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January 29, 2010

Economic Survey Reveals Northeast Wisc. Businesses Led Dane & Milwaukee/Waukesha Counties in 2009

MADISON, January 29, 2010 - Northeast Wisconsin businesses fared better than their counterparts in Dane County and Milwaukee/Waukesha Counties in 2009 according to a report released today by First Business Bank. Overall however, all three regions showed similar economic declines. The majority of firms did not meet expectations for 2009, with actual sales revenue and profitability showing declines. Despite a challenging 2009, all economic predictions for 2010 are positive.

"The optimism for 2010 is paramount," says Mark Meloy, President and CEO of First Business Bank - Madison. "Clearly there were challenges in 2009, but nearly 50 percent of businesses, and higher figures in some regions, expect increased sales revenue this year. That confidence says a lot about the character of the states’ business owners."

The First Business Economic Survey of Dane County, Milwaukee/Waukesha Counties, and Northeast Wisconsin was sponsored by First Business Bank and conducted by the A.C. Nielsen Center for Marketing Research at the University of Wisconsin-Madison School of Business. The University of Wisconsin-Oshkosh and Insight Publications additionally sponsored the Northeast survey. Carroll University additionally sponsored the Milwaukee/Waukesha survey. Results for each region were released late last year. This new report looks at the state as a whole to compare economic realities across regions.

"The results show that the three geographic areas surveyed are all quite comparable," says Mickey Noone, President - Northeast Region of First Business Bank. "The Northeast did see lower declines than the other survey regions in sectors such as profitability and sales revenue which may be attributed to a higher number of business-to-business firms located in the Northeast."

For the first time in the seven year history of the survey, all three regions saw declines in all seven economic indicators including: sales revenue; profitability; total operating costs as a percentage of revenue; capital expenditures; number of employees; overall wage changes; changes in pricing; and operating capacity. This is also the first time in the survey’s history a majority, 52 percent, of firms did not meet expectations. Sales were down overall and respondents that had steep sales declines, greater than a 10 percent decline, were over double that of the previous year.

Milwaukee and Waukesha Counties suffered the most in 2009 according to the survey. In addition to decreases in sales and profitability, these businesses reported the largest decrease in number of employees and changes to wages.

"The results for Milwaukee/Waukesha Counties may be attributed to a higher concentration of small businesses in the region," says Dave Vetta, President and CEO of First Business Bank - Milwaukee. "These businesses are already lean and may have a harder time downsizing their business models to meet economic challenges."

Additional survey findings by economic category include:

Sales revenue:
Firms headquartered in the Milwaukee/Waukesha region had the largest percentage of firms reporting decreased actual revenue among the three regions.

Forecasts for 2010 are most optimistic in the Northeast WI region, with 72 percent of firms expecting an increase in revenue next year.

37.2 percent of the Milwaukee/Waukesha region reported decreased profitability of 10 percent or greater, compared to just 21.8 percent in Northeast WI with Dane County between the two.

Milwaukee/Waukesha is forecasting a decreased profitability (31.8 percent) at a greater rate than Dane (23.4 percent) or Northeast WI (13.35 percent).

Operating costs as a percentage of revenue:
37.7 percent of the Northeast WI region reported 2009 increases in operating costs, compared to higher levels in Dane (49.5 percent) and Milwaukee/Waukesha (48.9 percent).

Capital expenditures:
All three regions had 35 percent - 40 percent of business reporting unchanged 2009 capital expenditures. Where there was a change, the highest report in percentage was greater than a 10 percent decrease (greater than 20 percent in all three regions).

All three regions had nearly 50 percent of businesses forecasting 2010 capital expenditures to stay constant.

Number of employees:
In 2009, most firms did not change their number of employees, however when there was a change, the greatest change was a greater than 10 percent decrease (more than 15 percent in all three regions).

Milwaukee/Waukesha had the highest proportion of firms indicating a decrease in the number of employees.

Overall wage changes:
In all markets, most firms made no change in wages. If they did make a change, it was an extreme increase or an extreme decrease, historically an unusual step.

Only 6.3 percent of firms from Northeast Wisconsin project cutting wages in 2010.

Dane County has the highest percentage of firms projecting increased pricing for 2010.

There are moderate price increases projected across the board for 2010, and very few firms project decreasing prices.

Operating capacity:
Capacity utilization levels are relatively similar across all three regions, however 29.7 percent of Dane County businesses are operating at 80 percent or higher of capacity utilization, compared to 23.0 percent for Northeast and 22.3 percent for Milwaukee/Waukesha.

2010 Expectations:
The majority of businesses in all three regions showed positive expectations for business performance in 2010.

Optimism varies by region. While only 14.8 percent of Northeast businesses expect to do worse, 25.5 percent and 35.2 percent expect to do worse in Dane County and Milwaukee/Waukesha Counties respectfully.

First Business Bank has been conducting the economic survey of Dane County for the past seven years. The survey was based on the responses of 425 Dane County businesses across the county. First Business Bank has been conducting the economic survey of Northeast Wisconsin for two years. The survey was based on the responses of 373 Northeast Wisconsin businesses across the Northeast region. This is the second year First Business has been conducted the economic survey of Milwaukee and Waukesha Counties. The survey was based on the responses of 566 Milwaukee and Waukesha County businesses across the two counties. The sample size has an error range of .05 and a confidence level of
95 percent.

Additional Information:
Full survey results are available at www.firstbusiness.com/survey

An 8 minute podcast highlighting the results is available at www.firstbusiness.com/podcast

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