Private Companies Grow; Strong Profit Margins for Accounting Firms
by Terri Eyden on
Private companies in the United States grew sales by approximately 9.7 percent in the period ended February 2013, about the same as in the period ended January 2013 and close to the 10.1 percent growth seen one year ago.
The average private company had a 7.6 percent net profit margin in the period ended February 2013, compared to 4.6 percent a year earlier. "The gains in profitability may stem from reduced overhead expenses or economies of scale achieved with increasing sales," noted Sageworks analyst Libby Bierman. "They can cover their fixed costs faster since they have continued to see top-line growth during the past year."
In an analysis of the top industries by profitability, Sageworks identified several service-based industries with strong net profit margins. Bierman explained that these companies don't have to purchase inventories or invest in much equipment.
Sageworks analyst Brad Schaefer explained that due to the busy tax season, accounting firms have consistently high profit margins: "They have a deep understanding of their own financials, and they have maintained that success even through rough economic times. This profitability is especially impressive when you consider the differences between the accounting industry and other sectors. For example, the oil and gas industry posted high profits in this period, but they also require a huge amount of up-front investment that accounting firms do not."
"Private companies continue to grow at an impressive rate, most notably even in the construction industry," said Sageworks Chairman Brian Hamilton. "Unprecedented is their lack of hiring over this much time, however."
Sageworks releases a monthly report on the state of privately held companies in America. It includes metrics on the average US privately held company as well as the performance of notable sectors and industries.
Access the full report, including sector breakout and further analysis.
Raleigh, North Carolina–based Sageworks is a financial information company. Sageworks' data and applications are used by thousands of accounting firms and financial institutions across North America. The company has been named to the Inc. 500 list of the fastest growing privately held companies in the United States and to the Deloitte Technology Fast 500.