Executive Summary
This report highlights the findings of the 2009 First Business Economic Survey of Milwaukee &Waukesha Counties, which was conducted by the University of Wisconsin’s A.C. Nielsen Center for Marketing Research in September and October of 2009. The survey was sent to 7,066 businesses in the two counties that were reported to have five or more employees. It was addressed to the CEO, CFO, President, and/or business owner. The survey asked questions regarding prior year and forward-looking results on eight key economic indicators in each of the following areas: Sales Revenue, Profitability, Total Operating Costs as a Percentage of Revenue, Capital Expenditures, Number of Employees, Overall Wage Change, Change in Pricing, and Operating Capacity. In addition, the survey also asked questions pertaining to changes in expenses and the impact of proposed healthcare legislation. This survey has been conducted in Dane County for six years, and this is the second year that it has been extended to include a separate analysis of Milwaukee & Waukesha Counties.
Overall, Milwaukee and Waukesha County businesses continue to face economic pressures. Over 60% of businesses did not meet expectations in 2009. Businesses reported declines in all eight of the primary economic indicators used for this survey. For example, 72.3% of businesses saw a decrease in sales revenue and 67.59% saw a decrease in profitability.
No geographic market was immune to the effects of the economy. The geographic markets Milwaukee & Waukesha, Midwest and Nation all reported significantly more decreases in both sales revenue and profitability. The service, manufacturing and other business sectors were the hardest hit in 2009. With the exception of other business – cost as a percent of revenue, each of these sectors experienced significant increases in the percentage of businesses reporting on each of the eight business indicators. Finally, each of the three business sectors – business-to-business, business-to-consumer and business-to-both – were significantly impacted by further decreases in most of the eight economic indicators.
The overall business performance was down in 2009 compared to 2008. Capacity Utilization shifted towards a lower utilization rate. Expenses are expected to rise by 3%. The majority of businesses anticipate health care reform to negatively impact performance. Fewer than 12% of businesses surveyed met their expectations for 2009. Some of the reasons cited for low performance were uncertainty in the economic future, domestic shortfall, high operating costs, insufficient cash flows, government regulation and the slowdown in the housing market.
Despite the poor economy, nearly 65% of businesses expect to perform better in 2010. And the attitude in open-end responses was generally optimistic for the future.
Presentation Highlights
The bad news
- All business sectors reported general declines in all of the eight economic indicators surveyed with steep declines observed which dramatically diverged from year ago expectations
- In excess of 60% of firms did not meet expectations
- Uncertainty is reigning supreme: credit availability, economic reforms, changing consumer behaviors and healthcare are replacing concerns tied commodity costs, staffing and capacity
The good news
- Generally optimistic of the future and an indication that we are at a bottom
- Expenses such as wages and commodities costs are down
- Unemployment and increased capacity imply that business are ready to go forward but are sitting on the sidelines yet
What lies ahead:
- Resolution of the significant level of uncertainty residing in the business environment will drive the turn around from status quo to significantly better times
Survey Background
- Survey sent to all Waukesha-Milwaukee County businesses with one or more employees; 7,006 surveys sent
- Those targeted: Owner, President, CEO, CFO
- 566 returned; approx. 8.0% response rate
- 139 completed online and 427 returned via traditional mail/fax
- 92.34% of respondents were represented by small businesses (<100 employees)
- Quantitative and qualitative data
- Margin of error .05 with 95% confidence level
Segmentation
Things to Remember
- Broad sample of business community; not cherry picked
- Self assessment by historically optimistic groups
- Essentially 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
- A negative story for Waukesha-Milwaukee: Nearly 61% - didn’t meet expectations and another 28% met expectations with only 11% exceeding expectations
- Reasons cited for lower performance: Higher energy and operating costs; sales shortfalls; the housing slowdown; insufficient cash flows; government regulations; and uncertainty
Uncertainty, Government and Healthcare
- Respondent comments with trend related to uncertainty caused by government spending, entitlement programs, and the direction of healthcare at state and federal levels
- Over 2 out of 3 highly concerned about healthcare on their businesses
Sales Revenue – 2009 and 2010
- Year over year comparisons
- Nearly 3 of 4 businesses reported decreasing sales revenue vs. 2008
- Large increases (greater than +10%) was seen by ½ as many firms and large decreases (less than -10%) nearly tripled
- 2010 expectations not much different than 2009
Sales Revenue – by Sector in 2009
- Sales Revenue by Sector All sectors, as expected, were hurt with significant declines
- Technology different? Significant as less than 3% of sample?
Profitability – 2009 and 2010
- Year over year comparisons
- Over 2 of 3 businesses reported decreasing profitability vs. 2008
- Large decreases (less than -10%) nearly tripled
- Relative to sales revenues, cost were managed
- Again, 2010 expectations not much different than 2009
Profitability – by Sector in 2009
- Profitability by Sector
- All sectors, as expected, were hurt with significant declines
- Again, Technology different? ½ firms saw increase …
Operating Costs – 2009 and 2010
- Significant increase in the % of firms experiencing a decline in operating costs as a % of revenue in 2009
- Significant decline in the projected expectations for 2010
- All negative categories see an increase
- All positive categories see a decline
Operating Costs - Actuals
- Possible Driver: Commodity prices, as evidenced by the CRB index below, is moving up again but improved over recent history
Capital Expenditures – 2009 and 2010
- Year over year comparisons
- 2 of 5 businesses reported decreasing capital expenditures and only 1 of 5 increasing expenditures
- Large decreases (less than -10%) tripled
- Nearly 7 of 10 forecasting no change or decrease – insignificant change
Capital Expenditures – by Market
- Comparison between target market regions
- Waukesha – Milwaukee target market saw significant declines like others
- But the region fared better on a relative basis
Number of Employees – 2009
- Year over year comparisons
- Significant reductions in employment, nearly one-half decreased and those increasing employment was one-half 2008
- Large decreases (less than -10%) exceptional change
- Every decline grouping saw an increase
Number of Employees – 2010
- Year over year comparisons
- Insignificant changes in projected employment for 2010
- Projected large increases (more than +10%) doubling
- Every increase grouping is projected to see improvement – caution … the projections are not statistically significant
Note: recent national data indicate a bottoming in unemployment would be consistent with the data
Wages – 2009 and 2010
- Year over year comparisons
- Significant reductions in wages and significant down- ward pressure forecasted to continue
- Again, large decreases (less than -10%) exceptional large Change
- Every decline and 0% categories saw an increase
- Healthcare perceptions could bias wage forecasts in a negative manner
Pricing – 2009 and 2010
- Year over year comparisons Significant downward change in pricing - 3.5X saw decrease in prices
- Every decline and 0% categories saw an increase: 68% saw 0% or decline vs 31% in 2008
- 2010 sees further significant declines
Operating Capacity
- Much greater capacity in 2009 than 2008
- 61% (2008) vs. 45% (2009) are at 80% or higher capacity
- 34% (2008) vs. 22% (2009) are at 90% or higher capacity
Looking Forward: Expectations for 2010
- What about 2010?
- “Can’t get worse” mentality – turning the corner
- Excess capacity available to increase output when needed
- Muted changes in capital expenditures
- Employment has adjusted and is available and seems to be turning the corner
- Wages adjusted downward with an expectation of further pressures
- Operating costs are down and further pressures exist
- Uncertainty reigns
- Consumer spending habits are changing?
- General optimism!
- Sidelines waiting to move in a positive direction - slow improvements in 2010 until uncertainty resolution
