This content was created by Eric Siu. This content was uploaded by Eric Siu. This is a YouTube episode titled "Is The Middle Market The Next Big New Opportunity?" (published 2025-02-14). It is a conversational, podcast-style exchange between Eric Siu and Neil Patel about the lower middle market (roughly $5M–$100M in revenue), discussing market size, creative deal structures (sale-leaseback, inventory-backed loans), an example of a no-money-down acquisition, and the importance of operator involvement and hands-on management. The excerpt also contains a short promotional mention of Karrot (karrot.ai) and a call-to-action to marketingschool.io/agency.
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I want to talk about the middle market opportunity.
Do you know what that is? I'm assuming you mean not enterprise and not small businesses in the middle.
So he basically talks about acquiring lower middle market companies is the best opportunity to build wealth right now. So this is for general population. So there are 350,000 US companies classified as lower middle market, which is $5 million to $100 million in annual revenue. The ecosystem is highly inefficient due to size and lack of institutional interest in these companies. Typically, private equity wants $100 million plus, right? It says the biggest variable to success here is operation expertise. If you can endure the day-to-day ups and downs of running a business, you can acquire a profitable business and reap the rewards. So it shows here the number of businesses, we're talking $5 million to $100 million or so, you have about 300,000 or so.
In the United States?
In the United States, yeah. And then under $500,000, you have like 14 million. And then, you know, you have like these over here, like a billion plus, you have 5,300, $500 million to $1.41 billion. So it just shows—
$100 million plus— $100 million to $500 million is what, $24,000?
Yeah, $24,000. So this is interesting, because I just listened to a podcast recently, speaking about listening to podcasts. This guy bought a $13 million company, and with no money down, it was $3 million EBITDA, $3.5 million EBITDA. Okay. And the way he structured the deal was this company had— he had— this company had real estate. So he did a sale leaseback, which is he, he sold the real estate, and then he leased it back. Okay. So that covered $10 million. And then he took the inventory, took out a loan against the inventory. And that covered all of the payment. And I'm just like, yeah, I mean, that guy's a perfect example. $13 million, $3.5 million EBITDA, and he got it for no money down. I think we're gonna see a lot more of this. So I think it's an interesting discussion.
It's creative. If you can do creative financing like that, you're great. The other thing is, I bet you he's also the one running the business.
He's not.
Really?
He's not, which is— I don't— he sounds inexperienced with operating. I think that's going to come back to bite him. He's like, I'm just going to focus on buying other businesses. I'm not going to be the CEO. I'm going to hire a CEO, blah, blah, blah. And I'm just going to buy like 4 or 5 of these. And this is the first one that he did. I'm like—
Good luck with that.
I don't think that's going to go well.
In most of these cases, you ideally want to be an operator and be the one—
He should focus on that business.
Yes.
That was such a good deal. He should do it.
He should make it work before he looks at another one and he should get— Hands-on.
It's not that easy to operate.
It's not. And what you want to do when you buy these is you want to keep the operating team there. And you want to get trained up by them, learn everything, and then improve upon the business over time.
By the way, the founders are staying with the company for the next 2 years or so. Ideally, he would be there with them.
Yes, to learn.
And he's like, oh, I live in Florida. And then, you know, they're up in Connecticut. I'm like, you should be up in Connecticut, like all the time. So—
You should just actually move to Connecticut temporarily and make it work.
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No, it's not that easy at all.
So anyway, guys, that's it for today. Please don't forget to rate, view, subscribe, and go to marketingschool.io/agency if you want to join 50+ other agency owners to grow your agency faster.
