Small businesses nationwide are experiencing something of a sales dip over the past three years, but there is good news, according to a new report from Sageworks: Profitability, for the most part, is on the rise.
Across all sectors, the average sales growth for small businesses, less than $5 million in total annual revenue, is at 6.1% in 2017 — down from 6.9% in 2016 and 7.8% in 2015, the report shows. At the same time, net profit margin in the same group has increased five straight years, from 5.8% in 2013 to 8.4% last year.
Raleigh, N.C.-based Sageworks collects and aggregates financial statements for private companies from accounting firms, banks and credit unions. The data for this report are for a 12-month period ending in October, according to a statement.
The sales growth versus net profitability data is mostly similar on an industry-by-industry basis when looking at sectors with the most employees, based on U.S. Census Bureau information. Those sectors are: manufacturing; retail; accommodation and food services; health care; and professional, scientific and technology services.
On sales, all five sectors posted a drop — some more pronounced than others. The average sales growth in health care, for example, dropped from 8.5% in 2016 to 8.4% in 2017, while in accommodation and food services, hospitality, it fell from 7.8% to 4.7%.
On net profitability, four of five sectors posted an increase from 2016 to 2017. Health care was the only sector to post a drop, and that was from 9.9% to 9.6%. Retail businesses, on average, had 4% in profitability in 2017, up from 2.8% in 2016. It was also the first time in at least four years the industry had more than 3% in average net profit margins, the report shows.
Even with the increase in profitability, the independent retail sector, says Sageworks co-founder Brian Hamilton, shouldn't let its guard down. “As consumers continue to embrace the ease of online shopping,” Hamilton says in the statement, “traditional retailers will have to learn to adapt to compete.”