By Mary Ellen Biery, Research Specialist, Sageworks, Inc.
The rate of annual sales growth among privately held US companies is slowing significantly, according to new data from Sageworks Inc., a financial information company.
Average annual sales growth for private companies has slowed to around 5.4 percent currently, from nearly 11 percent in January and from around 8 percent a year earlier, according to the Sageworks Private Company Indicator, a real-time measure based on financial statements filed in the most recent three months.
And while 5.4 percent is still a faster rate of growth than the broader US economy is experiencing, it's the slowest rate since November 2010, and it comes at a time of mixed results for other economic indicators, including choppy consumer spending. The September 7, 2012, employment situation report also indicated sluggish job growth continues, with employers adding only 96,000 jobs to nonfarm payrolls in August, according to the US Department of Labor. Approximately 139,000 jobs have been added per month this year compared with 153,000 in 2011.
Sageworks CEO Brian Hamilton notes",The biggest issue for businesses right now is that they don't know what's going to happen on major fiscal issues that affect their businesses. As such, they cannot plan out twelve and twenty-four months and adequately forecast their revenues, profits, and cash. The slowdown in revenue growth could have significant implications on such vital issues as job growth and GDP. Hopefully, all of this doesn't indicate that we're sliding into another economic downturn."
Since private companies drive significantly more than 50 percent of GDP*and 65 percent of new job creation** in the United States, private company financial performance is a gauge of the health of the wider US economy.
Sageworks Private Company Indicator, September 2011-September 2012
Additional Historical Data: Sageworks Private Company Indicator
*SBA Office of Advocacy report
**US Small Business Administration report
- AICPA Economic Outlook Survey: Second Quarter Results
- Financial Metrics Every Business Owner Should Know
About the author:
Mary Ellen Biery is a research specialist at Sageworks, a financial information company that provides financial analysis and benchmarking applications to accounting firms and private companies. She is a veteran financial reporter whose works have appeared in The Wall Street Journal and on Dow Jones Newswires, CNN.com, MarketWatch.com, CNBC.com, and other sites.