fbpx

5 Ways to Transform Your Company in 2025

The start of a new year is the perfect moment for business owners to pause, reflect, and strategize for the future. It’s a time to look beyond the day-to-day, assess your company’s current position, and identify the key moves that could make 2025 a transformational year for your business.

As a private equity firm, we have the privilege of speaking with hundreds of business owners every year. These conversations give us a front-row seat to the trends shaping industries and the strategies successful companies are using to stay ahead.

Drawing on these insights, we’ve identified five critical areas to focus on in 2025:

Punch Above Your Hiring Weight

After four years of tight labor markets, the labor market across many industries and functional levels is loosening and is likely to continue in this direction through the first half of 2025. In fact, 2024 recorded the highest number of job cuts since 2010 (with the exception of the pandemic-driven cuts of 2020), particularly in industries such as tech and healthcare. And newly-minted graduates in traditionally white-collar industries such as consulting, tech, and finance are finding it harder to get a job post-graduation – job placement outcomes across top M.B.A. programs in 2024 were the worst in years.

What does all of this mean for lower-middle-market business owners? A more level playing field when competing for top talent. These top-tier graduates and seasoned professionals alike may be exploring non-traditional roles, including looking downstream. The current environment presents an opportunity for business owners to simultaneously manage costs and upgrade your team.

Act now if you can afford it – especially if your competitors are hesitant or can’t afford to. Identify bottom-third performers across your organization, along with gaps in your team’s capabilities. Allow or encourage natural attrition to move lower performers out of the organization while using a portion of the savings to selectively invest in upgrading talent in key positions that align with your future growth initiatives. As the labor market loosens, you may find that there are talented professionals who are more interested and/or more likely to be available to lower-middle-market companies in 2025 relative to the past several years. Attract this talent by demonstrating that your company offers a differentiated career path, with more autonomy and a faster career track. Consider reaching out to recruiters to gather market comp data points for the positions you’re interested in hiring for to ensure you’re competitive.

Consider Fractional Talent

Another way to get creative when it comes to finding the right people? Fractional positions are on the rise; a recent HBR article found that the number of fractional leaders has skyrocketed in the last few years, along with a surge of third-party firms offering these fractional resources. It’s easy to see why this is appealing: wider access to higher-level talent at a fraction of the cost of hiring that same person full-time. Take the accountant shortage as an example: as the shortage grows, many companies in the lower middle market find themselves increasingly competing with larger companies for this talent, which doesn’t always work out. Fractional talent can fill the gap, allowing your company access to a shrinking labor pool without sacrificing quality or budget. CFO-level accounting and finance or marketing roles are popular choices for lower-middle-market companies looking to take advantage of fractional talent, as the scope of work can be adjusted to meet the time allotted. Take a look in your organization to identify roles that may not require a 40-hour work week to determine where fractional talent could make sense over a full-time role. As with other recruiting processes, we recommend developing specific, measurable outcomes for your fractional hires prior to starting the search. If you’re not sure if fractional hiring is right for your company, consider testing out fractional talent on a project basis where there is a clearly defined scope of deliverables.

Embrace the Digital Age

The next generation of decision-makers in B2B procurement—Millennials and Gen Z—are transforming the way businesses buy and sell. These buyers don’t want to deal with people or outdated communication methods like phone calls or emails for routine transactions, making B2B more transactional and less relationship-based in many industries. Instead, they expect the convenience of online purchasing. If your company doesn’t already offer eCommerce capabilities, 2025 is the time to prioritize it.

Start by assessing your current digital presence. Is your website easy to navigate? Does it clearly communicate your value proposition? Is it optimized for mobile users? If the answer to any of these is “no,” it’s time for an upgrade. Your website is not only your first impression for many customers —it’s also your most powerful sales tool. Invest in making it user-friendly, visually engaging, and consider features like online ordering, payment processing, and live chat support. Reduce friction in the customer experience and make it as easy as possible to buy.

Regardless of whether your company is B2B, B2C, selling a product, or providing a service, a strong organic content strategy is key to standing out and should have a home on your website. Think about your customers’ journey: What challenges are they facing? What questions are they asking before they make a decision? Create content that addresses these pain points, showcases your expertise, and builds trust. This could include blog posts, whitepapers, videos, or customer testimonials. Share this content on your social media platforms to amplify the reach and make the time investment of creating this content stretch further.

Assess Your Pricing Power

While consumers are feeling more optimistic about the direction of the economy as we begin the new year, their spending habits and intents are not necessarily following. And in a B2B context, many companies are finding their buyers placing a sharper focus on pricing and may find their competitors increasingly focus on discounting, leading to price compression in your industry. The time of relatively frictionless price increases in the post-COVID era is over in most industries.

To protect margins in 2025, business owners and management teams must develop an intentional strategy. Start by making a candid assessment of the degree of differentiation of your product or service. Consider how you can make smart investments in 2025 in innovation and/or enhancements to your right to win in order to protect your pricing power and, therefore, protect your gross margins. If this isn’t realistic for your company, you may need to focus on finding operating expense savings to enable you to be price competitive.

Start by assessing how well your product or service stands out in the marketplace. What makes it unique or indispensable? A candid evaluation of your competitive differentiation will help you determine whether your business can sustain current pricing—or justify premium pricing. If differentiation is a challenge, consider strategic investments in innovation, quality, or customer experience to strengthen your value proposition – if you can’t differentiate your product, differentiate your customer’s experience.

Next, analyze your customers. Conduct surveys, interviews, or data analyses to understand what they value most and what they’re willing to pay for. Ask where pricing falls in terms of decision-making criteria. Find out what pain points they have with you and other suppliers. Not only can this insight guide pricing adjustments that align with perceived value, but you may glean other actionable insights on how to improve your product or service. If you’re in a market with pricing pressure, think about offering tiered pricing models or bundling services to create value without compromising margins.

Shift Focus from Cost Cutting to Revenue Growth

Many businesses have already spent a great deal of time and money tightening belts on the cost side of the business in the past year, including upgrading CFOs and COOs that focus on cost management. Now that there is less uncertainty in the credit markets and fears of a hard landing recession are mostly cleared, the focus for many owners will shift more to maintaining this leaner cost structure and growing revenue in an effort to recapture margins that may have been eroded and rebuild the revenue base of the business.

Contributing to the need to look to revenue for growth is increasing geopolitical instability, which will continue to create supply chain disruptions and accelerate the on/near-shoring trends of the past few years. The pressure on cost from these trends means that further cost cutting is unlikely for many companies, and owners will look to offset these costs with top-line growth.

If you haven’t already, now is the time to create a three-year strategy for your company which will crystalize what revenue opportunities exist and what is needed to realize these. For example, does your company need to upgrade revenue-generating roles like chief commercial officers, chief revenue officers, or directors of sales? Key hires like these should be identified in the three-year strategy, along with other investments in growth such as marketing initiatives, product development, or geographic expansion.