First Business survey: Madison business optimism still high
Considering the whacking they took in 2020, Dane County businesses have a somewhat surprising level of optimism heading into 2021, according to the findings of an annual economic survey conducted by First Business Financial Services Inc.
Officially, the Wisconsin-based bank holding company’s survey is titled First Business Bank: 2021 Business Statistics and Trends Report. While it should be noted that not many survey respondents were in industries that took the brunt of the pandemic, and most of them failed to meet 2020 expectations due to the COVID-19 pandemic, the key trend identified in the survey is that most of them expect a stronger business performance in the new year.
When asked how their overall business performance was in 2020 compared to expectations, 47% said worse than expected, 33% said better than expected, and 21% said as expected. However, when asked if they think their business will perform better or worse in 2021 compared to 2020, 60% said better, 12% said worse, and 28% said no change. What’s more, one-third of respondents outperformed expectations this past year, citing “opportunities created by the pandemic” as the reason for better performance.
The 2021 report was conducted by Dr. Moses Altsech, who teaches in the marketing department at the UW–Madison Wisconsin School of Business and is the president of Moses Altsech Consulting LLC. Given the way 2020 unfolded, Altsech is surprised by the level of optimism expressed in the survey, but he offered one caveat to the findings — the industries that have been most negatively impacted by the pandemic represent a small percentage of the Dane County respondents.
Among the primary business types responding to the survey in Dane County, 30% were in professional services, 10% were in manufacturing, 8% were in health care, 5% were in commercial real estate, 4% were in technology or biotech, and 37% were in a variety of other categories. Tellingly, only 3% of local survey respondents were in retail, one of the sectors that has been most negatively affected by the pandemic.
“Retail is really underrepresented and so is the [personal] service industry,” Altsech notes. “A lot of these respondents are in things like construction and professional services and manufacturing, transportation, health care, and real estate. So, it’s other stuff that was perhaps not hit as hard, and if you have more respondents from hotels and restaurants and travel, boy, they are probably still in therapy from this. Their recovery is not around the corner either.”
The other factor was the timing of the survey, which was conducted in the fall as positive COVID-19 tests and related hospitalizations and deaths began to spike upward again. It also was conducted before recent and more positive news about a COVID-19 vaccine and before the Nov. 3 election. With all the uncertainty of that period, it’s all the more impressive that so many local businesses were positive about their prospects in 2021.
“By then, people had ‘MacGyvered’ it in a way, and they figured out how to adapt,” Altsech says. “There were a million things that we never thought would be the norm and, suddenly, our operations were different and unusual, but business went on. That may have given people the sense that we can manage this. We can hold on long enough for this to pass.”
The main source of more recent optimism is the 95% efficacy rates of COVID-19 vaccines developed by Pfizer and BioNTech and Moderna. While there have been some hiccups with the Pfizer vaccine in the United Kingdom because health care workers with a history of allergic reactions do not tolerate it well, the news about vaccines generally has been encouraging. On Dec. 10, a federal government advisory panel endorsed widespread use of Pfizer’s vaccine, and the next day staff scientists at the Food and Drug Administration approved it for mass distribution. Health care workers and residents and staff of long-term care facilities will be among the first to receive the vaccines.
If the First Business survey had been taken post-election, Jim Hartlieb, president of First Business Bank, believes even more optimism would have been evident in the responses. Altsech adds that local business owners have a sense that we’re closer to the end of the pandemic than we are to the beginning, “and that gives people optimism and hope.”
Their optimism was reflected in several survey categories, starting with sales. Compared to their sales from 2019, 56% of Dane County survey respondents reported a decrease in 2020, yet 62% expect their sales to increase in 2021.
The same optimistic pattern exists for profitability, where 49% reported a decrease in 2020 but 48% expect an increase in 2021.
Wages are another reflection of their optimistic outlook, as only 42% reported an increase in wages compared with 2019, but 53% anticipate an increase in wages in 2021.
Meanwhile, workforce size is likely to remain status quo, with a majority [51%] forecasting no change to their employee count in 2021.
In terms of strategies adopted in 2020, 40% listed diversifying their client base, 37% cited creating a process for innovation, and 36% listed cross training employees. Those also are the top three planned strategies for 2021, but client base diversification was cited by 62% when it comes to their plans for 2021. Meanwhile, to the surprise of nobody, the transition to a remote workforce was the listed most often (73%) as the business issue that most affected survey respondents organizationally in 2020.
“If you are looking at what people plan to do — what they did and what they are planning to do in 2021 — it’s the same strategies,” Altsech notes. “They are looking at diversifying client base and cross training employees, which makes sense. Joe in accounting is sick, and it would be great if I could step in for him while he’s in quarantine for two weeks, which is interesting. Cross training has always been thought of as an efficiency booster but never this really essential thing that is creating redundancies in the company. So, that’s an interesting development on this.”
The survey is given in four different markets served by First Business Financial Services, including Dane County, southeastern Wisconsin, northeastern Wisconsin, and the Kansas City metro market. In Dane County, there were 135 survey responses. Of those, 27% had 1–10 employees, 41% had 11–74 employees, and 32% had 75 or more employees.
Here are more detailed survey results:
Sales, compared to 2019
- 56% report a decrease;
- 31% report an increase; and
- 13% report no change.
Anticipated sales in 2021
- 62% expect an increase;
- 22% anticipate no change; and
- 16% forecast a decrease.
Profitability, compared to 2019
- 49% report a decrease;
- 31% report an increase; and
- 20% reported no change.
Anticipated profitability in 2021
- 48% expect an increase;
- 36% anticipate no change; and
- 16% forecast a decrease.
Number of employees, compared to 2019
- 47% report no change;
- 28% report an increase; and
- 25% report a decrease.
Anticipated employees in 2021
- 51% expect no change;
- 38% anticipate an increase; and
- 11% forecast a decrease.
Wages, compared to 2019
- 42% report an increase;
- 36% report no change; and
- 21% report a decrease.
Anticipated wages in 2021
- 53% expect an increase;
- 38% anticipate no change; and
- 8% forecast a decrease.
In early December, renewed hope for additional economic stimulus emerged in Washington, D.C., only to fade in recent days over disagreements about the size of the next stimulus bill and additional aid to the states. Some economists believe another round of stimulus is needed as a bridge to get the economy past the first four months of 2021, when COVID-19 vaccines will become more widely available to the general public.
Altsech says the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which included hundreds of billions of dollars for small business loans, went a long way in shoring up businesses that might have collapsed without it. While it would have been preferable for another round of stimulus to be enacted before the election, it’s better late than never.
“The dispute was never over whether we should have another one,” Altsech notes. “The dispute was about how much it should be and where should it go? If they iron that stuff out, think about how much more buoyant and optimistic everybody will become … and that will really give a lot of confidence to everybody, to ordinary people, to businesspeople, and to the stock market, so let’s keep our fingers crossed.”
Other comments about the survey results
Tara Conger, president of QTI Group: “I was relieved by the results. It does showcase a brighter future than what I thought might be given considering it was such a turbulent year for everyone. COVID has really hit each business industry and sector differently. I feel for retail, arts and entertainment, hospitality, and travel industries because they’ve seen a huge impact. Overall, I was pleasantly surprised with the brighter outlook, given that most people took this survey in September and October when there was still a lot of uncertainty in the economy.”
Mike Victorson, CEO of M3 Insurance: “Comparing the survey results to other years, business results are spottier in terms of performance. We spend a lot of time across the state in manufacturing, health care, and construction, and some clients, very quietly, are posting record years. When I looked at the results, I definitely saw what we’re experiencing as a business.”
Jim Hartlieb, president of First Business Bank: “In conversations with clients over the past six months, it depends on how closely they’re impacted by face-to-face, consumer-type businesses, which were most heavily hurt by the pandemic. The other thing that came through is the optimism of CEOs and leaders in our community. Comparing it to last year, almost 80% were expecting higher revenues and profits; now this year it’s a little more muted, but again that’s pre-election, pre-vaccine. Despite all that uncertainty, the optimism really came through for me, which is great to see.”
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