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Seventy percent of manufacturers expect at least 3 percent growth in 2017

02/06/2017

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Survey finds labor issues, including a shortage of qualified workers, cited as important challenge to growth

Seven in 10 U.S. manufacturers expect revenue growth of at least 3% in 2017, but labor issues, including a lack of qualified workers, is seen as a significant challenge to expansion, according to a new survey released by the Leading Edge Alliance and LBMC, a Nashville-based professional services firm.

The National Manufacturing Outlook Survey found that 30% of small manufacturers expect revenue growth in 2017 of between 3% and 9%, while 31% expect 10% to 20% growth, and 13% expect 20% or greater improvement. Among large manufacturers, 50% expect 3% to 9% growth, while 13% expect 10% to 20% growth, and 6% expect 20% or more.

When asked about barriers to business growth in 2017, three of the top four responses were labor based, with 47% of respondents citing lack of qualified workers, 38% citing healthcare costs, and 36% citing pressure for increased wages. The survey was based on responses from more than 250 executives of small and large manufacturing companies nationwide, and was conducted by the Leading Edge Alliance, an alliance of 220 independently owned accounting and consulting firms

The top priority for manufacturers in 2017 is cutting operations costs, the survey found. However, high-growth manufacturing respondents are more focused on research and development, with 12% of high-growth respondents reinvesting more than 10% of annual revenue.

“Proactively taking advantage of tax credits, entity structuring, enhanced technology solutions, research and development, and transaction preparation will help ensure a solid foundation for growth in this segment,” said John Mark McDougal, leader of the Audit and Advisory practice at LBMC.

A new provision of the research and development tax credit, first available in 2016, supports R&D growth by allowing the credit to be used to offset payroll taxes up to $250,000. This is particularly valuable to rapidly growing and early stage manufacturing companies that may be pre-revenue, but have significant labor expenses.

In another significant finding, more manufacturers will be considering both sales and mergers in 2017 as well as strategic acquisitions. While 10% of respondents said they explored a sale or merger in 2016, 12.5% said the expected to do so in 2017. And while 16.5% said they considered an acquisition in 2016, 23.3% said they expected to do so in 2017.

“Manufacturers that are planning to sell their businesses should take a close look at operations, product line profitability, raw materials inventory and customer concentration and the sooner the better” the survey report said. “These elements and the quality of financial statements and reporting can dramatically impact a potential sale price.”

About LBMC

LBMC has more than 500 employees, with offices in Knoxville, Chattanooga and Nashville (Brentwood), Tennessee. Founded in 1984 as a traditional accounting firm, LBMC has expanded its focus to meet a broad range of financial, human resources and technology needs for its diverse client base. Specific services offered by the LBMC “Family of Companies” include accounting and assurance services, business and personal tax consulting, investment advisory services, transaction advisory services, permanent and contract staffing, human resources outsourcing, payroll services, technology solutions, data security and risk, health care revenue cycle and consulting, litigation support, business valuations, and mergers and acquisitions.  For more information on LBMC, visit its web site at www.lbmc.com.

About Leading Edge Alliance

LBMC is a founding member of LEA. Founded in 1999, LEA global/ The Leading Edge Alliance is the second largest international association in the world, creating a high-quality alliance of 220 independently owned accounting and consulting firms focused on accounting, financial and business advisory services. LEA Global firms operate from 618 offices in more than 100 countries, giving clients of LEA Global firms access to the knowledge, skills and experience of 2,270 partners and 23,014 staff members. LEA Global firms’ combined annual revenue totals more than $3 billion. Members stand out as leaders in their markets with firms ranking in the top tiers throughout all the regions of the world. In the U.S. more LEA Global firms are in the top 100 than any other association or network.

Download the National Manufacturing and Distribution Survey Report