2009 Survey & Results

Executive Summary

This report highlights the findings of the 2009 First Business Economic Survey of Northeast
Wisconsin, which was conducted by the University of Wisconsin’s A.C. Nielsen Center for
Marketing Research in October of 2009. The online survey link was sent to 6,866 businesses in
Northeast Wisconsin that were reported to have one 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 as well
as the anticipated impact of the proposed legislation pertaining to healthcare reform, which
during the timing of the survey was not finalized in any form. This survey has been conducted
in Dane County for seven years, and this is the second year that it has been extended to include
a separate analysis of the Northeast Wisconsin area businesses.

Overall, businesses in the Northeast Wisconsin region continue to face economic pressures.
Over 50% 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, 56.83% of
businesses saw a decrease in sales revenue and 49.31% saw a decrease in profitability.

The geographic markets of Northeast Wisconsin, Midwest and Nationwide all reported either
significant decreases in increased sales revenue or significant increases in decreased sales
revenue. In terms of business sectors, the manufacturing and “other” sectors were the hardest
hit in 2009, with the manufacturing sector reporting a drastic drop in the percentage of firms
reporting increased sales revenue from 54% in 2008 to 16% in 2009. 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, with the
B2B classification showing significantly negative changes in all seven 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 4%. The majority of
businesses anticipate health care reform to negatively impact performance. Fewer than 20% of
businesses surveyed met their expectations for 2009. Some of the reasons cited for low
performance were uncertainty in the economic future and domestic sales shortfall.
However, despite the poor economy, nearly 85% of businesses expect to perform better in
2010. And the attitude in open‐end responses was generally optimistic for the future,
expressing hope for improving economic conditions in 2010.

First Business Economic Forum Highlights

Bad News

All business sectors reported general declines in the eight economic indicators
Steep individual declines were seen for B2B, Manufacturing and those selling only in Midwest
Percent of firms that did not meet expectations in 2009 was over 50%
42% reported decrease in number of employees
While 35% reported wages increased that was half of what it was in 2008.
Perceptions on healthcare reform negative despite no clearly defined reform

Bad News

Expectations have risen sharply
Service and tech firms feeling less pain than other sectors
Comparing other regions will be possible – Dane County and Milwaukee area

Survey Example

Download survey

Survey Background

Survey conducted online – emails sent to 3,000 and post cards to 3,866 for a total of 6,866
Those targeted: Owner, President, CEO, CFO
363 returned; 5.29% response rate – half of last year’s rate
Heavily represented by small businesses (<100 employees)
Segmented by business type, markets served, types of customers
Questions on eight economic indicators
Margin of error .05 with 95% confidence level

Response Rate

Segmentation

Overview of Sample & Interpretations

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 actual; comparisons done Actual 2008 – Actual 2009 Projections of 2009 – Projections of 2010
Value of statistically significance changes

Performance vs. Expectations in 2009

A majority of firms didn’t meet expectations: 50.43% vs 43.67% in 2008
Nearly three times as many failed to meet as exceeded
Those selling just in Midwest fared much worse – 9/1 ratio failed to exceeded

Reasons for Under- Performance

24% Uncertain economic future
21% Sales shortfall (domestic)
9% Higher operating costs
7% Housing slowdown
7% Domestic competition

Sales Revenue – 2009

Year over year comparisons

Twice as many decreased as increased – 2/1 ratio of revenue drops
4/1 ratio of projected increase over decrease – across the board

Sales Revenue by Sector – 2009

All sectors except retail affected negatively
Manufacturers had a 4/1 ratio of decreased to increased sales revenue
A significantly higher percentage of Manufacturing, Retail and Technology PROJECT increased revenues than did for 2009

Actual Sales Revenue by Region & Classification – 2009

Selling to Midwest hit hardest -- 4/1 ratio of decrease to increase
B2B worse than B2C and both

Profitability – 2009

Decreases in ACTUAL Profits exceeded increases by a 3/2 ratio
Compared to 2008 significantly lower percentage reported increased profits
Those selling just within Wisconsin fared better with 1/1 ratio
For 2010, firms PROJECTING increases exceeded firms PROJECTING decreases by a 4/1 ratio across the board; significantly greater than projections for 2009

Operating Costs - 2009

Increases equal to decreases -- overall no change in ACTUAL, across the board (unlike 2008, when costs were rising)
PROJECTED for 2010 increases exceeded decreases by 3/2 ratio across the board; but significantly fewer projecting increases than PROJECTED for 2009

Capital Expenditures - 2009

ACTUAL decreases to increases was a 3/2 ratio worse than 2008
Those selling just in Midwest had worst ratio, 9/1 reducing capital spending
Service showed no difference from 2008, remainder did
PROJECTED for 2010 increases exceeded decreases by 3/2 ratio across the board; same as PROJECTED for 2009

Number of Employees – 2009

Overall ACTUAL employment decreases exceeded increases 5/2, significantly worse than 2008
Overall PROJECTED 2010 increases exceeded decreases 3/1, significantly better than 2009 projected

Number of Employees by Sector – 2009

All sectors, except technology, statistically significant decreases in ACTUAL employees
Manufacturers worst with a 6/1 ratio of decreased to increased
A significantly higher percentage of Manufacturing and Technology firms PROJECT increased employees for 2010 than did for 2009
Manufacturing 4/1 ratio of increases to decreases – Good News

Number of Employees by Region & Classification – 2009

Selling to Midwest hit hardest with an 8/1 ratio of ACTUAL decreases to increases, all regions significantly worse than 2008 B2B ACTUAL worse than B2C ACTUAL PROJECTED shows B2B to increase 4/1 ratio with B2C unchanged; Both PROJECTED better than 2009 PROJECTED, with higher percentage projecting increase in employees

Wages – 2009

Overall for ACTUAL slightly more increases than decreases , significantly fewer firms had increases than 2008, across the board
Overall PROJECTED 2010 increases exceeded decreases 8/1, but still significantly lower than 2009 projected, across the board
All except service industries had significantly lower wage growth than in 2008

Change in Pricing – 2009

Overall for ACTUAL balance of increases and decreases, hence no change in prices, significantly lower than 2008 across the board ACTUAL B2B prices down 3/2, B2C prices up 2/1 Across the board PROJECTED 2010 increases exceeded decreases 4/1, but still significantly lower than 2009 projected price increases

Current Events – Healthcare

Question asked: “If the proposed legislature on federal healthcare reform becomes law, how would it affect your business” – Very Negatively to Very Positively
Asked in Oct 2009 – nothing was close to being finalized – responses possibly an example of economic uncertainty
Manufacturing most negative; Retail sector nearly neutral

2009 Summary

Substantial declines in Sales, Profits, Employees, Capital Expenditures
Operating Costs, Wage rates, Prices essentially flat
Hardest Hit: Manufacturing firms, firms selling in Midwest market, B2B
Least impacted: B2C, firms selling in NE WI market

Looking Forward: 2010

85% expect performance to be better next year
Consistent with statistically significant changes in projected sales, profit, and employees
Given how bad 2009 has been – is this really a significant improvement?