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December 06, 2006

Dane County Businesses Show Resilience to 2006 National Economic Hardship

Dane County outperforms compared to low national GDP and the outlook for 2007 more optimistic than prior years.

Dane County businesses fared better than expected in 2006 despite concerns over Gulf Coast hurricanes and increased gas prices, according to the fourth annual First Business Economic Survey of Dane County sponsored by First Business Bank and the UW-Madison School of Business. However, the gap between small and large companies in actual sales revenue continues to grow.

MADISON, December 6, 2006 - Results of the just-released 2006 First Business Economic Survey of Dane County reported a significant increase of companies surveyed performed better than expectations when compared to 2005. The outlook for 2007 is also drastically better than it was in comparison to a year ago when companies surveyed projected performance. 84% of firms surveyed project an increase in performance, as compared to 70% from last year. This dramatic change reflects in part a rebound effect when last year at this time firms were concerned about the effects Hurricane Katrina and Hurricane Rita might have on the local economy.

The 2006 First Business Economic Survey of Dane County, conducted by the A.C. Nielsen Center for Marketing Research at the UW-Madison School of Business, took the pulse of 485 businesses between September and October of 2006. The survey was sent to CEOs, CFOs, presidents and/or owners of Dane County businesses with five or more employees.

Corey Chambas, President of First Business Financial Services, stated, "This survey reflects the fact that we have resilient and innovative local businesses that are able to do well regardless of national economic fluctuations. This is our fourth year of commissioning this study and it has provided us and other local businesses with valuable information for building budgets and projecting growth in the Dane County market."

Scott Converse, Director of Technology and Innovation Programs for Executive Education at the UW-Madison School of Business, noted, "The survey gives a unique look into the economic adaptability Dane County businesses had after the uncertainty following the Gulf hurricanes. While slow, steady growth within the region was expected, we saw companies outperform expectations of gains in profitability. We did see that larger companies, especially those with market reach outside of Dane County, show a greater increase in sales revenue than small companies and those operating only in the Dane County area. We also saw that a greater percentage of larger firms are seeing an upward trend in the number of employees. In addition, there was a decrease in the number of firms that saw operating costs rise, which is ironic given the fluctuations seen in fuel, energy, and raw materials over the past year."

While 2006 experienced some economic challenges for local and national businesses, including gas, oil and material hikes due to Hurricanes Katrina and Rita, a local labor shortage, and concerns over the war in Iraq, local businesses report that they performed fairly well and had an increase in profitability and a decrease of cost structure as a percentage of revenue.

These are some of the key economic indicators of the survey:

  • Sales revenue: 60.6 percent of companies saw increases in 2006, down 2.6 percent from 2005. 72.7 percent expect sales to increase in 2007, up 3.9 percent from 2006 expectations.

  • Profitability: 50.5 percent of companies saw increases in 2006, up 3.2 percent from 2005. 65.4 percent expect increases in 2007, up 8 percent from 2006 expectations.

  • Number of employees: 36.2 percent of companies saw increases in 2006, up 2.5 percent from 2005. 37.9 percent expect employee increases in 2006, up 1.6 percent from 2006 expectations.

  • Overall wage change: 76.9 percent of companies saw an increase in 2006, up 1.5 percent from 2005. 76.3 percent expect an increase in 2007, up 1.4 percent from 2006 expectations.

  • Capital expenditures: 45.6 percent of companies saw increases in 2006, down 2.6 percent from 2005. 42 percent expect increases in 2007, down 6 percent from 2006 expectations.

  • Operating costs as a percent of revenue: 66.1 percent saw increases in 2006, down 2.8 percent from 2005. 59.7 percent expect increases in 2007, down 3.8 percent from 2006 expectations.

The manufacturing sector continues to outperform other sectors (service, retail, technology) with stronger performances from the Business-to-Business firms over Business-to-Consumer companies. Capital expenditures are declining; however, this has had little short-term effect. If the trend continues long-term, it will have more impact. There is a shift in profitability, stating a lower percentage of smaller businesses reporting gains, and more gains in larger firms.

The increase in wages and employment is good news to Dane County employees and the confidence shown the 2007 projects is definitely good news overall.

About First Business Bank First Business Bank was the first bank in the Midwest to devote itself exclusively to serving businesses. We take an individual approach to your company’s banking needs and pride ourselves on responsiveness. First Business Bank offers a full range of lending and cash management products, as well as innovative services such as no-cost courier deposit pick-up.

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