Editor's Note: This article is part of Inc.'s weekly report on business niches in partnership with financial information company Sageworks.

The U.S. day care industry is in the middle of a massive growth spurt.

Net profit margin in the child day care services industry climbed to 9.9 percent last year from 5.4 percent in 2013, according to a financial statement analysis by Sageworks.

"As the economy continues to improve and more people head back to work, the demand for child care services increases, which also allows providers the ability to raise prices and pad their margins," Sageworks analyst Kevin Abbas says.

While sales growth for the industry has dipped slightly since 2013, from 8 percent to 5.6 percent, net profit margin has risen steadily since 2011.

According to the U.S. Census Bureau, the cost of child day care services rose 70 percent between 1985 and 2011, to $143 per week. During roughly the same period, the Census Bureau estimates, the number of facilities in the country increased to more than 766,000 from 262,000.

"If companies in the industry are able to continue to justify higher prices while maintaining the same cost structure, we could see profit margins in the industry rise even more, ” Abbas says.

Sageworks collects and aggregates financial statements for private companies from accounting firms, banks, and credit unions. Net profit margin has been adjusted to exclude taxes and include owner compensation in excess of their market-rate salaries. These adjustments are commonly made to private company financials to provide a more accurate picture of the companies’ operational performance.

 

Published on: Mar 26, 2015