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Episode Summary
You’re sitting in your office after the executive meeting, staring at a hiring decision, a capex bet, or a building purchase, asking yourself if this is the right move. The mainstream headlines are no help. They’re written for public companies and the S&P 500, not for the middle market owner-operator generating real cash flow to fund payroll, taxes, distributions, and the next bet. So I stacked four experts back-to-back to give you the view from the seat you’re actually sitting in. Brian Beaulieu from ITR Economics on China, the inverted yield curve, the commercial real estate cliff, and where every industry sits in the A/B/C/D business cycle. Doug Farren from the National Center for the Middle Market on the data behind 1,000 C-level executives running companies that grew revenue 11.8% while the S&P grew 4.8%. Jeff Buettner from ButcherJoseph on what’s actually happening to deal volume, multiples, and the financial performance premium as the cost of capital resets. And Jeff Campbell from AI Commerce on where retail and e-commerce sales are going as Gen Z scales from 46M to 61M consumers. Four lenses. One question: where are you placing your bets, and do you actually have a financial roadmap to validate them?
Watch on YouTube
## Top 10 Takeaways- The middle market grew revenue 11.8% and employment 10% while the S&P 500 grew 4.8% and large company headcount grew 1.6%.
- Your industry sits somewhere on the A/B/C/D cycle, and the late-B/early-C top is where most owners build factories they shouldn’t.
- History bias is the most expensive bias you own: the last two good years are not the next two.
- Housing has likely already bottomed; commercial real estate is at the apex about to go careening down.
- Deal volume is on pace for a five-year low because the bid-ask spread between sellers and buyers has widened.
- Peak earnings from 2022 are reverting, and nobody knows where the new floor is, which is why diligence is taking longer.
- The financial performance premium between A-companies and C-companies is compressing because debt capacity sets what buyers can pay.
- Strategic buyers are quietly celebrating: sensibility is back in the multiples and they’re competitive again.
- Six out of ten middle market companies invest the next dollar instead of saving it, but that’s down from seven out of ten pre-COVID.
- Your access to capital is fine. The cost of capital is not. Plan your bets against your target valuation, not against this quarter’s rate.
Sound Bites
“Ask yourself, why are the BRICS opening up and welcoming others in? Why are they doing that? They don’t want to be working with us, would be my thought.” (@TBD) — Brian Beaulieu
“At the top of C, you’re riding high. The year over year growth numbers are terrific. People have a history bias. So I’ve been successful, I’ve led this company for the last two, three years. Everything’s been turning to gold. Let’s just keep doing it.” (@TBD) — Brian Beaulieu
“I know when a business is really in trouble, when they’re riding that crest of the cycle, late B, early C, and they say, this is a great time to remodel the office.” (@TBD) — Brian Beaulieu
“The strategic buyers are all going, thank goodness. Thank God we finally have some sensibility in the marketplace, because they were a lot of times priced out two, three years ago when private equity was paying multiples that they felt were astronomical.” (@TBD) — Jeff Buettner
“We’ve seen some financial statements that are showing a decline from peak earnings. Everyone’s sort of looking for, okay, we get that you’re coming off peak earnings, but what we don’t get is how far below peak earnings you’re going to go.” (@TBD) — Jeff Buettner
“Even with that restriction of inventory, we’re seeing some pickup in existing home activity. Existing home sales lead industrial production and GDP by 15 months. This is an early sign that there’s light at the end of the tunnel, and it’s not another train coming at us.” (@TBD) — Brian Beaulieu
About This Episode
Q3 2023 quarterly economic and M&A update, sponsored by ITR Economics. Ryan stacks four segments back-to-back: Brian Beaulieu (ITR Economics, 94.7% forecast accuracy, co-author of Prosperity in the Age of Decline) on the macro and the business cycle; Doug Farren (Managing Director, National Center for the Middle Market at Ohio State) on the mid-year 2023 Middle Market Indicator surveying 1,000 C-suite financial decision makers; Jeff Buettner (Managing Partner, ButcherJoseph) on M&A volume, multiples, and deal structures pulling from GF Data’s 400+ private equity firm dataset; and Jeff Campbell (founder of AI Commerce, Wake Forest adjunct) on retail vs. e-commerce trends sourced from eMarketer’s 2023 US E-Commerce Forecast. Built for the middle market owner-operator running a few million to a few hundred million in revenue who needs data tied to the seat they actually sit in.
Resources Mentioned
- ITR Economics — Brian Beaulieu’s firm; live trends subscription and quarterly forecasts. — itreconomics.com
- Prosperity in the Age of Decline by Brian and Alan Beaulieu — Practical economic playbook for middle market entrepreneurs through the 2030 Great Depression.
- National Center for the Middle Market — Mid-year 2023 Middle Market Indicator and the Market That Moves America report. — middlemarketcenter.org
- ButcherJoseph & Co. — Middle market investment bank covering sell-side, debt raises, ESOPs, and internal transitions.
- GF Data — Aggregated transaction data from 400+ private equity firms, $10M–$500M enterprise value.
- AI Commerce — Jeff Campbell’s digital marketing agency focused on retail media and marketplaces. — aicommerce.com
- eMarketer 2023 US E-Commerce Forecast — Source for the retail/online/mobile/marketplace growth data Jeff Campbell walked through.
- Arcona Complimentary Business Financial Assessment — 15-minute discovery call to qualify, then a two-call walkthrough where Ryan’s team plugs a financial dashboard into your accounting system.
Connections
Phase + Module:
- Module 3 — Owner’s Playbook — The quarterly rhythm where macro context turns into ownership decisions
- Module 1 — Ownership Goals — Where target valuation and cash flow goals become the constraints every bet is measured against
Milestones:
- Milestone 8 — Quarterly Boardroom Rhythm — The cadence where this kind of macro and M&A update belongs
- Milestone 12 — Five-Year Forecast — The horizon the cycle data should feed into
- Milestone 13 — Strategic Plan — Where the A/B/C/D positioning informs strategy
- Milestone 3 — Net Worth & Valuation Targets — The target the multiple environment maps back to
Concepts referenced:
- Three-Statement Model — The financial roadmap Ryan points listeners back to at the close
- Normalized EBITDA — The earnings base the multiple gets applied to
- The Multiple & WACC — Why a cost-of-capital reset moves multiples and slows deals
- Value Gap — The space between the bid and ask Jeff Buettner described
- Quarterly Boardroom Rhythm™ — Where this episode is designed to be consumed
- iBD North Star™ — The target valuation that turns every macro headline into a yes/no decision
Related episodes:
- Ep. 369 — Corey Rosen - The Case for Employee Ownership — Companion piece on ESOPs as a transition path