Expansion? Not for construction and contracting businesses

The reality of the staggering economy and decreasing confidence about near term business prospects are compelling fewer owners and managers of small construction and contracting businesses to consider expanding their operations, according to the results of the latest Small Business Research Board (SBRB) poll.

The SBRB report said that 30 percent of the small construction and contracting businesses during the fourth quarter were planning to expand their businesses the next 12 to 24 months. This was six points fewer than the 36 percent who felt the same during the third quarter 2007 reporting period.

Furthermore, respondents to the survey, co-sponsored by IPA, said they are re-orienting their operating agendas to focus more heavily on customer issues than making investments in facilities and processes.

Providing more services (22 percent) and adding new products (20 percent) were the two most mentioned enhancements that will be made by the owners and managers participating in the study who intend to grow their businesses. They ranked fourth and sixth, respectively, during the prior quarter.

Expansion at existing locations (19 percent) fell to third in the most recent rankings after having been cited the most during the third quarter. Enhancing customer services capabilities (18 percent) was fourth during the last quarter.

Human resources continued to be the most important ingredients to improving productivity during the fourth quarter. Improved staff training, the addition of more staff and implementation or enhancement of employee incentive programs were the top three elements cited for improving productivity. Those were followed by improvements to existing automation or technology and adding more automation or technology, which finished fourth and fifth.

The opinions about issues impacting their businesses were consistent with the recently reported decline in confidence. The SBRB Construction and Contracting Industry Small Business Confidence Index (C-SBCI) dropped 12 points or nearly 25 percent during the fourth quarter of 2007, indicating owners and managers had significant concerns about their near term business prospects.

Declines during the fourth quarter in all three key indicators drove the C-SBCI lower. The fourth quarter construction and contracting industry indicators were similar to what was found among all businesses participating in the nationwide study.

The current Construction & Contracting Industry Index is 1.33 points higher than the 33.67 reported for all U.S. small businesses during the fourth quarter of last year. The overall U.S. SBCI of 33.67 was nearly 10 points (21.7 percent) lower than the index of 43 reported during the third quarter of 2007.

Small businesses concentrate on human resources and customer service to improve operations according to SBRB Study; predict less technology investments

Small business owners and managers in the U.S. confirmed they expect to more heavily focus on issues related to customer service and human resources to improve their operations the next 12 to 24 months rather than continue making significant investments in automation and technology, according to the latest (SBRB) study released.

The quarterly nationwide SBRB poll indicated improved staff training, the addition of more staff and improved or enhanced employee incentive programs would be key to improving productivity. The fourth quarter poll co-sponsored by IPA said that investments in existing or new automation and technology trailed human resources in the rankings.

Meanwhile, the quarterly report said 32 percent of the businesses plan to expand during the next 12 to 24 months, the same percentage as indicated in the prior study completed during the third quarter of 2007. For those businesses forecasting growth during the coming months, 24 percent said they would provide more services, 21 percent said they would add new products and 18 percent said they would enhance current customer services. Facilities expansion was the fourth most mentioned possibility for increasing revenue with 15 percent saying they plan to grow within their current locations and 13 percent said they would add a location.

The results were a reversal from the third quarter when investments in automation and technology were the leading candidates for near term investments. It was the third consecutive quarter that 32 percent of the respondents said they were considering expansion.

As previously reported, the SBRB (SBCI) during the fourth quarter of 2007 was set at 33.67 or nearly 10 points (21.7 percent) lower than the index of 43 reported for the previous report.

Small business owners and managers throughout the U.S. reported lower levels of expectations for the next 12 months in all three categories comprising the confidence index. Only 24 percent of the respondents indicated they intend to increase hiring the next 12 months, a decrease of 15 points from the 39 percent reported during the prior study conducted during the fall of 2007. Of the participants, 29 percent said they believe the economy will improve, 8 points fewer than the last study. The current report also showed 48 percent of the businesses are projecting revenue increases, 5 points fewer than the 53 percent indicated last fall.