Private-company profit margins recover

Privately held companies in most major economic sectors have returned their profit margins to pre-recession levels or better, according to a new analysis from Sageworks Inc., a financial information company.

Sectors including manufacturing, wholesale trade, transportation/warehousing, health care and retailing each generated net profit margins in 2011 that were higher than in 2007, according to Sageworks. Construction was the only major sector examined that continues to post margins below those of earlier years, but as Sageworks has previously noted, even that industry’s margin trends have been improving.

“Business owners have learned to do more with less,” said Sageworks analyst Greg Mulholland. “What’s really clear is overhead has dropped and stayed low.”

At the same time, private companies grew their revenues by nearly 8 percent in 2011. “With sales being up and profit margins being up, that’s really indicative of private company growth, really significant private company growth,” he said.

Through its cooperative data model, Sageworks collects financial statements for private companies from accounting firms, banks and credit unions.  In this study, Sageworks examined net profit margins across major sectors, as well as various influences on margins across all industries.