Executive Summary
This report highlights the findings of the 2009 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 2009. This was the seventh year for the study. The survey was sent to 4,568 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 respondents to evaluate the current, and predict the future performance of their business on 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. We also asked business owners their projections on the potential effect of the newly proposed legislature regarding healthcare reform, which during the timing of the survey was not finalized in any form.
As the data in this report will show, 2009 was a year of extremes. The economic downturn was felt almost indiscriminately. All major categories of analysis (revenue, profitability, capital expenditures, number of employees, pricing, etc.) were down compared to 2008. For the first time in the survey’s history a majority (52%) of firms did not meet expectations. Sales were down overall and respondents that had steep sales declines (greater than 10% decline) were over twice that of the previous year. Manufacturing was hardest hit with over 86% of firms reporting decreased sales, the worst value by any sector in any year of the survey. Profitability was also down for firms, and for the first time in the survey, more than half of respondents reported decreased profits. Also, the number of respondents that reported steep profit declines (greater than 10%) was more than twice that of last year.
The number of employees also fell, with almost 40% of firms reporting a decrease in employee numbers, the highest percentage since the survey began. Service and technology sectors were better off than others; neither group had any statistically significant changes. Wages were also strongly impacted with over 60% of businesses reporting no increase or a decrease in wages. This was also a historic extreme for the survey; previously the highest this statistic reached was 35.5%.
Pricing was also drastically affected this year. For the first time since its inclusion in the survey, a majority of businesses (over 66%) indicated they either didn’t change or lowered their prices. The percentage of businesses that raised their prices (approximately 33%) was less than half that of 2007. Even projections for future pricing lagged behind previous years with a majority of businesses indicating they would either lower or leave prices unchanged.
There was a negative response to the current events question this year on Federal healthcare reform. When asked, “How would the proposed healthcare legislature affect your business,” only 21% of firms responded positively. Note though that at the time of the survey, (Oct 2009) the legislation was not finalized, and responses are based on speculation about the outcome.
In spite of the downturn in 2009, or perhaps as a result, businesses are optimistic when looking at 2010. Approximately 74% of businesses expect to do better in 2010, as compared to only 60% in projections for 2009. A majority of businesses (55.6% and 52.3% respectively) expect sales revenue and profitability to increase in 2010. Employment is also looking up with over 83% of businesses reporting either no change or an increase in the number of employees projected for 2010. A majority of firms (52%) also expect to increase wages in 2010.
First Business Economic Forum Highlights
The bad news:
- All business sectors reported general declines in the eight economic indicators (2nd year in a row)
- Steep individual declines were seen more than in any of the past surveys
- Percent of firms that did not meet expectations reached an all-time high and was over 50%
- Businesses reporting declines in employees reached an all-time high (2nd year in a row)
- Wages for the first time were negatively affected
- Perceptions on healthcare reform negative
The good news:
- Expectations have risen sharply and are back to pre-recession levels
- Service and tech firms feeling less pain than other sectors
- Comparing other regions will be possible – Northeast WI, Milwaukee area
What lies ahead
- Continued slowdown
- Slightly better times
- Significantly better times
Survey Background
- Survey sent to all Dane County businesses with five or more employees; 4568 sent
- Those targeted: Owner, President, CEO, CFO
- 425 returned; 9% response rate
- Heavily represented by small businesses (<100 employees)
- Segmented by business type, markets served, types of customers
- Questions on eight economic indicators
- Quantitative and qualitative responses
- Margin of error .05 with 95% confidence level
Segmentation
Sample Survey
Things to remember about the results
- Broad sample of business community; not cherry picked
- Self assessment by optimistic groups
- Two surveys in one:
- Actual for 2009
- Projection for 2010
- 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
- First time in survey’s history that majority of firms didn’t meet expectations
- All 8 economic indicators down from previous year
- Reasons cited for lower performance: 40% Uncertain economic future, 13% Sales shortfall (domestic), 8% Housing slowdown, 8% Higher operating costs, 4% Rising energy costs
Sales Revenue –2009
Statistical significant changes:
- All time high of 62% reported decreasing sales revenue
- 6 year trend in decreasing revenues
- Large decreases (>10%) more than doubled
Sales Revenue by Sector
Profitability – 2009
- Statistically significant dip in increased profits and spike in decreased profits
- 2nd year of survey in which decreased profits higher than increased profits and for first time more than half saw decreases
- Large decreases ( >10%) more than doubled
Profitabilty by Sector:
- No statistically significant changes in Service and Tech sector – an indication that they may have weathered the storm better than other groups.
Number of Employees - 2009
- Firms decreasing headcount – at highest level in survey history
- Spike in large (>10%) declines
Number of Employees by Sector - 2009
- Manufacturing hit hard – decreasing headcount doubled
- No statistically significant changes for service and technology – another indication that they may have weathered the storm better
- Service and technology sectors saw biggest changes; only Service was statistically significant
Wages - 2009
- First time in survey history we saw statistically significant changes
- Spike in large (>10%) declines
Operating Costs - 2009
- At the lowest levels since inception of survey
- Spike in large decreases (>10%)
Change in Pricing - 2009
- First time in survey history we saw statistically significant changes
- Over 3 times as many firms decreased pricing as compared to 2008
- Spike in large (>10%) declines
Current Events - Healthcare
- Question asked: “If the proposed legislature on federal healthcare reform becomes law, how would it affect your business” (1-very negative; 5-very positive)
- Asked in Oct 2009 – nothing was closed to being finalized – responses based on speculation of what an outcome would look like.
- Another possible example of economic uncertainty
- Not a regression to mean – more than double view it negatively.
Looking Forward to 2010
- Better performance percentage back to pre-recession levels
- Negative three year trend finally broken
- No statistically significant changes in projected sales, profit, employees
- Is this good given declines reported in previous years
- Is this bad given the historic low levels we are currently at?
Other Indicators
Statistically Significant:
- Lowest level report in survey history for Increased operating costs
- Wages Pricing Spike in large (>10%) decreases in operating costs
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