2008 Survey & Results

Executive Summary

This report highlights the findings of the 2008 First Business Economic Survey of Dane County which was conducted by the University of Wisconsin's A.C. Nielsen Center for Marketing Research in September and October of 2008. This was the sixth year for the study. The survey was sent to 5,300 businesses in Dane County that were reported to have five or more employees and was addressed to the CEO, CFO, President, and/or business owner. The survey asked questions regarding eight 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, Change in Pricing, and Operating Capacity. This year, as in past years, the survey also asked questions pertaining to changes in expenses, and the impact of the slowdown in the housing market.

Overall, respondents continued to feel a slowdown in the local economy for 2008 which seems to be a continuation from last year. All business sectors reported declines in the survey's seven primary economic indicators. Manufacturing businesses reported a decline in actual and projected percentages across all seven measures, most notably in profitability, where almost 50% reported a decrease in profitability this year compared to 30% last year. Other sectors such as retail, service and technology also projected a decline across all measures. Decreasing jobs was a theme for service industry firms, as 28% of those businesses reported a decrease in employee numbers, an all-time high. Fewer firms reported an increase in profitability, sales revenue and capital expenditures for 2008 relative to 2007, a trend that continues from last year. As was the case last year, more businesses reported not meeting performance expectations than those that reported meeting expectations. This year more than 45% of the firms saw a decrease in sales revenue and profitability.

It's not surprising that these negative actuals for 2008 have created pessimistic expectations of future performance in 2009. The percent of companies which expected to do better in the future has reached its lowest level ever this year at 60% compared to last year's 81%. These overall market slowdown projections are more apparent among businesses with market-reach only in Dane County, where for the first time businesses projecting ‘sales revenue increase' and ‘profitability increase' dropped below 50%. Also the number of businesses focusing on Dane County that projected that there will be further decreases in sales revenue in 2009, almost doubled since last year. Businesses with reach in the Midwest and national/global markets have also dropped but have slightly better economic projections.

Rising gas prices, rising raw material costs, sales shortfalls and higher operating costs were some of the key reasons cited for the poor performance of many companies. The reasons cited most for this future outlook was the slowing economy, expected decrease in consumer spending and the continued slow down in the housing market.

First Business Economic Forum Highlights

The bad news:

All business sectors reported declines in the seven economic indicators
Businesses reporting declines in employees reached an all-time high
Percent of firms expecting to do better next year reached an all-time low

The good news:

Fuel and raw material costs, a top reason for poor performance, have stabilized or decreased
Wage pressure doesn't appear to be an issue outside of the tech sector
Over half respondents performed the same or better than last year and over half expect to do better next year

What lies ahead

Rounding the corner toward better times or continued slowdown

Survey Background

Survey sent to all Dane County businesses with five or more employees; 5,300 sent
Those targeted: Owner, President, CEO, CFO
488 returned; ~10% response rate
Heavily represented by small businesses (<100 employees)
Segmented by business type, markets served, types of customers
Questions on seven economic indicators
Quantitative and qualitative responses
Margin of error .05 with 95% confidence level

Segmentation

Number of Employees

Sample Survey

Click here to download survey

Things to remember about the results

Broad sample of business community; not cherry picked
Self assessment by optimistic groups
Two surveys in one: Actuals for 2007 and Projections for 2009
Survey instrument not meant to measure previous year's projections to current year actuals; comparison done with like variables
Value of statistically significance changes

Overall Performance vs. Expectations

A negative or mixed story at best: Two years in a row - more didn't meet expectations than did
Still though, over ½ of respondents met or exceeded expectations

Overall Performance vs. Expectations

Reasons cited for lower performance: Fuel prices, higher operating costs, sales shortfalls, housing slowdown
New category – rising raw material cost

Sales Revenue – Actuals

Year over year comparisons

Statistical significant changes:

All time high of 40% reported decreasing sales revenue
5 year trend in decreasing revenues

Sales Revenue

Profitability – Actuals

Year over year comparisons:

Statistically significant dip in increased profits and spike in decreased profits

Trends:

First year of survey in which decreased profits higher than increased profits\

Operating Costs – Actuals

Year over year comparisons Reversal of 4 year trend in manageable operating costs
Spike in the >10% increase category

Total

Number of Employees- Actuals

Year over year comparisons:

Firms increasing headcount – at lowest level in survey history
Service and technology sectors saw biggest changes; only Service was statistically significant