Becker Private Equity & Business Podcast
The Rising Challenges of Middle Market Businesses with Matt Wolf of RSM 2-27-25
Thu, 27 Feb 2025
In this episode, Matt Wolf, Senior Analyst at RSM discusses how supply chains have become nine times more complicated over the past 15 years, the impact of labor shortages, and the growing role of AI in managing business operations. Click here to learn more from RSM’s ‘The Real Economy Blog’
Chapter 1: What challenges are middle market businesses facing today?
Hello and welcome to the Becker Private Equity and Business Podcast. My name is Chanel Bunger, and today I'm excited to speak with Matt Wolfe of RSM, who joins us weekly to share insights into economic trends he's keeping an eye on. Matt, thank you as always for joining me. Why don't you take it away and tell us about some of the things that you're seeing out there?
Chapter 2: How has the complexity of supply chains changed over the years?
Thanks, Chanel. I'm really fascinated. A colleague of mine at RSM, Scott Reamer, has been doing some really interesting research on the overall complexity of middle market businesses across industries. He published a tidbit of the first bit of that research today on our economics blog. I've been working with him a little bit on it.
Chapter 3: What factors contribute to the increased complexity in business operations?
We found that over the past 15 years or so, the supply chain for middle market companies has become about nine times more complicated to manage, right? So it's whatever sort of baseline complexity existed in 2009 is now, it's nine times more complex than it was then, which I think is really, really fascinating. And I think intuitively it makes sense, right?
Chapter 4: How are consumer demands affecting business strategies?
I mean, we understand that just the nature of business has become more complicated. Consumer demands have become more, significantly more complicated and managing all that finding and creating and expanding a niche to add value in the sort of global marketplaces has really become complicated.
Chapter 5: What are the implications of increased capital costs for businesses?
And so I don't think the direction should surprise anybody, but, but certainly the magnitude nine times more complicated to manage these businesses. And I think for, for sponsors and management teams working to, to navigate that complexity, um,
is going to be really tough right we talk a lot about how you know with the the increased cost of capital we don't really have the margin for error for for making you know sub-optimal capital allocation decisions of you know companies to buy systems to implement processes to improve we got to really be dead on from that perspective and it's just more complicated to make those decisions now nine times more complicated to manage supply chains
And the other element of that is who's going to do it, right? I mean, not only is the actual sort of knowledge kind of capped, right? There's only so many people who have years or decades of experience in a given industry. You know, unemployment remains around 4%. The labor force participation rate is really high. So as we try to add value and execute on this, we can't
can't always find the exact sort of human resources and talents that we're looking for to navigate this. And we're going to have to turn to more technology, artificial intelligence to help just help make sense of this increasing complexity. So again, the first tidbit of that is up on the Real Economy RSM blog.
And we're continuing to dive into various measures of complexity of managing middle market businesses. But the research so far has been fascinating. And as I said, I don't think directionally it will really surprised many people, but certainly the magnitude surprised me. Nine times more complicated to manage supply chains now for middle market businesses across industries than it was 15 years ago.
So an absolutely An absolute increase. Pretty staggering stuff. And I think, you know, in those challenges, certainly will come opportunities, right? And we've seen sponsors narrow their investment thesis, find those right operating partners, really focus on where they can drive value in navigating that complexity.
And I'm confident that they'll be able to deliver outsized returns for their LPs if they're able to execute on that. So, Changing environment as always. And this latest little tidbit of research I think is really worth checking out for anybody interested.
Absolutely, Matt. Well, I will make sure to add a link to that in the description. And I want to thank you as always for joining me today and for sharing your insights on the Becker Private Equity and Business Podcast. Always a pleasure.
Thank you.
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