Small Biz Barometer Tips Down

By Staff -- Home Textiles Today, 7/16/2007 12:00:00 AM

Northfield, Ill. —

Made increasingly wary by a soft economy, high taxes and the rising price of raw materials, small manufacturing businesses say they're scaling back growth plans, and fewer than 30% plan to expand their business over the next 12 to 24 months.

In a quarterly canvass of small manufacturers, the Small Business Research Board (SBRB) said only 29% of the more than 130 business owners polled said they intend to expand over the next two years. Putting a damper on growth plans, they said, were three major areas of concern: general economic conditions, taxes and the cost of raw materials.

In prior surveys, rising healthcare costs had been the single greatest concern of small manufacturers. But that took a back seat this time and fell to sixth place, giving way to worries about the overall state of the nation's economy, said the business trade group. "Concern about energy and fuel costs, as well as finding quality employees, ranked ahead of health care expenses as more problematic issues among manufacturing companies," said the SBRB.

Of the 29% of business owners who said they plan to expand, 28% said they intend to grow their current locations, while 21% said they will add more products, and 20% said they will focus on increasing customer service. Only 7% said they plan to add more locations.

Adding more automation and trading up to new technology were cited as primary drivers for increasing productivity over the next 12 to 24 months.

Weighing the state of the U.S. economy, small manufacturers remain anxious. Only 36% expect conditions to improve over the next 12 months, while 28% expect them to worsen. Another 36% expects no change.

When it comes to boosting sales, just 30% expect a gain of 10% or more, while 22% forecast a gain of less than 10%. About a third, 34%, think sales "will be about the same." About one in 15 anticipate sales will drop more than 10%, while the same number expects a decrease of less than 10%. Hiring plans remain muted, with only 34% planning to hire new workers over the next 12 months. Taking the opposite tack, 14% plan to whittle down their workforce. The vast majority said employment levels will be unchanged, while 9% are unsure.