Get Started: Who has big profits? CPAs, real estate, lawyers
By Joyce M. Rosenberg, August 7, 2017
MOST PROFITABLE COMPANIES
Accounting, real estate and legal services businesses were the most profitable private companies during the past year. That's the finding of Sageworks, which compiles loan and other financial information on companies.
Businesses that offer accounting, tax preparation, bookkeeping or payroll services had profit margins of 18.4 percent, said Sageworks, which based its conclusions on an analysis of pretax net profit margins for private businesses in the 12 months that ended June 30. Just behind accounting were real estate leasing companies, with a 17.9 percent profit margin, and legal services providers, with a 17.4 percent margin.
Higher profits at service providers like accountants and lawyers are related to their industries' extensive education and certification requirements, says Libby Bierman, an analyst with Sageworks.
"Before firms can enter these lines of business they have to invest considerable time and money into degrees and training. It makes sense, then, that these industries can charge a premium for their specialized services," Bierman says.
Service firms also don't have large inventories that are expensive to manufacture and maintain, a burden that reduces profitability.
No. 4 on Sageworks' list was businesses that manage companies or enterprises, with a 16 percent profit margin. In fifth place were companies involved in real estate-related activities including property management, with a 14.9 percent profit margin.
Small business owners' optimism is picking up momentum, according to a survey by Wells Fargo and Gallup.
The latest Wells Fargo/Gallup Small Business Index, based on the survey of 605 company owners, rose 11 points to 106 last month from 95 in April. It's the highest the index has been since it reached 113 in April 2007, as the economy was slowing and heading toward recession.
Eighty-four percent expected their companies' financial situation to be good 12 months in the future, up from 80 percent in April, and 73 percent a year earlier.
The economy is less of an issue for many owners than in the past. Only 5 percent called it their biggest challenge, down from 10 percent in April and 12 percent a year earlier.
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