In today’s challenging economic landscape, many private equity firms and business owners find themselves effectively in a holding pattern. Elevated interest rates, geopolitical tensions, evolving tariff policies, and market volatility are compressing valuation multiples across sectors, prompting PE principals to extend hold periods and business owners to delay planned exits. In the US mid-market, for example, average EBITDA multiples have declined in recent years and have yet to fully recover, amid ongoing economic uncertainty that continues to cloud near-term forecasts. While this waiting period is understandably frustrating, like being stuck in purgatory, it is better framed as an urgent opportunity—a critical window to reinforce core performance and position the business for the strongest possible exit when market conditions ultimately recover.
The EBITDA Imperative: Why Waiting Demands Action
Viewed through a value-creation lens, waiting for better market conditions comes with hidden risks to overall returns. Extending hold periods in pursuit of higher valuations can erode performance, as each passing period reduces returns and demands a meaningfully higher exit valuation simply to maintain the original investment thesis. What may start as a tactical pause can quickly evolve into a strategic liability if not offset by decisive actions that deliver real improvements to the underlying business. For business owners, simply waiting in hopes that multiples will recover creates a real risk of missing their desired exit valuation.
The imperative is clear: in periods of market uncertainty, leaders should focus on what is within their control—strengthening the core of the business and, specifically, driving EBITDA improvement. Each incremental dollar added to EBITDA has an outsized impact on valuation. For example, a $1 million EBITDA improvement at a 9x multiple equates to $9 million in additional exit value—provided those gains are both credible and sustainable. This approach helps prevent a temporary pause from becoming a long-term holding trap, and positions sellers to capitalize when favorable exit conditions re-emerge.
Using Price Optimization and Cost Reduction as Precision EBITDA Levers
Not all EBITDA improvement strategies are equally effective—particularly when timelines are short and economic headwinds strong. Business leaders often gravitate toward driving top-line growth, assuming increased sales will ultimately yield a stronger valuation. While revenue growth remains an important factor, this approach is often inefficient for generating rapid EBITDA gains during a holding period, especially in today’s challenging environment.
Take, for example, a $100 million business with EBITDA margins of 20%. Achieving a $2 million increase in EBITDA would require a 10% rise in revenue—an ambitious target even in a strong economy. In the current climate, such growth is even harder to achieve given muted demand, extended sales cycles, and constraints on capital. On top of that, the incremental revenue often comes with added costs—marketing, sales, and operational capacity—diluting the EBITDA impact even further. As a result, the return on effort is modest and may draw down limited capital or management bandwidth that could otherwise be deployed elsewhere.
By contrast, price optimization and cost reduction offer more direct and efficient routes to EBITDA improvement. Because each dollar of price increase or cost savings flows almost entirely to the bottom line, the same $2 million EBITDA lift could be realized with, for example, a 2% increase in price, a 2.5% reduction in costs, or a combination of smaller adjustments across both levers—changes that are typically faster to implement and less dependent on capital investments or prolonged initiatives.
For many management teams, the real opportunity lies in disciplined, targeted price optimization and cost reduction efforts. These improvements don’t require major transformation programs to produce results; rather, they can be tackled as manageable, incremental projects that each deliver tangible value. This focused, modular approach minimizes disruption and allows leadership to pursue sustainable EBITDA gains without distracting from daily operations or hampering readiness if an unexpected sale opportunity arises.
Rapid Price Optimization Techniques
Pricing remains one of the most powerful—but underutilized—levers for direct EBITDA improvement. While sector-specific nuances abound, most businesses have untapped opportunities to refine pricing strategies, even in a challenging economic climate. The following techniques are applicable across industries and can help leaders kickstart their price optimization efforts, often yielding compelling gains without major disruption.
1. Customer and Product Segmentation
Effective price optimization begins with understanding that value—and willingness to pay—are not uniform across the customer base or product portfolio. Generalized pricing leaves margin on the table, whereas tailored approaches capture more value without sacrificing volume.
- Segment Customers by Willingness to Pay: Analyze historical sales data, leverage account team insights, or conduct customer surveys to identify segments that place a higher value on your product or service. Adjust pricing accordingly, targeting 5–10% uplifts where differentiation justifies it.
- Move Beyond Standard Margins: Replace the habit of setting uniform profit margins across all products. Instead, use perceived value and customer utility as the guide, challenging default cost-plus calculations or “backing into” price from COGS and volume targets.
- Revisit Product Line Pricing: Periodically review pricing across the entire product lineup. For premium features or high-demand items, raise mark-ups; for commodities, consider more competitive positioning. This avoids the common pitfall of blanket pricing strategies that fail to reflect nuanced value.
- Embed A/B Price Testing: Implement small-scale price experiments on select products or regions. Monitor outcomes for 1–3 months, allowing actual sales behavior to inform broader pricing decisions—rather than relying on intuition or historical precedent.
2. Price Analytics
Focused price analytics can be used to fine-tune pricing in response to shifting market dynamics. Modern platforms make it possible to analyze internal and external data, allowing businesses to adjust pricing strategies with greater precision and speed.
- Automate Price Benchmarking: Implement systems that help monitor competitor pricing, identify gaps or opportunities, and adjust pricing quickly.
- Refine Discount Management: Audit discount programs to ensure they are used strategically—rewarding loyal or high-potential customers—while eliminating unnecessary concessions for high-cost-to-serve accounts. Tighten discounting discipline across sales and channel partners.
- Incentivize List Pricing: Align sales compensation structures to reward deals done at full price, not just volume. This discourages routine discounting and helps retrain behaviors, delivering margin lift in as little as one to two quarters.
- Explore Demand-Based Pricing: Use demand analytics to lift prices during peak periods (e.g., holidays, busy seasons) or during supply shortages.
3. Margin-Advantaged Value Enhancements
Additional revenue need not always come from core price increases. Thoughtfully introducing high-value add-ons or creatively combining existing products and services into novel packages can significantly increase customer willingness to pay with minimal investment.
- Add-Ons and Upsells: Offer complementary extras—such as premium support, expedited services, warranties, or accessories—during the purchase process. These can materially increase transaction value and margins, especially when they carry minimal incremental cost.
- Product and Service Bundling: Combine related products and services—such as maintenance, support, or digital features—into integrated solutions, packages, or subscription-based bundles that deliver greater value together, enabling higher average prices and reducing the overall cost of sales.
- Effective Value Communication: Equip the sales team with the training and tools to shift customer conversations from price to value and ROI. When customers understand the impact of your offer, resistance to price adjustments is reduced, and sales teams become more confident in positioning higher price points.
Rapid Cost Reduction Approaches
Even companies that manage costs effectively—typically by controlling spending to stay within budget—often overlook broader opportunities for sustainable savings. Three methods in particular stand out for identifying and achieving rapid, lasting cost reductions beyond routine budget control.
- Zero-Based Budgeting (ZBB): Rather than relying on incremental budget changes, reset select cost categories to zero, forcing a thorough analysis of which expenses are truly justified. In practice, ZBB can uncover “run rate” costs that are misaligned with current business priorities, regularly freeing up 10% or more of total spend. While commonly used as a multi-month cost transformation methodology, the same ZBB technique can be applied in a targeted manner to achieve meaningful cost reductions quickly.
- Strategic Procurement: Begin with a granular review of all major vendor relationships and procurement processes. Consolidating overlapping suppliers, renegotiating contractual terms, and aligning volume commitments can often yield 5-10% reductions in direct costs within a single budgeting cycle. When executed through cross-functional teams tasked with spend analysis, these savings are resilient and typically have minimal impact on customer delivery or service quality.
- Process Improvement: Focus on identifying and eliminating non-value-added activities in your major business processes. Review current workflows and legacy policies to streamline processes, removing any unnecessary steps. Leverage existing technology and automation tools—making full use of the capabilities your business has already invested in—to optimize efficiency. As you sunset outdated practices, also address associated cost drivers, such as legacy IT systems, redundant compliance reporting, or obsolete service contracts, to ensure that cost savings translate directly into sustained EBITDA improvement.
These pricing and cost strategies are inherently adaptable, allowing management to roll them out selectively and at a pace. Instead of wholesale transformation, most can be started as focused pilots and expanded based on proven results—a practical way to enhance EBITDA, strengthen valuation, and present a more attractive business profile to future buyers.
Refocus on EBITDA
In a market environment where waiting for better days can feel passive, refocusing on EBITDA through high-leverage, operationally sound moves creates a foundation for both immediate performance and future value realization. For business owners and PE sponsors alike, it is the difference between enduring the cycle and using it as a springboard for a stronger exit when opportunity returns.
Joe Sagrilla is an independent management consultant and business advisor, a top business school faculty member, a Board member, a writer, and a speaker. His specialties include business strategy, technology, transformation, process improvement, and organizational performance. He currently lives in Austin, TX.
Photo courtesy Getty Images for Unsplash+
