Jan Smallenbroek
Managing Director, CBIZ, USA
How US mid-market businesses are growing globally
October 14, 2024
With an election within weeks and an economy that looked set to falter in August, the US market could be forgiven for adopting a wait-and-see attitude. This is somewhat adrift from the optimistic results of the latest mid-market research report conducted by Kreston Global in February 2024, which saw 94% of US respondents expecting to see an increase in international business this year.
Low growth, high optimism
We spoke to Jan Smallenbroek, Managing Director and National Leader of the International Tax & Transfer Pricing Practice at CBIZ, Kreston Global’s US firm, to shed light on how mid-market businesses are taking the economic headwinds, and the answer is, in their stride. “Most of the companies I work with have an international footprint. They are active in multiple countries. They’ve been there for years. If companies have reached a certain level in the US and they want to grow, they need to go outside the US in order to be able to expand and that’s why they go to Canada, they go to Asia, they go to Europe.”
Keeping Pace
Although business growth appetite is still the same, there has been a few distinct changes in the way American businesses are planning expansion, according to Jan; “We’re seeing a trend where some of our larger clients are moving their manufacturing operations away from Europe and China to other countries like India and the Philippines,” Jan notes. This shift is driven by the need for cost efficiency. For mid-market businesses, these strategic decisions are vital for sustaining growth in an increasingly competitive global market.
Billion dollar challenges
Jan works across many mid-market clients, from in the millions of dollars, turnover to in the billions, and the conversations with clients across the whole of the mid-market strike a similar tone, ‘Whether you work for the largest multinationals in the world, or you work for a mid-sized company with an international footprint, with a revenue was $1 billion instead of $30 billion, the issues are the same. The difference is the dollar amount.”
This is why the CBIZ transfer pricing team has seen significant growth over the last few years, hiring experts that have experience dealing with billion-dollar challenges. Jan himself worked with a large multi-national brand for 10 years as an adviser, helping set up their shared service centres, procurement companies and European headquarters. “When you compare CBIZ’s International Tax and Transfer Pricing practice today to where it was two years ago, we’ve seen annual growth of approximately 35% to 40%. That’s a remarkable achievement.”
Pillar Two
The global tax environment is undergoing significant changes, particularly with the introduction of the OECD’s Pillar Two framework. This new set of rules is designed to ensure that multinational enterprises pay a minimum level of tax, regardless of where they are headquartered or operate. Jan highlights that Pillar Two is not just a regulatory requirement but a strategic challenge that mid-market companies must address.
“Pillar Two is here to stay, and companies have to deal with it,” Jan emphasises. While larger companies may have already begun implementing these changes, many midmarket firms are still in the assessment phase. CBIZ has positioned itself as a key partner in this process, offering tools and expertise to help companies navigate the complexities of Pillar Two compliance.
Tax confidence
Another surprising result in the recent Kreston Global mid-market survey was the confidence mid-market business leaders feel when dealing with global tax rules, with 98% of US respondents feeling confident about their experience. Jan’s experience working with both U.S. and European multinationals means he can offer some insight on why that confidence might exist in the US. Multinationals he works with now in the U.S. tend to have smaller tax departments, “U.S. multinationals rely a lot more on service providers than European multinationals,” Jan notes. This reliance creates opportunities for firms like CBIZ to provide comprehensive tax services, especially as U.S. companies navigate the complexities of international expansion and compliance.
Growth strategy
The recent news that CBIZ has acquired billion dollar national accountancy and advisory firm Marcum hints at CBIZ’s ambition. Jan underlines an appetite from the mid-market multinationals to move away from the pricing and operation model of the Big Four to companies like CBIZ. “One example that highlights the value CBIZ brings is our relationship with a billion-dollar company in the energy drinks sector. Two years ago, this company operated in 10 countries, but they now aim to expand into 40 within the next two to three years. The CFO, recognised some of the common challenges I had faced at other, much large expanding multinationals. He said, why would I go to the Big Four if I have a guy sitting here who’s probably more experienced in dealing with consumer product companies and half of the rates thanks to the agile way we approach client management. I think that’s a pretty powerful proposition.”
