First Business Bank: Business report operating cost changes in 2013, first business economic survey of Milwaukee-Waukesha counties

Contact: Kathy Epping, 608-333-4406

For interviews with First Business executives, contact Jodie Johnson at 262-792-1400.

Sales Revenue Shows Trend Reversal

(BROOKFIELD, WI) – December 13, 2013, – Operating costs as a percentage of revenue changed significantly in 2013 according to a report released today by First Business Bank.

The First Business Economic Survey of Milwaukee and Waukesha Counties, sponsored by First Business Bank and conducted by the A.C. Nielsen Center for Marketing Research at the University of Wisconsin-Madison School of Business, indicates The percentage of firms reporting an increase in operating costs as a percentage of revenue declined significantly in 2013.

Fifty-three percent of firms reported an increase in operating costs this year, compared to nearly 62 in 2012. Additionally, almost 24 percent of businesses reported no change in operating costs as a percentage of revenue in 2013, compared to 16 percent in 2012.

“This is a key economic indicator of positive magnitude,” says Dave Vetta, President of First Business Bank-Milwaukee. “We are seeing some of our costs of doing business leveling off which will help our competitive bottom line.”

Vetta points out that Milwaukee and Waukesha Counties saw an interesting trend reversal in sales revenue.

The sales revenue course for Milwaukee and Waukesha Counties changed in 2013. Companies reporting an increase in sales revenue reversed an upward trend reported since 2009. Companies indicating an increase in sales revenue fell by 6.7 percent. At the same time, companies that reported decreased sales revenue rose this year from nearly 39 percent in 2012 to nearly 43 percent this year.

“This may signal a leveling off within business sectors,” says Vetta.

Companies in Milwaukee and Waukesha Counties reported virtually no change in profitability in 2013. Nearly 60 percent of businesses reported the same number of employees in 2013, similar to the last two years. Milwaukee and Waukesha County firms also showed slight increased wages and the percentage of firms reporting no change or a decrease in wages fell by 2.5 percent. Pricing in 2013 also remained fairly steady with virtually no change from 2012.

Additionally, more businesses are operating at or above 90 percent capacity, a trend that continues from last year.

Businesses in Milwaukee and Waukesha Counties continue to be optimistic. A record percentage of firms, 73 percent, expect to perform better in 2014, the highest percentage since the inception of the survey.

“The challenges for Milwaukee and Waukesha County Businesses continue,” says Vetta. “But their optimism shines through as they continue to develop tactics and procedures that will propel them forward into the coming year.”

First Business Bank has been conducting the economic survey of Milwaukee and Waukesha Counties for the past six years. The survey was based on the responses of 349 businesses across the two counties. The sample size has an error range of 5 percent and a confidence level of 95 percent. Full survey results are available under “Newsroom” at www.firstbusiness.com

ABOUT FIRST BUSINESS BANK – MILWAUKEE

First Business Bank – Milwaukee was established in 2000 to provide a full range of commercial banking services to Milwaukee-area businesses and business people. It is chartered as a unit bank with a CEO, not a branch president, and a board of directors rather than an advisory board. This structure allows it to understand Milwaukee-area businesses and respond quickly and proactively to their needs. For additional information, visit www.firstbusiness.com or call 262-792-1400.

2013 FIRST BUSINESS ECONOMIC SURVEY OF MILWAUKEE-WAUKESHA COUNTIES

Executive Summary:

(BROOKFIELD, WI) – December 19, 2013 – Key findings of the 2013 First Business Economic Survey of Milwaukee and Waukesha Counties, which was conducted by the University of Wisconsin’s A.C. Nielsen Center for Marketing Research in September and October of 2013, indicate changes in operating costs as a percentage of revenue. Milwaukee and Waukesha businesses are more optimistic about performance in 2014 than in any year since the surveys inception.

Key Findings for 2013:

· A statistically significant number of firms in Milwaukee and Waukesha counties report a fall in Operating Costs as a Percent of Revenue.

Ø The percent of companies reporting an increase in Operating Cost as a Percent of Revenue fell 8.4%, a statistically significant amount, from 61.9% in 2012 to 53.5% in 2013.

Ø The percent of companies with no change in Operating Cost as a Percent of Revenue increased 7.5%, a statistically significant percentage, from 16.2% in 2012 to 23.84% this year.

Ø Companies also expect a statistically significant fall in Operating Costs as a Percent of Revenue in 2014.

· Companies in Milwaukee and Waukesha Counties are more optimistic about performance in 2014 than in any year in the history of this survey.

Ø A statistically significant, record high, of 73% of companies expect to perform better in the coming year, compared to 65% of businesses in 2013.

Ø Companies that expect worse performance has decreased to 27% from the 2013 percentage of 35%, this change is also statistically significant.

· The percent of companies projecting a decrease in Profitability for 2014 fell a statistically significant percent, from 26.7% last year to 19.1% this year.

· The highest percent of companies cited domestic sales shortfall as a reason for low performance (75.7%). Behind domestic sales businesses rank high operating costs and a slowdown in the housing market (Both 62.5%) as reasons for low performance in 2013.

· While not statistically significant the trajectory seen in increasing and decreasing Sales Revenue reversed five year trends.

Ø Companies reporting an increase in Sales Revenue reversed an upward trend seen since 2009. The percent of companies reporting an increase in Sales Revenue fell by 6.7%, from 52.2% in 2012 to 45.5%.

Ø The percent of companies reporting decreased Sales Revenue this year rose by 4.16% from 38.7% in 2012 to 42.9% this year. This change marks a reverse in the downward trend seen since 2009.

· Similar to the last two years- almost 60% of companies in Milwaukee and Waukesha counties report the same Number of Employees in 2013.

Ø The percent of businesses reporting a decrease in Number of Employees rose slightly by less than 2%, from 22.0% in 2012 to 22.4% this year.

Ø The percent of businesses reporting an increase in the Number of Employees fell slightly, from 19.0% in 2012 to 18.3% this year.

· While not statistically significant, Wages increased in Milwaukee and Waukesha counties in 2013, the percent of companies reporting an increase rose, while the percent reporting no change or a decrease fell.

Ø The percent of firms reporting an increase in Wages grew from 45.1% last year to 50.2% this year.

Ø The percent of firms reporting no change in Wages or a decrease in Wages both fell by approximately 2.5%.

· Although not statistically significant, companies moved from increases and decreases in Pricing in 2012 to no change in 2013.

Ø The number of companies reporting an increase in Pricing fell from 49.6% in 2012 to 45.7% this year.

Ø The number of companies reporting a decrease in Pricing fell as well by slightly more than 1%.

· Companies report virtually no change in Profitability in 2013, decrease; increase and no change in Profitability all vary by less than one percentage point when compared with 2012.

· While not statistically significant, more businesses are operating at or above 90% capacity and slightly fewer businesses are operating under 70% capacity- this continues the prior year trend.

This was the sixth year for the study. The survey was sent to 8,039 businesses in Milwaukee and Waukesha Counties that were reported to have five or more employees and was addressed to the CEO, CFO, President, and/or business owner. The survey asked respondents to evaluate the current, and predict the future performance of their businesses on eight key economic indicators in each of the following areas: Sales Revenue, Profitability, Total Operating Costs as a Percentage of Revenue, Capital Expenditures, Number of Employees, Overall Wage Change, Change in Pricing, and Operating Capacity.