CEOs remain optimistic about prospects for the economy as well as the outlook for their own firm’s performance in the midst of persistent economic and political uncertainties. The Vistage CEO Confidence Index was 105.1 in the 1st quarter 2012 survey, up from 98.8 in Q4 and 83.5 in Q3 of last year. Confidence is at its highest level since 105.2 was recorded at the start of 2011. Expected economic gains have prompted CEOs to continue to slowly expand employment in anticipation of higher sales; nonetheless, 84 percent of the CEOs surveyed said they’ve learned to be more productive with fewer employees. The Q1 2012 results reflect the sentiments of 1,854 small business CEOs surveyed from March 5-16, 2012.
Britt Spaulding, a member of Vistage International, Inc. and CEO of Round Butte Seed Growers with locations in Culver, Bend, Prineville and Christmas Valley, agrees with the premise that his company like so many other Central Oregon businesses has learned to be more productive with fewer employees.
“I am probably doing ten to twelve percent more this year than I did three years ago with 15 less employees,” commented Spaulding. “It’s not necessarily a good thing from a standpoint that there are less jobs today, but it does makes your company better and stronger.”
Spaulding explained that he has hired one more person in the Bend store, but has used a lot more temp agencies over the past three years for their semi-skilled personnel.
Round Butte Seed is a multi-faceted agriculture-based company that offers a wide variety of products and services for ranchers, farmers and landscape professionals. All stores sell seed, fertilizer, wildflower seed, a complete line of agriculture chemicals and wildbird feed. The Bend location also sells livestock feed, vet med supplies, bird feeders, landscaping supplies and offers a rental service. All four locations offer licensed consultants for crop, pasture, turf, habitat restoration and soil sampling as well as spraying for pasture, noxious weeds, roadsides, and lawns.
According to Spaulding cattle is a large dollar business to the Central Oregon agriculture income and “they’re at record prices. Wheat prices are also high and that’s good as everything is tied to wheat in our region,” says Spaulding.
“What has really grown for us, however, is the wholesaler landscape business in the last three years. We will have record sales in our Bend store this year. Through February we are running about 15 percent increase over any prior year.”
Michael Lalonde, another Visage member and chief financial officer for Deschutes Brewery, says the well-known handcrafted beer company has been working to improve efficiency and reduce waste using at Toyota type of system. “We’ve continued to help our business improve and sustain employees,” said Lalonde. “In 2007 we really started to concentrate on efficiency; we’ve had to be very careful because of commodity prices which continued to fluctuate during the recession.”
As for today’s economy, Lalonde is also optimistic, “I think we’re at the bottom it seems like and some real estate transactions are being made even in Bend and nationally; they’re not at least dropping and that’s a positive sign. Any positive sign helps the consumer want to spend again.”
Notable in the Q1 survey is that nearly two-thirds of all CEOs believe that the top three economic priorities for whoever wins the presidential election should be the federal deficit/national debt, health care and entitlement programs (in that order).
Rafael Pastor, chair of the board and CEO of Vistage International, said: “While CEOs plan to increase hiring, they have adapted their companies to be productive with fewer employees and do not expect employment to return to pre-recession levels anytime soon. They do, however, see the President’s job, whoever he may be, to deal with these fiscal and policy challenges on which the health and growth of our nation’s enterprises and economy depend.”
Spaulding adds to the optimism: “I’m pretty optimistic, but still have uncertainties, things could go wrong with the economy fairly quickly, but there’s definitely an increase in interest in activity in Jefferson County.”
Founded in 1957, Vistage International, Inc., headquartered in San Diego, California, is a peer advisory membership organization, serving more than 15,000 CEOs and senior level executives in 15 countries. Vistage members participate in Chair-led advisory board peer groups, receive one-to-one coaching, learn from expert speakers and interact among a global network of business leaders from a broad range of industries. Bruce M. Juhola of Bend is chair of the local group.
According to Juhola all of the Vistage members have been doing extremely well through the recession and, in fact, have been breaking records for revenue and EBITDA through the last three years. “They’ve added approximately 300 employees during the recession and are now poised for even more explosive growth as the country comes out of the recession,” offered Juhola.
“In the next few months I’ll be adding several new members who are also about to experience phenomenal growth and will receive enormous value from their Vistage memberships. Through the recession period Vistage as a whole has added over a thousand new members as CEOs realized that they had to work smarter in order to survive the recession and even thrive as their competitors have faltered. We are preparing our members for slow growth in the economy for the next year and a half with a mild recession expected in the 2H of 2013 extending through 2014.
“The members have access to economic forecasting models that have proven to be 96 percent accurate in the last 25 years and is the reason that many prepared for the Great Recession a year before other economists foresaw the recession and then began investing for post-recession while their competitors had their heads in the sand.”
Commenting on the survey results, University of Michigan’s Dr. Richard Curtin said, “The overall improvement mirrors gains made a year ago, which began to fade as gas prices rose. The same retreat could again be sparked by rising gas prices; however, unless other negative events occur or national gas prices rise significantly above $4, it is unlikely to affect the otherwise modest pace of economic growth that firms anticipate. While firms now have the financial legs to sustain growth, the long devastating downturn has made firms much more cautious about both the economic and political climates.”
Q1 2012 Vistage CEO SURVEY HIGHLIGHTS
Durable Recovery Expected. Six-in-ten CEOs thought the economy had improved in the latest survey, three-times the level recorded last summer and the second highest percentage in seven years. Just five percent thought the economy had worsened during the past year, barely above the all-time low of four percent set in 2004. Importantly, the majority of CEOs believe that recent economic gains signal a durable and lasting recovery. Just seven percent expected the economy to worsen during the year ahead. While CEOs anticipate positive GDP growth, they expect the rate of growth to be modest in the year ahead.
Hiring Plans at Five-Year Peak. Net increases in employment were planned by 57 percent of all firms, the highest percentage since 2007. Gains in planned hiring were quite favorable last year as well, as hiring plans were already at twice the levels recorded at the 2008 lows. Importantly, like last year, firms plan to gradually increase hiring throughout the year ahead as business improves and uncertainty about the economy declines.
Investment Remains Strong. Planned investments in new plants and equipment remained largely unchanged at the improved levels recorded a year ago. New investments were planned by 45 percent in the first quarter of 2012, between the 42 percent recorded last quarter and last year’s 48 percent. This was well above the low of 27 percent recorded during the last recession, and much closer to the peak of 57 percent in the closing quarter of 2004. The continued commitment to invest underscores CEOs’ favorable outlook for a sustainable recovery.
Revenue Prospects Remain Bright. Revenue growth was expected by 75 percent of all firms in the first quarter survey, between the 73 percent in the prior quarter and last year’s 76 percent, but well above the recession low of 36 percent. Price increases for the goods or services they provide were anticipated by 42 percent of all firms, below the 49 percent recorded in last year’s first quarter survey, but well above the 28 percent at the start of 2010. Price gains were not sparked by higher demand but by efforts to manage rising costs, reported as a top challenge by firms.
Profit Outlook Improves. Higher profits were anticipated by 60 percent of all firms in the first quarter, up from 55 percent in the prior quarter and last year’s 57 percent. While the worst impact of the recession is over (just nine percent anticipated declining profits, down from a peak of 36 percent three years ago), the expectation of higher profits is still below the peak of 74 percent in the fourth quarter of 2003 due to the expectation of modest economic growth.