Accounting Leads Most Profitable Industries
Accounting, tax preparation, bookkeeping and payroll services are collectively the most profitable industry in the U.S., according to a new ranking.
The financial information company Sageworks issued its annual ranking of the most profitable industries in the U.S. on Friday. Leading the way was accounting firms, with a net profit margin of 19.6 percent, followed by real estate lessors at 16.0 percent, and automotive equipment rental and leasing at 15.8 percent. Dentist offices and legal services were tied at 15.4 percent.
Companies operating in those industries are seeing average net profit margins greater than 15 percent, or more than double the average for private companies.
A separate ranking of the most profitable small business industries is also included in the report, focusing on businesses with less than $5 million in annual revenue.
Sageworks based its analysis on private-company financial statements filed over the 12 months ended Aug. 27, 2015, using net profit margin as the metric by which each industry is ranked. Net profit margin was adjusted to exclude taxes and include owner compensation in excess of market-rate salaries.
Private companies are growing revenues at nearly a double-digit rate year over year, and Sageworks found this is one of the healthiest sales growth rates of the past 10 years. Private companies are also expanding profit margins. The average private U.S. company has a net profit margin of 7.3 percent, a five-year high.
“These companies don’t typically grab the headlines, but their performance is crucial for the overall health of the U.S. economy, as privately held companies drive the bulk of GDP and job creation in the U.S.,” said Sageworks analyst James Noe in a statement. He noted that a healthy bottom line allows these businesses to expand, reinvest in their businesses, and take on extra overhead such as new hires. “A healthy net margin for the average U.S. business is a very good thing for the U.S. economy,” he said.