Leading private companies report plans to hire.

As markets begin to stabilize, CEOs of the nation’s leading private companies surveyed for PricewaterhouseCoopers’ Private Company Trendsetter Barometer anticipate improvements in the US and world economies within the next 12 months (43% optimistic about the US economy). This sentiment was mirrored by international marketers, with 49% of reporting CEOs optimistic about the world economy over the next 12 months, up 19 points from the prior quarter and 30 points from one year ago.

In line with this optimism, Trendsetter CEOs reset revenue growth projections for the next 12 months, up nearly two points from last quarter’s 5.2% to the third quarter’s 7.1%. Both international marketers and their domestic-only peers reported increased revenue projections, with the latter closing the gap (7.4% and 6.8%, respectively). Overall, more than two-thirds of leading private businesses plan for positive revenue growth over the next 12 months, with 33% expecting double-digit growth and 35% expecting single-digit growth. Only nine% forecast negative growth, while 16% expect zero growth.

“With revenue increasing and productivity at an all time high, we’re beginning to see signs of economic recovery,” says Ken Esch, partner with PricewaterhouseCoopers Private Company Services practice. “Private business owners are taking full advantage of anticipated growth and are repositioning themselves for the future.”

Improving gross margins trigger plans to hire

Approximately 23% of private companies surveyed reported higher gross margins in the third quarter while 27% reported lower margins, resulting in a net minus four%, better than the prior quarter’s minus 12% and one point higher (a net minus 3%) than one year ago. In line with these results, costs and prices decreased for net 15% and net 18% of all respondents, respectively.

“Lower than usual gross margins still represent a challenge for private company owners, but slightly better results this quarter combined with an expected increase in hiring indicates that leading private companies are taking action consistent with their increasingly optimistic view of the future,” says Esch.

Approximately 42% of Trendsetter executives plan additions to their workforce, up from the prior quarter’s 34% and in line with last year’s 48%. Alternatively, 10% plan to reduce staff over the next 12 months, up one point from last quarter and up two points from last year. Surveyed CEOs project an average composite workforce increase of 2.5% — up from the prior quarter’s 1.4% but remaining below last year’s 3.6%. Smaller private companies (revenues under $100 million) plan more increases in their workforce than do larger counterparts, with anticipated overall composite workforce increases of 5.0% and 2.2%, respectively (both up 1 point since last quarter).

“Private companies generally operate with fewer people, so it’s expected they will need to act quickly when they anticipate demand to pick up for their products and services,” says Esch. “Private companies are also looking to upgrade their talent base, as the recession left many well-qualified people looking for work—even at reduced salaries.”

International sales continue to creep higher

Those private businesses already operating abroad reported international sales improving over the prior quarter, with 32% reporting increases (up 8 points from the prior quarter but down 6 points from one year ago), 20% reporting decreases, and 48% reporting no change. Over the next 12 months, the average prospective contribution from international sales to total revenues among those operating abroad is 18%. Interestingly, those operating in emerging markets — including China, India and Brazil — expect a solid 26% contribution to total revenues, while all others selling abroad expect a 14% contribution.

Spending and capital investments remain steady

Similar to previous quarters, private companies doing business abroad — especially the one-third selling in China, India and Brazil — remain ahead of their domestic-only peers in prospective spending over the next 12 months. Approximately 29% (up 1 point from last quarter) of all Trendsetter executives plan major new investments of capital over the next 12 months; prospective spending is expected to be an average of 8.9% of sales (up from 7.1% in the prior quarter and 8.2% one year ago).

“These results reflect an economy on the mend, and companies operating internationally are able to take advantage of higher growth opportunities around the world,” says Esch. “The emerging markets continue to be a viable source of growth and development, as evidenced by the significant planned investments by companies in these markets.”

Bank loans and lack of demand cited as barriers for growth

Despite a four point drop from last quarter, concern about lack of demand remains the principal potential barrier to growth, cited by 77% of respondents. Other top concerns include legislative and regulatory pressures (43%), profitability and decreasing margins (43%), possibility of increased taxation (35%) and lack of capital for investment (27%).

For more information at http://www.pwc.com