“In 2025, profitability isn’t about just one factor—it’s about how effectively firms combine growth, cost control, and margin discipline. Execution isn’t an afterthought, it’s the strategy.” — Vinay Prathy
Private equity value creation in today’s conditions has become a test of execution, not creativity. Expanding on the first pillar the “Five Key Levers for Value Creation in 2025,” here we take a closer look at how private equity firms and their portfolio companies are applying three core levers—growth, operational efficiency, and margin expansion—to strengthen profitability in a complex and rapidly changing environment.
Executing the Profitability Triad: Growth, Efficiency, and Margin in 2025
The Economic Context: A Brief Look Back
In early 2025, macroeconomic changes reshaped how private equity firms think about value creation:
- Rising tariffs. U.S. tariffs on Chinese imports increased sharply, pushing effective rates to 22.2%, forcing firms to rethink sourcing and logistics (Richmond Fed).
- Persistent inflation and slow hiring. With inflation still high (PCE +2.8% YoY) and wage pressure continuing, firms are feeling cost pressure and uncertainty about future demand.
- More deal flow, but more caution. Global PE deal activity rose to $565B in 2024 (up 25% YoY), but deals are increasingly grounded in operational plans rather than financial upside alone (EY Pulse).
These shifts have made execution—not exposure—the central focus. What follows are trends we’ve observed across client work, along with our perspective on how firms are applying the profitability triad.
1. Smarter Growth: Protecting Margins While Scaling
What We’re Seeing
Firms are rethinking growth. Instead of prioritizing raw revenue, they’re focusing on growth strategies that protect profitability:
- Targeting customers and industries with higher margins
- Building out Revenue Operations (RevOps) to improve visibility and accountability across sales
- Using data and analytics to focus on high-value segments and increase cross-sell performance
These tactics are working. In our client engagements, we’ve seen companies improve margins by 3–5% over 12–18 months.
Where There’s Opportunity
There’s still room to improve. Companies can sharpen how they segment their customers, build more maturity into RevOps functions, and better connect growth plans to profit goals. Growth that protects margin—and is measured with discipline—is what drives sustained value.
2. Operational Efficiency: A Strategic Risk Mitigator
What We’re Seeing
Companies are going beyond cost-cutting to build flexibility into their operations. Across engagements, we’re seeing:
- Shifting suppliers and production closer to home to reduce global exposure
- Upgrading ERP and CRM systems to make processes faster and more reliable
- Adding real-time dashboards to help managers make decisions faster
Those that have made these changes are seeing 3–5% cost savings and 10–20% faster cycle times (Deloitte).
Where There’s Opportunity
Efficiency today means being ready to adapt. The next step is to better connect operations with financial performance, enable quicker course-corrections, and embed these agile habits across functions.
3. Expanding Margins Through Strategic Leverage
What We’re Seeing
Margin pressure is real, but companies are finding success when they take a focused approach:
- Modernizing finance systems to speed up and improve reporting
- Building out scenario planning to prepare for volatility
- Starting exit planning earlier to ensure clean financials and visibility for sponsors
According to recent E78 portfolio benchmarks, companies that invest in these capabilities are seeing 10–15% higher exit valuations..
Where There’s Opportunity
There’s still more that can be done. We’re seeing firms expand into areas like product mix evaluation, pricing corridor redesign, and accountability for margin at the team level. The focus has shifted from cost cuts to designing margin resilience that scales.
The Bottom Line: From Strategy to Execution
In 2025, private equity firms are under pressure to deliver profitable growth in a tough economic landscape. What we see across engagements is encouraging—but still developing. Many firms are leaning into growth, efficiency, and margin levers, but consistency and coordination across the triad is what really set leaders apart.
The firms that win are those that treat execution not as a one-time plan, but as a continuous discipline—from day one through exit. As market conditions continue to evolve we will explore additional value creation opportunities like digital transformation, M&A integration, and performance optimization.
