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Private, "Mom & Pop" Businesses Get Props For Trustworthiness

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Edelman's latest Trust Barometer revealed something interesting about Americans' views on privately held companies - a huge but often-overlooked part of the economy generating roughly half of U.S. non-farm GDP and 65 percent of new jobs. Privately owned businesses, especially family-owned and small- and medium-sized firms, have a trust advantage over the government, big business and publicly traded companies, Edelman's survey found.

Among North Americans surveyed for the report, 63 percent expressed trust in privately held businesses, compared with 60 percent for publicly traded companies. Family-owned businesses garnered the highest trust rating, at 85 percent.

In addition, respondents were more likely to say private companies are responsive to customers' needs, innovative and entrepreneurial than they were to say those things about publicly traded firms.

Overall, it looks like private companies in North America, at least, earned a good trust grade from the public, noted Libby Bierman, an analyst with Sageworks, a financial information company.

"That reputation is at least one of the reasons why we see a commitment to 'shopping local' or campaigns like Small Business Saturday," Bierman said. "The survey says private companies are perceived to be more innovative and receptive to their clients' feedback than their larger counterparts, which makes these smaller businesses more like partners than just a stock symbol."

"That increased trust with private companies--and the even higher degree of trust in family-owned or SMEs--reinforces the significance these companies have in the economy," she said.

Because private companies do play such a big role in the economy and consumers' perception, Bierman said, it would be nice to see higher revenue growth from these companies.

Sageworks' data private company financial analysis; financial performance in 2011, 2012, 2013

"Sageworks' latest report shows the average private company only grew about 5 percent in 2013, which is still positive but down relative to recent years," she said. "The good news is that the average profit margin is higher than before, so business owners are better positioned to invest in their companies, through technology or employees, to hopefully spur growth moving forward."

Through its cooperative data model, Sageworks collects financial statements for private companies from accounting firms, banks and credit unions, and aggregates the data at an approximate rate of 1,000 statements a day.

Each annual data point in the chart above represents the average for all private companies in Sageworks' database that had a financial statement end during that year. The 2013 estimate looks at all statements that have been filed for 2013 as of mid-January 2014. Sageworks receives a large number of statements toward the end of the year and in the first few months of the calendar year, when many companies are filing their annual statements. As these filings continue to be made, the estimate is subject to revision, though Sageworks is confident it is indicative of directional change.

Sageworks, a financial information company, collects and analyzes data on the performance of privately held companies and provides accounting and audit solutions.