Risky times ahead for private companies

Latest figures released by Dun and Bradstreet have painted a gloomy picture for private companies, with indications they are more likely to fail in the coming twelve months, outperformed by their public counterparts.

The report examines the characteristics of Australia’s top 100 public and private companies as defined by annual sales, with public companies more likely to succeed in profit margin, return on assets and investment; while private firms excel on liquidity and return on equity measures.

The study found that private companies have an average change of failure, while the likelihood of public companies failing is quite slim.

The last financial year saw the annual median revenue of public companies close to four times that of private companies, at $1.9 billion to $500 million. Public companies also outperformed on revenue growth at 12.9 percent, compared to 8.5 percent for the private sector.

According to Dun and Bradstreet CEO, Christine Christian, the public and private sectors operate differently and have different key strengths; however private companies are more at risk in this current financial climate.

“At a time when credit is particularly difficult to access... a company’s liquidity position must be seen as an important indicator of financial health. Public companies have greater stability and outperform on revenue and revenue growth... with larger firms on average, more stable than smaller organisations and able to produce higher revenue figures.”