Private Companies Grew Sales in February

U.S. privately held companies saw their sales grow approximately 9.7 percent in February, according to the financial information company Sageworks.

That figure represented approximately the same amount of sales growth as in January and close to the 10.1 percent growth rate of a year ago (see Private Companies See Sales Growing). The average private company had 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,” said 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 that don’t have to purchase inventories or invest in a significant amount of equipment. “For service-based companies like accounting firms and law firms, revenue dollars just have to cover payroll and overhead expenses, allowing these companies to achieve above-average margins,” said Bierman.

The construction industry also saw gains in a positive sign for the housing market, but employment gains have still been lagging. “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.”