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Small Business Digest


More Small Manufacturers Considering Expansion, But Not Physical Plant

More owners and managers of manufacturing businesses plan to grow their operations during the course of the next 12 to 24 months, but they will be doing so more through investments in human resources and customer needs rather than in facilities and processes, according to the latest Small Business Research Board (SBRB) study.

Of the owners and managers responding to the nationwide quarterly SBRB poll co-sponsored by International Profit Associates, 34% said they plan to expand their businesses the next 12 to 24 months.

This is an increase of nine points from the 25% who said during the prior quarter that they were planning to expand their businesses.

A previous SBRB report capturing data from a sample of all small businesses, said that overall in the U.S., 32% of the businesses participating in the fourth quarter poll plan to expand during the next 12 to 24 months.

Among the manufacturing companies participating in the study, it is indicated that there will be significant concentration on human resources and customer satisfaction to help propel their expansion plans.

The addition of new products was cited by 26% of the respondents planning for growth as the most important contribution the next 12 to 24 months. Providing more services (22%) and enhancing customer service capabilities (20%) followed. The addition of new locations (14%) and expansion at current locations (13%) rounded out the top five.

During the prior quarter, by contrast, expansion at current locations and enhancing customer service capabilities finished a close first and second, respectively. Adding new locations and adding new products tied for third. Providing new services was fifth.

In terms of productivity, the fourth quarter participants said improved staff training would provide the greatest boost to their business. Adding more staff was second, followed by improvements to existing automation and technology and the implementation or enhancement of employee incentive programs. Adding "more" automation or technology is cited as being the fifth most important element that could improve productivity in the coming months.

These results represented a shift from the third quarter when the addition of more automation or technology was regarded as the leading means for improving operating efficiency the next 12 to 24 months. This was followed by improved staff training and the addition of more staff as a means for enhancing productivity. Improvements to existing automation was fourth and the implementation or enhancement of employee incentive programs was fifth in the rankings.

The increased interest in growth needs to be contrasted with the recently released SBRB Manufacturing Industry Small Business Confidence Index (M-SBCI) which fell to 32 during the fourth quarter of 2007, a decline of 6.33 points from 38.33 recorded the prior period.

All three major indicators used in calculating the index were lower.

Only 23% are expecting the economy to improve during the next 12 months, 13 points fewer than the 36% who believed the economy would improve as reported in the third quarter of 2007.

Similarly, 37% of the same group said they expect revenues to increase during the coming 12 months versus 45% who predicted revenue increases during the third quarter.

Hiring plans also were less optimistic with 26% of the respondents saying they would increase hiring against the 32% who said they would increase hiring during the prior period.

The current M-SBCI is 1.67 points lower than that reported for all U.S. small businesses during the fourth quarter of last year. The overall U.S. SBCI of 33.67 was nearly 10 points (21.7 %) lower than the index of 43 reported during the third quarter of 2007.

More than 950 owners and managers participated in the national study.


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