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Midmarket Outlook Report 2021

Taking the pulse of Canadian midmarket leaders


Midmarket businesses tend to fly under the radar in business research. Everyone knows midmarket companies, but few know their unique priorities and pain points.

This Midmarket Outlook Report 2021 takes an important step to fill the vacuum. Based on the survey responses of almost 1100 business leaders, it presents a snapshot of the Canadian midmarket at a critical time. The COVID-19 pandemic continues to shape business decisions and results. As businesses look to the future, even short-term planning carries some uncertainty.

The Canadian midmarket comprises a rich spectrum of organizations, spanning industries and geographies. To respect that diversity, this report compares the experiences of small, medium, and large enterprises in the midmarket classified by revenue: under $25 million, $25 to $100 million, and more than $100 million.

Yet the report also dedicates special attention to the experiences of medium enterprises. They offer a powerful model of growth for small enterprises—and provide actionable lessons about their own pursuit of large-enterprise success.

These findings reveal midmarket decision-makers pushing forward to rethink their business. While they sometimes lack the robust internal resources of their larger competitors, they bring a best-in-breed approach to their plans and operations. This ambition will serve them in good stead as they take advantage of new opportunities in the coming years.

Table of contents

Doubling down on digital transformation

Closing the action gap on climate

Supply chains under assault; businesses respond

War for talent and mental health remain issues post-pandemic

Companies commit to diversity

The great divide: remote vs. return-to-office

"There’s no question the midmarket punches well above its weight in the Canadian economy. What this research drives home is their resilience and vision. Companies are embracing digital transformation. They get it when it comes to diversity. They’re gradually increasing their sustainability. And they’re supporting their greatest asset, their people."
Daphna Smuckler, Managing Partner, National Assurance & Accounting Leader

Doubling down on digital transformation

Midmarket enterprises are investing in digital transformation—and then investing again. Almost two-thirds (64%) of medium enterprises plan to increase their spending on digital transformation over the next year (vs. 54% for large and 41% for small). What's more, this figure rises to 77% for companies that have either developed and implemented, or have completed, a digital transformation project.

How to explain this doubling down on digital? Two factors are at play.

For one thing, decision-makers seem to recognize that digital transformation isn't a ‘set it and forget it' proposition. Yes, technology changes, but business needs change too. Most medium companies (54%) saw the pandemic impact their digital transformation in some or a significant way (59% for large; 47% for small).

That impact didn't just accelerate timelines. It redefined goals. Customers are ultimately the most important part of any business. Now organizations have diffused that message to their digital transformation plans.

The numbers point to another factor: companies seeing results. When asked whether they saw the return on investment they had expected from their digital transformation projects, more than two-thirds of medium-enterprise respondents (67%) said they had. In reinvesting, businesses are following standard best practice: keep doing what works.

The post-pandemic spike in digital transformation will continue—and companies will need to resist the urge to act just for action's sake. In fact, their next project's success may depend on it. We asked medium enterprises whether they had aligned their plans to business objectives. The result? Seventy-five percent of companies that aligned their digital transformation saw ROI, compared to zero for those who hadn't aligned and 44% for those who were neutral on the subject.

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Closing the action gap on climate

The midmarket organizations we surveyed have their companies' values in the right place when it comes to climate. More than two-thirds of medium enterprises (68%) say their organization is very concerned about environmental issues. About the same amount (67%) say their management and board consider sustainability a priority. And almost three-quarters (71%) say their organization is doing a good job addressing environmental sustainability (72% for large; 58% for small).

Yet we saw a different reality when we asked about implementation. None of the steps we identified have seen uptake by more than half of medium-enterprise respondents, and almost one in seven (14%) have yet to implement any of the items. Governance items rank particularly low: creating a senior position for the file (20%), implementing an ESG framework (18%), requiring suppliers and partners to meet environmental sustainability criteria (16%).

Implementation numbers for small enterprises trended even lower than for medium enterprises.

Many will see the action gap as cause for concern. Certainly, businesses need to prioritize environmental, social, and governance (ESG) reporting and other climate initiatives. What's more, medium enterprises trail their larger counterparts in this area. Only 13% listed it as a top-three business objective in the short-term (23% for large enterprises; 7% for small enterprises).

But in context these results are encouraging. Environmental sustainability and ESG are growing fast as business imperatives, but they're still maturing. Companies will close the gap between values and action as they learn more about sustainability's long reach—into supply chains and customer experience and beyond.

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Supply chains under assault; businesses respond

It's no surprise that supply chain issues rank as the second-biggest challenge overall for medium enterprises in our study—with 35% citing it (more than large enterprises, at 27%, and small enterprises, at 21%).

The pandemic is the chief cause of organizations' supply chain concerns. While the global village lifted logistics during business as usual, it has made all companies vulnerable to its weakest link as COVID-19 ebbs and flows. Now some companies are rethinking the just-in-time approach that shaped supply chains pre-pandemic.

Yet even before COVID-19, many organizations reassessed their supply chains to match up against the ‘Amazon effect.' When we asked medium enterprises to rank their top priorities to improve supply chains, they shared plans that will last well after the pandemic subsides. Their top three priorities? Customer service, customer order cycle time, and total delivered cost.

War for talent and mental health remain issues post-pandemic

Of all the challenges facing midmarket businesses in our survey, finding and keeping the right talent presents the toughest. This is particularly true for the medium enterprises in our survey, a full half of whom mentioned talent as a top-three pain point—15% more than the second spot, supply chains. (The 50% mark for medium enterprises far outpaced results from other segments in the survey: 35% for small; 41% for large.)

Businesses expect the trend to continue. When we asked respondents to zero in on their top-three workforce challenges, talent attraction was mentioned most often both currently and as anticipated post-pandemic. And talent retention—a growing concern on the heels of the pandemic—is expected to climb in importance post-pandemic for all midmarket businesses. For medium enterprises, it occupies the fourth spot currently and second spot post-pandemic.

While medium-enterprise business leaders expect talent retention to grow as a pain point post-pandemic, they anticipate fewer challenges when supporting their people's mental health. Mental health was the fourth-most common challenge for post-pandemic expectations, compared with second-most currently. This is to be expected, as the pandemic's impact on work and personal life recedes.

What's interesting is the emphasis employers continue to place on mental health—even as businesses emerge from crisis. More than one-third (34%) of medium enterprises ranked it as a top-three challenge post-pandemic. And in a separate question on our survey, companies of all sizes pinpointed mental health of employees as their top workforce priority in the next 12 months (medium – 52%; large – 56%; small – 41%).

Much as companies are seeing with digital transformation, the focus on mental health may prove to be a pandemic legacy that lasts. Companies know their people are their greatest asset and will do what they can to support their success.

Companies commit to diversity

Equity, diversity, and inclusion (EDI) has jumped in recent years from nice-to-have to necessary, and midmarket businesses are embracing the challenge. In our survey, 69% of medium enterprises said an EDI strategy is important to their organization, with 38% of those describing it as very important.

What makes these findings even more impressive is leaders' commitment to action. When we asked medium enterprises to rank their top overall objectives in the next year, they cited “a more diverse and inclusive workplace” as No. 5—ahead of cybersecurity and international expansion. More than one-fifth (21%) even placed EDI among their top three objectives.

Despite their commitment to EDI, midmarket businesses still have work to do. Our survey shows that the larger the organization, the more likely it is to prioritize EDI.

The great divide: remote vs. return-to-office

Medium enterprises in our study are divided on return-to-office plans, with some prioritizing in-office and others preferring remote work. (These findings echo the views of the small- and large-enterprise segments.) Companies plan corresponding changes to their physical workspace—some redesigning the office for social distancing, others shrinking their office footprint.

Whether organizations return to office, expand remote working, or pursue a hybrid approach, they will need to put their people front and centre. Attracting and retaining talent rank in our survey as the top two anticipated challenges for all companies post-pandemic, with large enterprises ranking retention third. Employees have grown accustomed to flexibility. Navigating the next phase of work will require sound policies, strategic organizational design, and clear communications.

The future of work is here. Are you on board?

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This research is based on an online survey conducted from July 8 to July 19, 2021, by BDO Canada and Leger Marketing, an independent marketing research firm. A total of 1094 decision-makers participated, representing businesses across Canada. The margin of error for this research is 3%, with a confidence level of 95%.

Survey participants represented three sizes of enterprise:

  • small – less than $25 million (847 respondents)
  • medium - $25 to $100 million (100 respondents)
  • large - over $100 million (70 respondents)

Seventy-seven respondents did not identify their revenue band.

No standard definition exists to differentiate enterprises by size. Researchers have pointed out that variations across geography and industry create significant ambiguity. That said, the insights gleaned in this research are designed to be directional. We hope they help all enterprises gauge their progress against that of their peers.

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