Private companies in the U.S. have been growing sales and profits like gangbusters in 2014.
The third quarter of the year represented the third consecutive quarter of strong performance for privately held companies, according to financial information company Sageworks.
Looking at statements filed over the past year, these businesses on average grew sales at a rate of 8.6 percent and saw net profit margins approach 7 percent.
"Increasing revenue is positive, but when it's combined with increasing profit margins, it's very good news for the businesses and their ability to either reinvest for additional growth or reward shareholders," says Sageworks analyst Libby Bierman. "The most recent Private Company Report’s good grade for private companies isn't surprising given the current climate in the broader economy, including the positive revisions to the GDP. Private companies make up a significant portion of GDP, so success in private companies is favorable for the economy as well."
It’s hard to overstate the importance of net profit margin for owners of privately held companies. While some large publicly traded firms are able to get away with lack of profitability, private companies for the most part do not enjoy this luxury.
"A lot of times, profit margins are how business owners provide for their families, and put food on their tables," says Sageworks chairman Brian Hamilton. "Solid profitability is one of the most important--if not the most important thing that business owners can do to run their companies successfully. It shows business owners how much room for error they have, and how concerned they need to be once revenue growth starts to dip."
In terms of specific industries, businesses such as law firms and doctors' offices tend to be more profitable than say, construction companies, Hamilton adds.
"It’s also important to look directionally at net profits and performance," he says. "Are companies becoming more profitable over the years, or are they seeing net profits drop?"
The table below identifies the 10 industries with the biggest jumps in net profits over the past year, all of which are seeing profits rise at an extraordinary rate.