IPA SBRB Study: Manufacturers Optimistic About Business Prospects; More Confident About Prospects than Other Small and Medium-Size Business Sectors

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Projected revenue growth, hiring expected to remain strong.

Small and medium-size manufacturers are more optimistic than other industry segments with many owners and managers projecting revenue growth and continued hiring over the next 12 months, according to the results of an International Profit Associates Small Business Research Board (IPA SBRB) survey released here today.

The IPA SBRB Manufacturing Confidence Index was established at 45 for the first IPA SBRB manufacturing industry poll completed earlier this month. By contrast, the aggregated IPA SBRB Small Business Confidence Index (SBCI) for all small and medium-size businesses participating in the survey was 39.3, which represented a drop from 47.3 for the previous poll concluded in May 2006. Similarly, the confidence of construction and contracting firms dropped to 30.7 from the 49.3 that was registered three months ago.

The IPA SBRB has been tracking the attitudes of small businesses since July 2004. Earlier this year, the IPA SBRB began issuing reports for specialized industries, the first of which measured the attitudes of construction and contracting companies. Manufacturing represents the second focused industry study that will be conducted quarterly. A third focused industry study will be added when the next round of research is conducted during the beginning of the fourth quarter of 2006.

Nearly half of the manufacturers that responded to the poll indicated that they are forecasting improvement in the economy over the next 12 months and that a full 50% of them expect revenues to increase during this period. Nearly 40% said they expect revenues to remain about the same. This compares to the universe of all small businesses of which only 42 % believe the economy will improve during the next year and 46% of whom are expecting revenue growth. Among construction and contracting companies, 26% said they had confidence that the economy will improve. Of the construction and contracting firms responding to the survey, 40% are estimating that revenues will exceed current levels over the next 12 months.

Hiring among manufacturers is projected to remain healthy. During the next 12 months only 5% said they intend to decrease the workforce, 45% said it will remain the same and 38% believe they will add employees.

“There is a significant variance in the confidence levels of manufacturers versus those of the general small business community and those of construction companies and contractors. By the end of the year, we will be able to determine whether the perceived strength in the manufacturing is based upon existing orders or new contracts,” said Gregg Steinberg, President of International Profit Associates, the largest privately-held provider of management consulting and professional services to small and medium-size businesses in North America.

“Hopefully, manufacturing will not suffer the same slowdown occurring in the construction sector and that the optimism will turn into reality,” Steinberg added.

Nevertheless, finding quality employees, cost of materials, the general economy, and taxes -- listed as the top four issues of concern among manufacturers -- may present serious obstacles to meeting the growth projections.

Finding quality employees was listed by 17% of the manufacturing respondents as their most significant issue. Other major issues were cost of materials (16%), taxes, (13%) and economic conditions (12%).

“The fact that 12% of the manufacturers are concerned about the economy illustrates that there is a pocket of concern about the next 12 months and that some owners and managers are following the indicators should it be necessary to make adjustments necessary to manage profitability,” said Steinberg.

Surprisingly, only 2% of the manufacturers said energy and fuel were there greatest concern, while 15% of the universal group of all small businesses said it was their leading issue.

As far as other areas of interest, manufacturing firms had varied opinions about being prepared to handle emergencies, whether the minimum wage should be raised and the fate of the estate tax -- all of which were similar to the universe of all small to medium-size businesses.

Of the manufacturing firms, 34% said they have a disaster or emergency plan ready.

Manufacturing firms are split about the minimum wage, with 45% in favor of it being raised, 23% opposing an increase and 31% not certain.

The view on estate taxes are mixed as well with 21% opting for them remaining as they are, 25% abolishing them, 21% looking for a “change” and 21% unsure.

The International Profit Associates Small Business Research Board ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations.

The IPA SBRB research includes studies of specific industry segments, such as Construction & Contracting and Manufacturing. The IPA Small Business Research Board will continue to expand upon the base of industries it tracks.

Participants in IPA SBRB polls provide feedback on significant issues and allow for real-time insight into the state of small businesses nationwide. The universe of participants is developed from among small businesses across the United States. IPA SBRB studies are voluntary surveys conducted via phone and email. Polls are structured and supervised through an independent resource.

The latest information about the IPA Small Business Research Board can be found at http://www.ipasbrb.com.

International Profit Associates, Inc. (IPA) is the largest privately held provider of management consulting services to small and medium-sized businesses in North America. IPA and its more than 1,800 professionals offer a wide range of proven and innovative methodologies to help businesses grow and prosper regardless of the economic cycle. IPA either provides directly or through its affiliated companies a comprehensive array of business advisory services, tax and estate planning services or merger, acquisition and other financial advisory services in the United States and Canada. More information about IPA can be found at http://www.ipa-iba.com.

IPA SBRB Manufacturing Industry

Summer 2006 Survey (results in percentages)

General economy                    

Better                        48

Worse                        17

No Change                    35

Revenue expectations

Expect increase of 10% or more        38

Expect increase of less than 10%        12

Expect revenue will be about the same    39

Expect decrease of less than 10%         8

Expect decrease of 10% or more         2

Hiring

Increase hiring                    37

Decrease work force                 5

Remain the same                45

Unsure                         13

Single issue

Interest rates                     6

Healthcare costs                 8

Taxes                        13

Cost of materials                16

Economic conditions                 12

Foreign competition                 7

Government regulation             6

Finding quality employees            17

Ability to obtain capital             5

Energy/Fuel Costs                 2

Other                         9

Developed and/or instituted an emergency disaster plan since hurricanes

Yes                         21

No                        68

Already had one in place last year        13

Raise minimum wage

Yes                        45

No                        23

Don’t know/no opinion            31

Estate tax

Abolish                    25

Change                    33

Remain same                    21

Don’t know/no opinion            21

Copyright 2006 International Profit Associates Small Business Research Board (IPA SBRB). The International Profit Associates Small Business Research Board ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations. The information may be reprinted or quoted from with attribution.

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Raymond Minkus
MINKUS & PEARLMAN PUBLIC RELATIONS
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