With the housing industry finally recovering from the Great Recession, revenue growth at construction companies makes them prime candidates for accounting services.
The Commerce Department recently reported that housing starts grew a 18 percent last year, the strongest performance since the 2008 financial crisis. As a leading indicator in the U.S. economy, this may be good news not only for the construction industry, but also for accountants, according to a new report from Sageworks, a provider of financial analysis solutions for accountants.
Sageworks examined the average ratios and financial metrics for the residential construction industry and found impressive growth backed by strong financial fundamentals. Looking at private company financial statements from residential construction businesses over the last 12 months, Sageworks found sales growth of 14.39 percent, up from the 2.02 percent growth average over the past five years.
Residential construction companies enjoy a robust 7.4 percent net profit margin, up from 3.6 percent in 2012.
“Looking at these numbers, it is hard to argue that residential construction is going anywhere but up in the coming year,” said the research. “Construction does tend to fluctuate over time, as seen when looking at the past 12 months as compared to 5 year averages, but there have been strong numbers in the last 12 months and there is no reason to believe that trend is likely to change in the coming year.”
Sageworks noted that liquidity ratios remain consistently strong. From a business development perspective, CPAs may find it useful to target companies related to residential construction, the firm advised.
“You are looking at companies which have seen strong growth in their industry over the last 12 months,” said Sageworks senior consultant Greg Pinnix. “These small business owners may have new tax business advisory needs which, once filled, could become a source of reliable and consistent business for your firm.”
For more information, see the construction analysis in the latest Private Company Report by Sageworks. To find more financial metrics for the construction industry or approximately 1,400 other industries, visit Sageworks industry data for CPAs.
The data below focuses on financial statements ended in the 12-month time period between January 2013 and January 2014: