Private Companies Still Growing, But Sales Growth Slowing
October 4th, 2012—NEW YORK, N.Y. – Brian Hamilton, CEO of Sageworks, and Mark Jaffe, President of the Greater New York Chamber of Commerce, discussed the newest data and trends related to America’s private companies at The Harvard Club in New York City.
At “Analyzing America’s Private Companies,” Hamilton talked about the sales growth, profitability, and significance of private businesses in the United States. 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 U.S. economy.
Jaffe outlined the current environment for small businesses, access to credit and jobs.
Private Company Sales Growth Slowing
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. Hamilton expressed concern about this slowdown’s effect on the job market in 2013. If companies weren’t hiring when sales growth was really strong, Hamilton asked, what will they do now that sales are slowing down?
“The biggest issue for businesses right now is that they don’t know what is going to happen on major fiscal issues that affect their businesses,” he said. Hamilton urged Washington to create clear-cut policies on fiscal issues. The quality of the policies, Hamilton explained, is less important than the urgency with which the policies are implemented; the less uncertainty, the better.
Private Company Profit Margins Expand
Private companies in 2012 continue to strengthen their net profit margins, which on an average annual basis are now more than triple their rates during the depths of the recession. And average margins are more than three percentage points higher than before the recession.
The average annual net profit margin for U.S. private companies that filed financial statements within the past three months is 9.1 percent according to the Sageworks Private Company Indicator. Annual net margins averaged around 3 percent in February 2010 and 5.8 percent in August 2007.
Hamilton warned that profit margins will inevitably slow down, if sales continue to slow. However, Hamilton explained that this would be a short-term situation, since business owners are likely to cut costs to keep their cash flow stable and food on their tables.
About the Data
Sageworks possesses a proprietary database of privately held company financial statements aggregated by industry. Each day, approximately 1,000 of these financial statements are collected by Sageworks from accounting firms, banks, and credit unions through a cooperative data model with Sageworks’ clients. The data is segmented and can be queried by 1,200 industry codes, 70 financial metrics, company size, and geographic location.
About Sageworks, Inc.
Raleigh, NC-based Sageworks, Inc. is a financial information company. Sageworks’ data and applications are used by thousands of accounting firms and banks across North America. The company has been named to the Inc. 500 list of the fastest growing privately held companies in the US and to the Deloitte Technology Fast 500.