Accounting Tops List of Most Profitable Industriesby
Accounting, tax preparation, bookkeeping, and payroll services â grouped together in one category â was the most profitable industry in the United States for the 12 months ending Aug. 27, according to a new report by financial information provider Sageworks.
Accounting firms' net profit margin of 19.6 percent led real-estate rental companies (lessors) at 16 percent and automotive equipment rental and leasing at 15.8 percent. The three industries' margins were more than double the private-company average of 7.3 percent.
âThese companies don't typically grab the headlines but their performance is crucial for the overall health of the US economy,â Sageworks analyst James Noe said in a written statement.
Noting that privately held companies drive the bulk of gross domestic product and job creation nationwide, Noe said that âa healthy net margin for the average US business is a very good thing for the US economy.â
In 2014, accounting led with a net profit margin of 19.8 percent, followed by legal services at 17.8 percent and oil and gas extraction at 16.4 percent.
The bottom three industries in the latest report were: management, scientific, and technical consulting services (10.7 percent net profit margin); electronic and precision equipment repair and maintenance (10.4 percent); and coating, engraving, heat treating, and allied activities (10.3 percent).
While the rankings above include all private industries, the report also includes a separate list of the most profitable small business industries. This list focuses on businesses with less than $5 million in annual revenue. The accounting category led again with a net profit margin of 20.5 percent, followed by automotive equipment rental and leasing at 20.4 percent and real-estate rental companies (lessors) at 16 percent.
The bottom three industries in the small business ranking were: specialized design services (11.7 percent net profit margin); mining support activities (11.4 percent); and coating, engraving, heat treating, and allied activities (10.7 percent).
Net profit margins were adjusted to omit taxes and included owner compensation in excess of their market-rate salaries. Such adjustments are âcommonly made to private-company financials in order to provide a more accurate picture of the companies' operational performance,â the report states.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.