Small Business, Smaller Pain

Overseas competitors have been hurting major U.S. maufacturers. At mom-and-pop outfits, however, a new survey says things are looking up

What with all the talk about America's fast-declining manufacturing sector, it would be easy to assume that the nation's smaller manufacturers are feeling a bit desperate these days. But they aren't. A new survey by the Washington D.C.-based National Small Business Association (NSBA) suggests that smaller outfits just aren't suffering as much as their larger counterparts. Of the 474 respondents, only 15% listed "unfair overseas competition" as their biggest problem. Instead, health-care costs (27%) and the state of the economy (26%) were the primary concerns. Says NSBA spokesman Jeremy Claeys: "To see overseas competition get trumped by those two things was a surprise."

Despite general economic concerns, a huge majority -- 88% of respondents -- expect revenues to increase in 2004. More than half predict increases of up to 10%, but some see their revenues soaring over 20% next year (15% of respondents). Employment expectations are also heartening, with 48% looking to hire in 2004 and only 8% bracing for declining staff numbers.

The NSBA is especially encouraged that so many respondents are planning capital expenditures in 2004. "The [response] 'we're expecting to buy things' is really great," enthuses Claeys. With 72% ready to spend next year, Claeys has every reason to be excited. Most of these expenditures will be small -- no more than $100,000 -- but some hardy souls plan to lay out as much as $400,000 (10% of all respondents) or more (3%).


  Also significant, says Claeys, is that 42% are taking advantage of the increased expensing. "This is part of the Bush tax plan," Claeys points out. "So, it shows that some of the economic recovery [efforts are] working."

Nearly all the outfits surveyed have 50 employees or less, and most have between 6 and 19. More than half sell goods only in the U.S., but the rest either sell both at home and abroad (39%) or exclusively overseas (2%). Moving operations overseas is an issue for about 10%, but only 2% have made the leap in the past year, and the majority is content to stay in the U.S.

In a final surprise, the NSBA survey included a question about environmentally friendly technologies, and was intrigued to learn that 58% of responding small manufacturers are already using them. All told, it looks like small manufacturers are not only embracing these technologies voluntarily; they are making money in the process -- and all that in the face of an undervalued yuan. Maybe the big guys ought to take a look at what the small fry are up to.

By Lisa Miller in New York

Before it's here, it's on the Bloomberg Terminal. LEARN MORE