US Professional and Technical Services Sector

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 1,604,844 professional and technical services establishments in the US provide specialized expertise to clients and typically operate as third-party contractors. As opposed to producing a physical product, professional service providers are primarily knowledge-based businesses that offer advice and make available the skills of their employees.

Dependence on Government Projects

The US government is one of the largest consumers of professional services, and federal, state, and local government organizations are important customers for several industries in the sector.

Dependence on Expensive, Skilled Labor

The professional and technical services industry is dependent on highly skilled labor and jobs that command high wages.

Industry size & Structure

The professional and technical services sector is comprised of 1,604,844 establishments that employ 10.5 million workers and generate $2.6 trillion in annual revenue, according to government sources.

    • The professional services sector represents 6.5% of the nation's Gross Domestic Product (GDP) and employs 7% of the country's workers.
    • The sector is fragmented with the 20 largest firms representing 11% of revenue.
    • In addition to employer establishments, the professional services sector has 3.7 million owner-operated establishments with no employees. Subsectors with the highest numbers of nonemployer establishments are management, scientific, and technical consulting services (25%); accounting, tax preparation, bookkeeping, and payroll services (10%); and computer systems design and related services (9%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
    • The professional and technical services sector shed about 237,000 establishments in 2021, which equals about 14.7% of existing establishments, according to the Bureau of Labor Statistics. However, the sector added about 353,000 new establishments, which is equivalent to 22% of existing establishments. As a result, the sector had a growth rate of 7.2%.
    • The professional and technical services sector is forecast to grow its employment base by 10.9% overall in 2021-2031, which is much higher than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
                                    Industry Forecast
                                    US Professional and Technical Services Sector Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    Apr 19, 2024 - Steady but Weaker Industry Growth
                                    • The US professional & technical services sector is expected to see weaker sales growth this year, but demand is projected to remain steady, if a bit flat, over the next several years. The industry’s year-over-year sales increased by 11.5% in 2022 before dropping to 6.2% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to moderate further to about 2.8% in 2024. The industry will then see steady but mostly flat average annual growth of about 5.1% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
                                    • According to the most recent outlook from Gartner, global IT spending is forecast to reach $5.06 trillion in 2024, up 8% over 2023 spending levels. Gartner VP analyst John-David Lovelock said, “With spending on IT services on track to grow by 9.7% to eclipse $1.52 trillion, this category is on pace to become the largest market that Gartner tracks. Enterprises are quickly falling behind IT service firms in terms of attracting talent with key IT skill sets. This creates a greater need for investment in consulting spend compared to internal staff. We are at an inflection year for this trend, with more money being spent on consulting than internal staff for the first time.” Global data center spending is expected to rise 10% in 2023 to more than $237 billion. Device spending is forecast to increase by 3.6% in 2023 to $664 billion.
                                    • A string of jumbo-sized mergers and acquisitions (M&A) early this year could signal that a sleepy dealmaking environment is stirring back to life, according to The Wall Street Journal. Recent high-dollar deals include Capital One Financial’s $35.3 billion bid for Discover Financial Services and Home Depot’s agreement to purchase roofing materials distributor SRS Distribution for $18.2 billion. So far, in 2024, there have been 11 deals valued at $10 billion or more, marking one of the hottest starts for megadeals in more than 20 years, according to Dealogic. M&A activity in 2023 was muted as high interest rates pushed up borrowing costs, and stock-market volatility made it hard for buyers and sellers to agree on valuations. Some deal watchers suggest the flurry of high-value dealmaking indicates the early signs of a surge in M&A activity. However, an M&A rebound could be undermined if anticipated Fed rate cuts fail to materialize. Election-year political uncertainties could also chill dealmaking.
                                    • Some consulting firms are struggling to keep all their partners and junior staffers busy after a pullback in demand, according to The Wall Street Journal. The consulting business boomed during the pandemic as clients sought help with evolving remote work needs and supply chain disruptions. More recently, corporations have increased their focus on containing costs and are pulling back on consulting spending amid growing global economic uncertainty. According to Source Global Research, US consulting market growth is projected to slow to about 6% this year after posting double-digit growth during the pandemic. Source Global Research says more than 85% of US clients plan to reduce their consulting spending in 2024. However, some consulting firms believe the downturn is temporary, and the market is beginning to improve.
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