (71 percent vs. 64 percent), they are dramatically more positive about the state economy (94 percent vs. 76 percent).
Despite this rosy outlook, middle market companies face challenges in business development.
Taxes. The Mercatus Center at George Mason University says Texas has one of the lowest tax burdens in the country. The state, however, is still working to find a reasonable and equitable way to tax businesses.
Instead of a corporate income tax, the state has a franchise tax — a "fee" assessed for doing business in the state. In 2006, the legislature revised the tax and expanded it in a way that included more middle market businesses (such as partnerships), and changed the formula to create what's referred to as a margins tax.
Many prefer a revenue-neutral solution. Legislators would benefit greatly if middle market CEOs reached out to them with ideas about how to address this issue.
Regulation. Both the Mercatus Center and Forbes magazine's "The Best States for Business and Careers" place Texas a little better than average in its regulatory environment. There is a growing desire among elected officials in the state to rethink the scale and extent of federal regulations. As a result, legislators are looking for input from the business community.
Trade. For 11 years, Texas has been the top state exporter in the country. The International Trade Association claims that from 2012 to 2013 Texas exports grew 5.7 percent to nearly $280 billion, a record high. And the Business Roundtable notes that exports accounted for 18.8 percent of the state's GDP in 2011.
Ninety-three percent of exporters in Texas are small- and medium-sized businesses. Agriculture, technology, finance, warehousing, construction, consumer services — all of these local industries rely on robust trade channels to grow.
Despite these challenges, middle market companies in Texas have it better than most states. Still, that shouldn't stop elected officials and business development executives from trying to make continued improvements.
Merrill Matthews is an NCMM contributor and a resident scholar at the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter.