April 22, 2025 - It’s not your imagination — business is changing faster than ever. Just 10% of the companies that were on the Fortune 500 list in 1955 are still operational. Back then, manufacturers like General Motors and GE dominated the list. Today, technology companies do.
New tools are also perpetually released to the market and changing the ways we work at an unyielding pace. It took the internet a quarter of a century to reach most U.S. households. Whereas it took large language models (LLMs) under two years.
The playbook taught in business school for evaluating a company’s fundamentals has changed considerably. Dividends have given way to “daily active users.” Fieldwork and ethnographic research have largely been replaced by third-party data and product analytics. Every business is, in some way, now a technology company, and most employees are reasonably tech savvy.
This article offers an updated playbook for assessing business fundamentals based on what makes companies successful today, and what may remain true into the future.
5 Newly Important Factors to Assessing Business Fundamentals
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Financial Accounting
To value a business today, the maturity of its finance and accounting function must be accurately assessed. Harnessing financial data, tax planning, and mergers and acquisitions (M&A) are an increasing necessity. Companies with strong finance departments can better navigate the mesh of federal, state, and local tax laws that now envelop businesses. With each new regulatory change, there is new opportunity.
In 2017, for example, the U.S. tax code received its biggest update in 30 years, slashing the corporate tax rate from 35% to 21% and instituting all manner of new deductions and provisions. For the past seven years, pass-through entities, including trusts and estates, could deduct 20% of qualified income on their federal tax return. That provision will expire this year and more changes are imminent.
On the state and local side, technology companies have fought in court to earn the right to classify their data and software services as actual services, or in some states, as tangible personal property. The result, combined with the fact that states do not coordinate on taxation, creates opportunities. Some technology companies can legally claim “nowhere revenue” that is not taxed in any particular state.
Meanwhile, businesses that transact across borders must navigate trade conflicts, tariffs, and major supply disruptions for the second time in five years. Any business with a strong, well-staffed finance and accounting department has an easier time navigating these challenges. -
Digital Dynamics
Most companies are now software companies, reports McKinsey — as of 2022, 70% of top economic performers in their study used software to differentiate. JPMorgan Chase now employs twice as many software engineers as all employees at JetBlue.
To understand the fundamentals of a business, it’s critical to understand how it merges its physical operations with the digital world.
- How does it create or harness digital marketplaces?
- What is its cybersecurity posture and how prepared is it for quantum hacking?
- How is the business generating a proprietary dataset which can serve as a competitive moat?
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Leadership
Leadership at a company matters more, and in different ways, than it did before. Leaders used to be less visible and less was known about their personal lives. Now, leadership is expected to be much more public facing. Twice as many executives are on social media today compared to 10 years ago and media training is now a necessity. Executives are more responsive, work longer hours, and must handle issues on a wider range of topics than in the past.
In a 2024 survey, 54% of CEOs said they expect leadership positions to only grow more challenging as they juggle worker expectations and compensation, cybersecurity threats and data privacy concerns, AI and other disruptive technologies, and talent shortages.
This has produced a type of executive that must be everything at once, which can take a toll. The investment firm Bessemer Venture Partners went as far as to produce a physical and emotional bootcamp for new executives.
Simply checking all the boxes is not enough. When the Harvard Business Review asked management consultant Henry Mintzburg, author of the famed article “The Manager’s Job: Myth and Folklore,” to comment on his article’s 50th year anniversary, Mintzburg felt much wisdom had been lost.
A business with good fundamentals has a healthy leadership team that is able to balance the old and new. They know how to manage their energy and be omnipresent, without losing the timeless skills of managing and motivating their people. -
Talent Strategy
Business strength is still determined by talent strategy — perhaps even more so. Modern companies must have a strategy for attracting and retaining talent in a marketplace that moves fast, where skills are useful for fewer years, and where employees are increasingly skeptical.
The traditional security of holding a job for life has evaporated along with all the Fortune 500 companies no longer on that list. Employees feel less loyal to their employers partly because layoffs have grown more common and have broken their trust, and partly because they are aware that if they want a raise, they must move jobs. Frequent switches now reap rewards.
There is a relentless pace at which new technologies emerge, and skills quickly grow obsolete. According to our latest survey of 1,000 mid-sized businesses, half said they must look outside their own walls for at least 25% of their talent needs. When it comes to technological skills, 90% of companies say they must look outside their own walls.
Those technologically skilled workers are particularly difficult to find and retain as there is a pronounced skilled worker shortage. They are flush with opportunity, and many now freelance. Tech workers are jaded after years of mass-layoffs which news outlets named "The Great Betrayal" of the knowledge worker.
There are many ways employers can outperform in this regard, but some are doing so by cultivating concerted “employer brands,” separate from their company identity. For example, Starbucks famously pays for employees to go back to school. -
Physical Resources
AI is incredibly power hungry and demands far more energy than the U.S. grid can supply. Bain & Company estimates it will consume 2.6% of global energy by 2027. This is causing large companies such as Google, Amazon, and Microsoft to build their own nuclear power plants to power AI datacenters.
Meanwhile, manufacturers of electronic goods are scrambling to secure rare earth metals, mine meteors, and harvest deepwater stromatolites to guarantee their supply of cobalt, lithium, and more. At the same time, nations are securing access to fresh water and arable land as climate change resurfaces much of the Earth.
You cannot consider the fundamentals of a company today without considering how it plans to adapt over the next 50 years. What is its net-zero policy? Strategies like this are no longer a ‘nice-to-have’ but a survival strategy.
Changing Business Fundamentals
In many other respects, companies of today resemble companies of yesterday. Many aspire to go public, GAAP accounting is still the standard, and you can measure them on market capitalization, discounted cash flow, and EBITDA. They are the same, with the added complexities outlined in this article. There are greater tax complications as all companies become software companies, as it is difficult for regulators to determine where software-as-a-service originates and is used. There is a higher bar for executive leadership, greater need to craft an employer brand, and an increased imperative to navigate the ever-changing digital market dynamics.
Business fundamentals are continuously evolving. To stay ahead of the curve, explore our Private Company Performance Report and be on the lookout for new insights in our upcoming 2025 edition.