Businesses are prioritising growth and customer focus over cost-cutting

Starting and running a business is tough in today’s economy.

Amid the mass layoffs, declining sales and the cost of living crisis, many businesses are struggling to keep afloat and adapt to tough economic conditions.

But while cost-cutting measures sound like the obvious solution for survival, most businesses have reported prioritising other strategies, such as customer retention and exploring new markets, as key factors to getting through difficult times and long term success.

 Innovation and growth are prioritised over cost-cutting

Research from the Startups 100 for 2025 survey revealed that businesses focusing on growth and innovation are experiencing more success than those solely concentrating on cost-cutting measures.

Our study found that 52% of thriving businesses are prioritising developing new products and expanding into new markets, while 49% are focusing on customer retention.

On the other hand, businesses that have prioritised cost-cutting have seen less success. For example, companies that have implemented workplace layoffs reported only a 39% thriving rate.

But even surviving businesses are taking alternative measures to adapt to challenging conditions. Compared to last year’s focus on cost-cutting measures, 48% of surviving businesses are now exploring new markets, while 44% are looking to improve their marketing practices and customer engagement.

Customer focus and an engaged workforce are driving business success

Thriving businesses have also reported strong customer relationships (55%) and good employee engagement (52%) as key contributors to their success. Additionally, new products and effective marketing strategies were also cited as important factors.

Still, despite the change in focus, cost-cutting hasn’t been completely written off for thriving businesses. While it wasn’t the most cited factor for success, there had been a slight increase in its relevance from 2023 to 2024, with 23% of businesses highlighting cost-cutting as a contributing factor to their growth and success.

This suggests that while growth strategies and customer focus are at the forefront, even thriving businesses have had to make tough financial decisions due to economic difficulties, and that cutting costs have helped streamline operations and improve efficiency.

Which industries are cost-cutting the most?

Our research also revealed that while the finance and fintech sector was reported to implement the most cost-cutting measures (62%), a significant number of these businesses have also taken other measures to survive. Most notably, diversifying product offerings (62%), exploring new markets (57%) and improving customer engagement (57%).

Meanwhile, 50% of businesses in the hospitality industry are considering cost-cutting measures to ensure their survival, yet only up to 35% are looking into alternative strategies. 

This could be linked to the hospitality sector’s lowest optimism about the future. Only 70% of businesses reported feeling positive about future growth, the lowest percentage of the sectors we surveyed. 

From the UK’s rise in National Minimum Wage and National Insurance Contributions to new tipping laws and staff shortages, many hospitality firms are facing different challenges that are putting pressure on their ability to adapt to the current economic climate, so the lack of confidence and need for cost-cutting and survival isn’t all that surprising.

While the economy is putting a lot of pressure on businesses, those focusing on growth, innovation and keeping customers happy are doing better than those relying solely on cost-cutting. Although these measures can help and have contributed to success in some cases, most firms don’t see it as a long term solution for growth. Instead, businesses that adapt, innovate and invest in customer relationships are more likely to thrive, even in tough times.