PEOs enjoying double-digit revenue growth

By Brad Buttermore
Managing Partner and Chief Financial Officer

Professional Employer Organization (PEO) annual revenue grew by double-digits in 2018, according to an industry survey from the National Association of Professional Employer Organizations (NAPEO).

The revenue growth rate for all participating PEOs was 10 percent, with the largest firms (PEOs with more than 5,000 worksite employees) showing the biggest gain — 12.1 percent, according to NAPEO’s 2019 Financial Ratio & Operating Statistic Survey, or FROS.

Growth in the PEO industry has been strong for the past four years; this new statistic represents just a slight dip over 2017. Worksite employee growth was also at 10 percent, up about 1 percent from 2017.

This is the 26th year that NAPEO has conducted the confidential survey, which analyzes the PEO industry via key metrics, trends and forecasting. NAPEO released highlights of the survey during its recent annual conference, held last month in Austin. It releases more detailed statistics and analysis to the PEOs who participate. The survey takes a look at financial ratios and operating statistics of participating companies and includes a group of 50 companies that have participated consistently for 10 years or more.

The survey allows PEO industry players of all sizes to see how they match up against their peers. PEOs must participate in the survey to receive the results.

NAPEO also released a return-on-invest study during its conference that showed that the average client of a PEO can expect a return on investment – based on cost savings alone – of 27.2 percent. The study was conducted by economists Laurie Bassi and Dan McMurrer of McBassi and Associates and is the seventh in a series.

PEOs provide a variety of HR services to small and mid-sized companies, including but not limited to payroll, benefits and regulatory compliance assistance. At Capital Alliance Corp., we believe the industry’s future will continue to shine in the coming years. We’ll continue to use our blog to keep you updated on the latest news and trends in the sector.

Capital Alliance Corporation is a Dallas-based investment banking firm with a four-decade history and deep operational and M&A experience across many sectors, including human resource management. Capital Alliance is affiliated with Oaklins International, the world’s most experienced mid-market M&A advisor, with 800 professionals globally and dedicated industry teams in 40 countries worldwide. We have closed over 1,500 transactions in the past five years.