Respondents to CabinetMaker's annual Small Shop Survey clearly feel the effects of the economic slowdown, but most remain optimistic, changing tactics to meet the challenge.
Check out these charts:
- How do you promote your business?
- Which of the following are you planning for 2009?
- What actions have you taken as a result of the economic slowdown?
- What is your 2009 sales forecast compared to 2008?
- What percentage of your 2008 gross annual sales was profit?
Taken online and through conventional mail during January and February, the survey was designed to provide a representative sample of CabinetMaker's readership.
Although many segments of the construction and manufacturing industries reported declines for 2008 as the recession began to take hold, that isn't as much the case for small shops. The biggest percentage (26.5 percent) reported 2008 sales were about the same as 2007. Some 24 percent reported 2008 sales slightly up and another 10.5 percent said sales were way up.
On the down side, 23 percent reported a slight sales decline and 15.5 percent said 2008 was way off 2007.
Predictions for 2009 mirror responses for 2008. The biggest portion of shops (30 percent) expect 2009 to be the same as 2008. Some 26 percent predict business will be slightly down, but nearly as many (23 percent) predict a slight increase.
So, what are shops doing about the slowdown? Nearly 41 percent are using down time to reorganize and improve. Some 38 percent are postponing purchases. Still, some shops are not pulling back, choosing to market aggressively to bring in more business. More than 28 percent said they were increasing their sales and marketing efforts because of the economy. Nearly 15 percent are redirecting to new or different markets.
Less than a quarter of shops say they are cutting people. Only 23 percent said they were reducing staff in response to economic pressures. And finally, about one of every six shops (18.8 percent) are taking no action at all related to the recession.
However, some of those numbers were contradicted in another part of the survey where shops were asked in general about plans for 2009. To that question, 58 percent said they would increase marketing efforts. About half (49 percent) said they planned to buy new equipment, overpowering the 38 percent who said they would cut back in that area. Similarly, while 23 percent had said they were cutting staff, nearly 16 percent say they actually plan to hire more people in 2009.
Is competition tougher?
While anecdotally, many shops share stories of increased competition and cutthroat bidding, numbers in the survey don't necessarily reflect that. When asked to report how many jobs they expect to win out of every 10 bids, the biggest percentage (26 percent) say six or seven. That is statistically unchanged from last year.
However, there is some significant movement toward more shops reporting lower bid-to-contract ratios. Last year, only about 15 percent of shops reported winning five or fewer of every 10 bids. This year that number jumped to 48 percent (24 percent at four to five, 20 percent at two to three, and 4 percent at only one).
Profit numbers down
Shops reported lower profits in 2008. Nearly two-thirds reported making less than 16 percent profit in 2008, which was the same percentage reported in 2007. But at the bottom of the scale, 17 percent said they were not profitable in 2008, compared to only 10 percent in 2007.
Fewer shops are reporting higher profit margins. A little over 11 percent reported profits in the 16-20-percent range. About 8 percent reported making 21-25 percent. Another 8 percent listed profits of 26-30 percent, and a little more than 8 percent actually posted profits in excess of 30 percent.
Related to profit is the breakdown of a typical job into labor, materials, overhead and profit. As was the case last year, there is a disconnect in the profit margins reported per job and the annual profit reported for the company. Typically, shops said they made 15 percent profit on a job in 2008, which doesn't exactly agree with the annual numbers reported. Also the 15-percent number is down two points from 2007.
Shops report labor is 36 percent of a job, making it the biggest expense for 2008, and that is unchanged from 2007. Materials costs were 31 percent for 2008, same as 2007. The drop in profits reported for 2008 reflect in an increase in overhead costs, up to 18 percent or two points from 2007.
Have something to say? Share your thoughts with us in the comments below.