Cross-Regional Results (New!)
Our regional comparison includes data from three of Wisconsin's main business regions – Milwaukee and Waukesha Counties, Dane County, and Northeast Wisconsin. This summary is a product of the annual First Business Economic Survey and Forum, sponsored by First Business Bank and the AC Nielsen Center for Marketing Research at the University of Wisconsin. An 8% return of over 18,000 surveys distributed to Wisconsin's small business owners, CEO’s, and CFO’s delivers statistically meaningful information.
Preliminary Results
For the first time in the survey’s seven year history all major categories of analysis (revenue, profitability, capital expenditures, number of employees, pricing, etc.) were down when compared to the prior year. 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 a 10% decline, were double that of the previous year. Manufacturing was hardest hit with over 86% of firms reporting decreased sales, the highest of any sector in any year of the survey.
As we compare and contrast the regional results, you’ll notice: all three regions experienced decreases, Milwaukee/Waukesha fared the worst, Northeast Wisconsin businesses fared the best, and all business regions are optimistic about 2010.
Full results will be posted Friday, January 29.
Milwaukee/Waukesha’s results may be attributed to a higher concentration of small businesses. These businesses may have a harder time downsizing their business models as they are already lean. Northeast’s results may be attributed to a higher number of businesses surveyed selling goods and services to other businesses.
The businesses that were surveyed self-selected from 4 categories: manufacturing, retail, service, and technology. Nearly half of the businesses reporting categorized themselves in the “service” industry, which includes accounting and legal counsel, insurance, healthcare, and others. 16% described their business as manufacturing, the highest concentration being in Milwaukee and Waukesha at 19%. This may be another reason the Milwaukee/Waukesha region was the weakest performer of the three. Retail is the next highest reporting segment and Dane County narrowly leads the way with 13% of businesses claiming they were in that sector. Technology was the strongest performing industry sector. Only 3% of Milwaukee/Waukesha businesses were in that sector, compared to twice that in Dane and Northeast. This again contributes to Milwaukee/Waukesha’s lower performance.
Decreased profitability was the result of the drop in sales revenue as businesses could not reduce expenses fast enough. The Milwaukee/ Waukesha region lead the decline with 37% of businesses reporting decreased profitability of 10% or greater compared to 21% logging decreases in the Northeast. Businesses indicated anecdotally that sales bottomed out and began to increase in the 4th quarter. More than half of businesses expect sales revenue and profitability to increase in 2010.
Operating cost as a percent of revenue increased in 2009 as businesses struggled to balance the loss in sales with commensurate cuts in overall expenses. However, sales expectations are more positive for 2010 in all three regions. Particularly in the Northeast, where UW Oshkosh Professor Alan Hartman said, “There are some positive signs…Seventy-two percent of [Northeast] firms are expecting an increase in sales revenue in 2010….It shows resilience,” and he adds that, “There is confidence in the business community.” In comparison, 55% of Dane and 49% of Milwaukee/Waukesha businesses forecasted an increase in sales revenue.
2009 saw a decrease in Capital Expenditures in all 3 regions with 40% of Dane and Milwaukee/Waukesha respondents reinvesting less in their businesses. However 50% of the reporting businesses forecast their capital expenditures will remain constant in 2010 with almost 36% of businesses projecting an increase in the Northeast region.
Wisconsin’s unemployment levels hovered a bit over 8% in 2009 while nationally the unemployment rate rose to 10%. The region showing the largest reduction in employees was Milwaukee/Waukesha with 49% of the businesses reporting a reduction in 2009 staff. The Dane region saw the smallest decline with 39% of businesses reducing staff. Of the 3 regions, Northeast Wisconsin appears the most optimistic about 2010 with more than half of its businesses forecasting no change, and about a third projecting an increase in staffing.
Only 6% of the businesses project cutting wages in 2010 after 25% decreased their company’s wages last year. As may be expected with the somewhat weaker performance of sales and profitability – wage declines were most prevalent in the Milwaukee/Waukesha region. There was an interesting thing that happened in wage changes for 2009. Across all regions, most firms had no wage change, and if they did make a change, it was either a small increase of less than 3% or a large decrease of greater than 10%. This is highly unusual.
Price changes across the regions were very similar in 2009, with by far the highest percentage of firms reporting no change. For 2010, most firms are again projecting no price increase. Those that are, are projecting small increases – less than 3% - with Dane County being the highest with nearly 50% of businesses projecting that small increase.
Capacity decisions affect production lead time, customer responsiveness, operating cost, and the ability to compete. Inadequate capacity planning can lead to the loss of customers and business. Excess capacity reduces companies’ profitability. The capacity utilization is higher in Dane County with nearly one third of businesses operating at 80% of capacity or higher. Surprisingly, approximately 10% of companies in all 3 markets reported that they were operating at under 50% of capacity.
All 3 regions report that the majority of businesses did not meet expectations in 2009. Dane County businesses overwhelmingly attributed this to “Uncertainty in Economic Future.” “Domestic Sales Shortfalls” was the second most popular choice. In Milwaukee/Waukesha and Northeast, those same two reasons were cited as the top two explanations for low performance, however, “Domestic Sales Shortfalls” was a closer second.
All three regions reported positive expectations for 2010, but they varied somewhat by region. 65% of businesses in Milwaukee/Waukesha, 75% of businesses in Dane, and 85% of businesses in Northeast predict 2010 to be better. The attitude in the survey’s open-end responses was generally optimistic for the future, expressing hope for improving economic conditions in the coming year.
