Small Manufacturers More Optimistic About 2017 Than Large Ones

National Manufacturing Outlook survery shows 44 percent of small manufacturers expect revenue growth of ten percent or more.

(Image courtesy of LEA Global.)

The majority of manufacturers in the U.S. are anticipating revenue growth in 2017 according to a recent survey by Leading Edge Alliance (LEA) Global, a global network of accounting and business consulting firms.

LEA surveyed over 250 manufacturers in 20 states across the U.S. involved in the industrial/machining, transportation/automotive, construction, food and beverage and other sectors to produce their report.

An interesting difference between the expectations of small and large manufacturers is that while 44 percent of small manufacturers surveyed expect their revenue to grow by 10 percent or more, only 19 percent of respondents from large manufacturers have the same expectation.

The majority of manufacturers contacted for the study expect revenues to grow, but smaller firms are much more optimistic about the size of that growth. (Image courtesy of LEA Global.)

Instead, over half of large manufacturers are expecting a more modest revenue growth of three to nine percent. An additional 30 percent of smaller manufacturers expect to see at least three to nine percent growth. The manufacturers surveyed anticipate that the majority of this growth will come from local rather than national or global economies.

There are also challenges embedded within this optimism. The top priority for many respondents is cutting operation costs, but labor costs were also identified as cause for concern. 67 percent of respondents expect labor costs to increase to some degree and an additional 7 percent expect labor costs to increase significantly in 2017.  As a result of these challenges, many respondents reported considering sales and mergers or strategic acquisitions in 2017.

Cutting operational costs was seen as one of the most important priorities for many firms. (Image courtesy of LEA Global.)

An additional piece of good news, however, is that respondents in high-growth industries were more focused on research and development, with 12 percent of high-growth respondents planning to invest more than 10 percent of their annual revenue in R&D.

Interestingly, while most firms anticipated hiring additional staff, labour related concerns were identified as three of the top four barriers to growth. Specifically, the respondents identified a lack of qualified workers, healthcare costs and pressure for increased wages as three potential barriers to growth. 

The majority of firms expected increases in the cost of labour and materials. (Image courtesy of LEA Global.)

There are additional internal and external  factors that manufacturers can expect to deal with in 2017, according to LEA Global President Karen Kehl-Rose, who points to significant headwinds including high inventory-to-sales ratios, the cost of technology and labor shortages. There are also external issues, such as the price of raw materials and strength of the U.S. dollar.

For the complete survey, visit the LEA Global website.