Executive Summary
This report highlights the findings of the 2006 First Business Economic Survey of Dane County which was conducted by the A.C. Nielsen Center for Marketing Research between September and mid-October 2006. This was the fourth year for the study. The survey was sent to 4,414 businesses in Dane County with five or more employees and was addressed to the CEO, CFO, President, and/or business owner.
The survey asked questions regarding seven key economic indicators in each of the following areas: Sales Revenue, Profitability, Total Operating Costs as a % of Revenue, Capital Expenditures, Number of Employees, Overall Wage Change, and Operating Capacity. This year the survey also asked questions pertaining to Change in Wages for Existing Employees, expense changes, and the impact of the Iraq War. Additionally, the survey split out Technology firms from other firm types.
Overall, the local economy performed well in 2006, often times better than expected. While only 51% of businesses projected “on par or better” performance for the year, 66% of business owners achieved it. Also, a higher percentage of firms reported an increasing of profitability and decreasing of cost structure as a percentage of revenue. A smaller percentage of firms, however, reported an increase in sales revenue and capital expenditures in 2006 compared to 2005.
The outlook for 2007 is more optimistic, despite lower expectations for increasing capital expenditures. The survey reveals a dramatic rise in expectations, with 84% of Dane County companies projecting improved performance in 2007 (compared to 70% last year). Given the timing of the 2005 survey and the recent reduction in gas/oil prices, this does not come as a great surprise. The less optimistic outlook coming from the 2005 survey can be attributed in part to the unexpected hike in gas/oil prices as well as the social impact caused by the two Gulf-Coast hurricanes – Hurricane Katrina and Hurricane Rita. Regionally there are few year-over-year differences but some are worth noting. The sales revenue gap between small and large companies continues to grow, with a higher percentage of larger companies and a lower percentage of smaller companies reporting increases. And while revenue comparisons between those companies operating within in Dane County and companies that compete in national and/or international markets are statistically significant, year-over-year differences within regions are not. Larger firms also saw a significant drop in capital expenditures and operating expenses as a percent of revenue sending mixed signals of strength. Also, a greater percentage of the larger firms are seeing an upward trend in the number of employees. However, a larger percentage of smaller firms reported an increase in wages which contradicts the drop seen in the operating expenses of larger firms.
Manufacturing firms reported more successes in 2006, outperforming retail, service, and technology businesses in sales revenue, profitability, capital expenditures, and number of employees. Additionally, business-to-business (B2B) firms are generally outperforming both business-to-consumer (B2C) and B2B/B2C hybrids. This is especially true in the areas of sales revenue, profitability, total costs as a percent of revenue, capital expenditures, and number of employees. However, B2C firms are showing increases in projected sales revenue and profitability for 2007 as well as actual profitability for 2006.
