Keeping pace with and driving the economic recovery, small businesses continue to revive, while hiring lags.
That's the news from the just-released May private company survey by financial analysis firm Sageworks, of New York. Sageworks studies the financial statements of 1,000 private companies and bases its monthly research on sales growth for the previous six months.
Sales Are Up, Hiring Doesn't Keep Pace
Sales of private companies increased 10 percent in May, equal to the increase in April, and essentially equivalent to the same increase in May in 2012. Net margins across industries increased 6.6 percent, the same as April, and up more than two percentage points from the same period a year ago.
While private-company revenue is increasing, employment remains stagnant, with unemployment ticking up to 7.6 percent in May, from 7.5 percent in April, according to the Department of Labor.
Companies have learned to do business with fewer people. "As the recession happened, these companies learned to operate as leanly as possible, but they also picked up on additional technology as they became profitable, and they added new technology and systems that allow them to do more with the people they have in their offices," Libby Bierman, an analyst for Sageworks says.
Where the Most Growth Is
Construction companies grew more than any other sector Sageworks tracks in May, notching a 13.3 percent increase in sales, the same as in April. That's up about three percentage points from the year ago period.
Services companies also saw big growth in May. Sales for private companies in the management, scientific, and technical consulting sub-sector grew more than 15 percent, while staffing firms were up 15 percent, professional services more than 10 percent, and building and residential management 9 percent.
During the recession, out-of-work people may have started their own services companies because the barriers to entry and upfront equipment costs are low, Bierman says. Such companies, which include everything from IT consulting to janitorial services, still represent a good opportunity for people without work, or for anyone interested in creating a start-up, Bierman says.
"These industries are growing, so there is an opportunity because they are easy to get into, and you are more likely to see success," Bierman says.