Growth Is Where the Value Is. Owners Keep Staring at Costs.
In 2024, revenue growth accounted for roughly 71 percent of the value created in private company exits, according to industry tallies of that year's deals. Not margin engineering. Not cost programs. Growth. The businesses that got meaningfully more valuable did it mostly by selling more, to more people, at better prices. That number should sit uncomfortably with any owner whose instinct, when a quarter tightens, is to open the expense report and start circling.
The cost reflex is understandable. Cutting is fast, it is within your control, and it feels responsible. It also has a floor. You can only take so much out before you are cutting into the thing that generates the revenue in the first place, and a business run entirely on discipline eventually starves. Growth has no ceiling like that. It is slower and it is harder and it is where the value actually accumulates.
Why smaller companies have more of it lying around
Here is the part that gets missed. In a bigger, already-institutional company, most of the easy growth has been found and the operational machinery is built. What is left is optimization, squeezing another point out of a system someone already professionalized.
A lower middle market business is usually the opposite. The gains are not in optimizing what exists. They are in building what was never there. The company grew on the founder's energy and a good product, and it never installed the basic machinery that turns effort into repeatable growth. There is no real pricing discipline, so the company leaves money on every quote out of habit. There is no sales process, so results depend on which salesperson happened to be on the account. There is no view of which customers and which products actually make money, so the business chases revenue that costs more to serve than it brings in.
None of that is a crisis. It is unbuilt infrastructure, and unbuilt infrastructure is opportunity wearing work clothes. The reason operational help matters so much at this size is that so little of the standard equipment is installed yet. A 2023 PwC study found that 77 percent of private equity firms named operational expertise as critical to hitting their goals, and the smaller the company, the truer that gets, precisely because there is more foundation missing.
The math is not subtle
Owners sometimes treat operational improvement as a soft benefit, better systems, a smoother shop. The dollars are not soft at all.
Take a company doing $50 million in revenue. Move the EBITDA margin 5 points, which in a business with unbuilt pricing and no cost-to-serve visibility is often reachable, and you have added about $2.5 million to annual profit. Value that business at a fairly ordinary multiple of earnings and those 5 points are not worth $2.5 million. They are worth something closer to $25 million in what the business would sell for. The improvement compounds through the multiple. That is why the operating work and the eventual number are the same conversation, even though they feel years apart.
And this is not a story about a soft market carrying everyone. Financial reporting on 2025 showed the median company's EBITDA margin barely moved that year, flat against a stronger 2024, so the gains were not falling out of the sky. What stood out is that smaller companies posted the largest expected profitability improvements, with businesses in the single-digit-millions of revenue projecting the biggest margin gains of anyone. The room to improve is concentrated exactly where the infrastructure was never built, which is to say, in companies this size.
What this means for how you spend attention
The practical takeaway is about where an owner points effort, and it runs against the reflex.
When things tighten, the honest first question is not what can we cut. It is what have we never built that would let us grow or price like a company twice our size. The answer is usually sitting in plain view. Prices that have not moved in 3 years while costs did. A sales effort that lives entirely in one or two people's heads. A product line the owner is convinced is a winner that, once you actually load the cost of serving it, loses money on every unit.
Fixing those is not glamorous and it does not happen in a workshop. It is quiet, specific, unbuilt-infrastructure work, and it is where the value in a company this size has been hiding the whole time. The owners who come out the far side worth dramatically more are rarely the ones who cut the deepest. They are the ones who finally built the growth machinery the business had been running without.