74% of Dane County execs predict better business performance.
83% forecast more hiring or steady workforce levels.
While characterizing 2009 as a year of extremes in which the economic downturn played no favorites, Dane County executives expressed more optimism about their business prospects for 2010, including stabilization in the all-important area of hiring, according to the findings of the 2009 First Business Economic Survey of Dane County.
The survey, now in its seventh year, asked respondents to assess their current business performance, and predict their 2010 performance based on eight key economic indicators: sales revenue, profitability, total operating costs as a percentage of revenue, capital expenditures, size of workforce, changes in overall wages, price changes, and operating capacity.
Survey results, unveiled Thursday in a forum at Monona Terrace, revealed that approximately 74% of CEOs, presidents, and owners expect to fare better in 2010, compared to only 60% in the 2009 survey. Coming off a year in which most (52%) business organizations, for the first time in the survey’s history, did not meet expectations, a majority of businesses, 55.3% and 52.6%, respectively, expect both sales revenue and profitability to increase in 2010.
More importantly for people out of work or trying to hold down a job, 83% of Dane County businesses told First Business Bank they would either increase the number of employees or have no change in workforce levels in 2010. Specifically, 27.3% expect an increase in employees; 56.58% expect no change; and only 16.13% anticipate a decrease.
Business Mindset
The survey was conducted in September and October by the University of Wisconsin’s A.C. Nielsen Center for Marketing Research; it was sent to the top executive at 4,568 businesses in Dane County with five or more employees.
Helping to prepare the study for the A.C. Nielsen Center were Quincy Long, a project assistant and a graduate student in the MBA program, and Paul Hahn, a second-year lead on the survey project.
Given the restructuring and repositioning that companies have gone through in 2009, Long said many business owners believe they now are better able to handle whatever comes next. “A lot of business owners feel the economy has hit its low point, and there is nowhere to go but up from this point on,” Long said. “I think that’s the reason for optimism in next year’s projections.”
Respondents also were asked about changes in expenses and abut the potential impact of proposed health care legislation. Most, 52.23%, expect an increase in overall wages; 10.64% forecast a wage decrease; and 37.13% expect no change in wages.
The health care debate in Washington hardly inspires confidence among Dane County business operators. When asked about how the proposed health care legislation would affect their business, only 21% of firms responded positively.
It should be noted that the survey was conducted prior to the passage of a health care bill in the U.S. House of Representatives.
Other key findings related to 2010:
- While a majority (55.33%) expects an increase in sales revenue, 26.55% believe their sales will dip and 18.11% forecast no change.
- Most (52.64%) expect profitability to increase in 2010, 23.43% expect a decrease and 23.93% anticipate no change.
- 46.27% expect an increase in operating cost as a percentage of revenue; 25.87% expect a decrease; 27.86% anticipate no change.
- 29.03% forecast an increase in capital expenditures; 21.59% expect a decrease; 49.38% anticipate no change.
- 49.25% predict an increase in pricing; 10.45% expect a decrease; 40.3% expect no change.
2009 Recap
Their largely optimistic view of 2010 is in start contrast to their experience in 2009, when all major categories were down compared to 2008. For example, sales were not only down overall, but the percentage of respondents with steep sales declines (greater than 10%) increased by a factor of two over the previous year.
Despite the layoffs that were reported throughout the year — nearly 40% of firms reported a decline in employee numbers, the highest percentage since the survey began seven years ago — profitability also took at hit. For the first time in the history of the survey, over half of respondents reported decreased profits; what’s more, the percentage of respondents reporting steep profit declines (over 10%) was double that of 2008.
Also in terms of employment, the service and technology sectors fared the best, as neither industry experienced statistically significant changes.
Also among industry sectors, manufacturing was hit the hardest in terms of sales, as more than 86% of firms reported decreased sales in 2009.
Wages are another category that experienced what First Business Bank called “a historic extreme.” More than 60% of businesses reported either no increase or a decrease in wages; the previous high in this metric was 35.5%.
Another survey “first” involved the drop in prices. For the first time since its inclusion in the survey, a majority of businesses (more than 66%) said they either didn’t change or lowered their prices, and the 33% of businesses that raised their prices was less than half that of 2007. In terms of future projections, a majority of businesses indicated they would either lower or leave prices unchanged.
Most Dane County businesses are operating at well below capacity in 2009, according to the survey. The respondents said 29.7% were over 90% capacity, but 34.8% were operating at between 70% and 90% of capacity, and 33.6% were below 70% of capacity.
After surviving a year like 2009, Hahn said it’s natural for projections to be more optimistic, but that’s a result of growing business confidence. “If you’re trying to glean kind of a narrative from the results, I would say that a lot of businesses were in a downward trend since last year, and they were cutting back on expenses and employees,” he noted. “My read was that everyone was positioned to come out of this recession next year.
“The biggest impression I had was that they see light at the end of the tunnel.”
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