Private-company workers more efficient than in years
February 12, 2013 –Privately held U.S. companies achieved higher sales and profit per employee in 2012 than in recent years, according to preliminary data from Sageworks. This leads jobseekers to ask whether the positive trends will encourage these gun-shy firms to add to their payrolls with new hires.
Sageworks’ latest preliminary data for 2012 shows that the average profit per employee (total profits divided by the number of FTE) rose about 1 percent from the 2011 average. The average sales per employee (total revenue divided by the number of FTE) for private companies in Sageworks’ database also increased by nearly 5 percent over the 2011 level. The growth in 2012 was slower than the growth during 2011, when profit per employee increased by more than 20 percent and sales per employee grew by 10 percent. But, the 2012 averages make both per-employee stats the highest they have been in the past 10 years.
“As the economy rebounds, employers are used to getting a lot of value out of each employee,” said Sageworks analyst Brandt Leahy. “Even though companies are thinking of hiring again, they may be used to these higher levels of profit per employee.”
Given that the unemployment rate remains steady
and that economic growth is not booming
, Leahy noted that business owners will likely keep an eye on expenses, including payroll costs. He indicated that it’s unlikely for the profit per employee figures to return to pre-recession levels due to business owners’ attention to expenses and efficiency with employees.
As Sageworks collects more data for 2012 in the coming months, Leahy said, “We could see that profit per employee tick up even more, because the multi-year trend is strongly upward.”
In a recent data release, Sageworks’ data indicated that private-company sales increased nearly 8 percent in 2012, and net profit margins, on average, increased to around 8 percent from almost 5 percent in 2011.
“It seems like companies are growing sales without really increasing the workforce proportionally,” he noted. “I think that employers are asking employees to be more efficient than ever, and you’re seeing that with the net margin expansion across the board,” Brandt said.
A few economists have noted, however, that margin growth might be stymied by the slowing productivity growth
. The Labor Department’s latest data indicates that nonfarm business productivity decreased
in the fourth quarter. The decline, when combined with a slight increase to hourly compensation, led to a 4.5 percent increase in unit labor costs.
About the Data
Sageworks possesses a proprietary database of privately held company financial statements aggregated by industry. Sageworks aggregates private-company financial statements from accounting firms, banks, and credit unions through a cooperative data model with their clients. The data is segmented and can be queried by 1,200 industry codes, 70 financial metrics, company size, and geographic location.
About Sageworks, Inc.
Raleigh, NC-based Sageworks is a financial information company. Sageworks’ data and applications are used by thousands of accounting firms and banks across North America. The company has been named to the Inc. 500 list of the fastest growing privately held companies in the U.S. and to the Deloitte Technology Fast 500.