Private-Company Confidence Rises, in Tandem with Greater Profitability and Risk Appetite, PwC Survey Finds

  • Nearly two-thirds of private companies surveyed are optimistic about the U.S. economy.
  • Nearly half voice a willingness to assume new business risks in pursuit of growth.
  • Over one-third expect to make major new capital expenditures over the next year.
  • The number of private companies reporting profit increases is at its highest since 2006.
  • Most are hiring — but selectively — projecting a 1.6 percent rise in their average headcount over the next year.

PwC's Trendsetter Barometer tracks the business issues and best practices of privately held US growth businesses. It incorporates the views of 230 C-suite executives (CEOs/CFOs): 132 from companies in the product sector and 98 in the service sector, averaging $459 million in enterprise revenue/sales, and including large, $500 million-plus private companies.

New York, November 12, 2014 — Roughly two-thirds (63 percent) of private companies are optimistic about the U.S. economic outlook for the coming year, despite ongoing uncertainty about the world economy (expressed by 54 percent), finds PwC’s latest Trendsetter Barometer® quarterly survey, which tracks the business issues and best practices of America’s leading privately held companies. This optimism is translating into greater willingness to take on business risk in pursuit of growth (cited by 42% of respondents). Over one-third of these businesses also plan to invest in major new capital projects in the next 12 months.

Against this backdrop, private companies saw their profitability rise. Thirty percent of respondents said their gross margins rose in the third quarter, and just 13 percent saw a margin decrease, resulting in a net 17 percent reporting increases — the highest since 2006 (when it was net 18 percent).

“Private companies see a US economy that’s firmly back on track,” says Rich Stovsky, U.S. leader of PwC’s Private Company Services practice. “While they remain cautious in their global outlook, these companies continue to make calculated investments abroad and take a long-term view.”

Focus on growth, market expansion

About half of respondents said their initiatives around product innovation and U.S. market expansion will help fuel their companies’ growth in 2015. As for economic growth generally, the vast majority (82 percent) of private companies said they think more capital spending by public and private businesses alike will have the biggest impact.

When looking abroad, we see a steady increase in the number of international private companies planning expansion into new markets. A year ago, 15 percent of them intended to tap new markets, but that percentage has risen to 21 percent in the most recent quarter. International firms also are more likely to make capital investments than domestic-only firms, 41 percent vs 30 percent. “It’s an encouraging economic indicator that private companies continue to pursue capital spending plans both at home and abroad,” says Ken Esch, a partner in PwC’s Private Company Services practice.

As for U.S. private companies selling in China, they project that their international sales will account for almost one-third of their overall revenue in the next 12 months, whereas international marketers that don’t sell in China expect sales abroad to comprise only 10 percent of their revenue.

Greater demand for specialized skills

The majority of survey respondents plan to hire in the coming months, but they project only a 1.6 percent net increase in their headcount during this period, signifying that private companies are being very selective in their hiring. Blue collar workers with specialized skills are of particular interest, with 27 percent of Trendsetter product companies now seeking such workers. Technology workers also remain in high demand, especially among service companies (35 percent).

But qualified workers remain hard to find — and increasingly so. A year ago, 27 percent of private companies said the talent gap was a growth barrier, compared with 34 percent in the latest quarter. Likewise, 23 percent see wage pressure as a problem, up from 13 percent at the beginning of this year. 

“Highly targeted hiring is a common tactic we’re seeing among many of our private-company clients,” says Esch. “It points to demographic shifts in the workforce and to core changes in U.S. manufacturing, where employees with specialized skills are increasingly replacing workers who typically manned pre-recession factory floors. This dynamic could eventually lead to an uptick in wage growth.”

Additional Survey Findings

  • Companies anticipate a 9 percent revenue growth rate over the next 12 months, among the highest growth-rate projections in the past three years.
  • Though 58 percent of private companies say lack of demand is a barrier to growth, that’s markedly less than the 74 percent saying this a couple of years ago.
  • More companies plan strategic alliances than a year ago (21 percent vs 15 percent).

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About PwC's Private Company Trendsetter Barometer
Each quarter, PwC's Trendsetter Barometer® tracks the business issues and best practices of America's leading privately held businesses. This quarter's report incorporates the views of 205 C-suite officers (CEOs/CFOs): 118 from companies in the product sector and 87 in the service sector, averaging $355 million in revenue/sales, and including large, $500M-plus private companies.

About the Private Company Services Practice
Located in all major US markets, PwC's Private Company Services (PCS) is a national practice comprised of more than 170 partners who provide customized tax, audit and advisory services to private companies, their owners and high net worth individuals. More than 60 percent of America's largest private companies are PCS clients* They span a broad scope of sectors and industries ranging from manufacturing to retail to industrial to professional services.

A hallmark of PCS is a robust thought leadership program that provides clients with timely, thought-provoking information to help manage and grow their businesses and wealth.

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(1) 2013 Forbes America's Largest Private Companies List

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For additional information contact:

Laurie Kelly
PwC’s Private Company Services
(617) 530-4531

Caitlin Pike
Edelman for PwC’s Private Company Services
(212) 642-7772