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Private Company Services

Trendsetter Barometer

Business outlook report Autumn 2012

Trendsetter Barometer: Business outlook report PwC

2

Contents

1 Quarterly highlights Page 1.1 International marketers outpace domestic-only peers 3 1.2 Key indicators for the business outlook 4 2 Economic views 2.1 View of US economy, this quarter 6 2.2 View of US economy, next 12 months 7 2.3 View of world economy, this quarter 8 2.4 View of world economy, next 12 months 9 3 Company performance 3.1 Company revenue growth, calendar year 11 3.2 Industry growth, calendar year 12 3.3 International sales 13 3.4 Changes in gross margins 14 3.5 Changes in costs and prices 15 3.6 Finished inventories as a percent of sales 16 3.7 Level of operating capacity 17 3.8 New bank loans, credit terms and financing 18 3.9 Change in credit availability 19 4 Business outlook, next 12 months 4.1 Revenue growth, next 12 months 21 4.2 International sales, next 12 months 22 4.3 Percent planning to hire 23 4.4 Percent planning to hire by type of employee 24 4.5 Percent planning major new investments of capital 25 4.6 Percent planning to increase operational spending 26 4.7 Expected barriers to business growth 27 4.8 Plans for M&A and other business initiatives 28 5 Survey demographics and research methodology 29


Chart 1.1 International marketers outpace domestic-only peers

Business outlook, next 12 months

International

marketers

(n=106)

Domestic-

only peers

(n=128)

Optimistic about US economy 43% 45%

Optimistic about world economy 23% –

Revenue growth rate 8.5% 8.6%

International sales (% of total) 18% –

Planning major capital investments 41% 25%

Planning expansion to new markets abroad

29% 3%

Plans to increase spending (net) 80% 66%

• Information technology 32% 30%

• New products/services 36% 27%

• Sales promotion 26% 20%

• R&D 26% 9%

• Business acquisitions 14% 13%

Prior quarter‟s performance

• Increased gross margins (net) +2% +7%

• Increased costs (net) +19% +10%

• Increased prices (net) +10% +5%

Quarterly highlights

Majority of companies hiring. The majority of US privately held businesses (55 percent) are planning net new hiring over the next 12 months, and only 5 percent will be laying off workers. But somewhat less net new composite workforce hiring is expected, down from 2.4 percent to 1.6 percent. Note, however, that hourly wages are up from a 2.05 percent rate of increase a year ago to 2.57 percent.

• Continuity of spending. Thirty-two percent of Trendsetter private companies are planning major new investments of capital over the next 12 months, down 2 points since last quarter and 6 points below a year ago. Spending levels at 6.5 percent of sales is moderately high, above the prior quarter.

Increased operational spending is planned by 73 percent of Trendsetter companies over the next 12 months (up 5 points). Thirty-one percent of companies are planning increases for new product and service introductions and information technology (planned IT spending is down 7 points since last quarter). Next were facilities expansion (24 percent), marketing & sales promotion (23 percent), and geographic expansion (21 percent). Also planned are initiatives for new strategic alliances (24 percent), new joint ventures (16 percent), and the purchase of another business (15 percent). But expansion to new markets abroad lowered 6 points to 15 percent.

• Gross margins tighter. Gross margins were up for 25 percent of Trendsetter companies and down for 21 percent, a net 4 percent increase (off 7 points). Costs rose: 24 percent up, 10 percent down, or a net 14 percent increase (10 points up). Prices followed, with 20 percent up, 12 percent down, or a net 8 percent increase (up 2 points).

3

PwC commissioned independent research firm BSI Global Research Inc. to interview 234 chief executive officers (CEOs/CFOs) of leading privately held US businesses in the third quarter of 2012. The interviewees were asked about their current business performance, the state of the economy, and their expectations for business growth over the next 12 months. We then compared their responses with the prior quarter's results to see how the outlook has changed.

Key findings:

• US optimism softens. Optimism about the prospects for the US economy over the next 12 months among top executives of privately held US businesses dropped from 50 percent to 44 percent, down 6 points. Pessimism rose 3 points to 15 percent. Many companies (41 percent) remained uncertain (up 3 points). A year ago, optimism was notably lower at 27 percent (17 points lower).

Among Trendsetter companies selling abroad, optimism about the world economy over the next 12 months remained low, at 23 percent (same as last quarter), while a similar percentage, 21 percent, were pessimistic. The majority of international businesses remained uncertain (56 percent). A year ago, optimism was a bit lower (21 percent) and pessimism higher (28 percent, 7 points higher).

• Revenue targets strengthen. Trendsetter executives increased their own-company projected revenue growth rate for the next 12 months from 8.3 percent to 8.6 percent. The improvement is due largely to higher revenue forecasts among domestic-only companies (8.6 percent, up from 6.9 percent last quarter). International marketers forecast a slightly lower revenue growth rate (8.5 percent, down from 9.7 percent last quarter). Note that the overall 8.6 percent growth rate is similar to the final target expectations for this calendar year (8.5 percent).

Looking ahead, 83 percent of private businesses overall expect positive revenue growth over the next 12 months: 37 percent forecast double-digit growth and 46 percent single-digit growth. Only 6 percent expect negative growth and 7 percent zero growth over the next 12 months. Four percent were not reported.

• International markets lower forecasts. Although private companies selling abroad lowered their own-company revenue growth forecasts for the next 12 months (down from 9.7 percent to 8.5 percent), 88 percent expect positive revenue growth: 34 percent expect double-digit growth and 54 percent single-digit growth.

Those selling to the key emerging markets of China, India, and Brazil forecast somewhat lower growth rates this quarter, 7.8 percent, as compared with 8.9 percent of Trendsetter companies selling in other foreign markets. Despite this notably slower pace, 90 percent of companies selling in China/India/Brazil expect positive revenue growth over the next 12 months; only 4 percent expect negative growth, and 4 percent zero growth.

The overall contribution of international sales to total revenue among Trendsetter companies selling abroad remained at 18 percent. Thirty-five percent reported higher international sales, while 16 percent reported a decrease. Forty-nine percent remained about the same.

• Barriers to growth. Nearly three-quarters (74 percent) of Trendsetter companies cited lack of demand as the chief potential barrier to growth over the next 12 months (up 6 points), followed by legislative/regulatory pressures (52 percent, up 4 points).

Also on the rise are concerns about increased taxation (33 percent, up 5 points from last quarter) and lack of qualified workers (29 percent, up 6 points). There was a slight drop in concern about profitability/decreasing margins (29 percent, down 2 points) and oil/energy prices (27 percent, down 2 points).

Note: International marketers have average revenue of $425.0 million; their domestic-only peers have average revenue of $263.4 million.

A quarter-by-quarter comparison of the key indicators shows the business outlook for the next 12 months and how the views of the survey panel have changed (see Chart 1.2). The pages that follow provide a detailed look at each question for the previous five quarterly surveys.


4

Key indicators for the business outlook

Chart 1.2 Key indicators for the business outlook

A quarter-over-quarter comparison of the key indicators shows how the 12-month outlook has changed. The change column indicates the movement of opinion from second-quarter 2012 to third-quarter 2012.

Business outlook, next 12 months 2011 2012 Change Page

3Q ‟11 4Q ‟11 1Q ‟12 2Q ‟12 3Q ‟12 2Q – 3Q ‟12

Optimistic about US economy 27% 39% 60% 50% 44% 7

Optimistic about world economy1 21% 24% 29% 23% 23% = 9

Expect positive revenue growth 78% 78% 90% 86% 83% = 21

Average growth rate expected 7.2% 8.5% 9.5% 8.3% 8.6% 21

Planning major new investments 38% 40% 38% 34% 32% = 25

New investments as a % of sales 6.1% 8.2% 7.2% 5.6% 6.5% 25

Planning to hire 48% 54% 59% 54% 55% = 23

New workers as a % of workforce (net) +1.6% +2.0% +1.8% +2.4% +1.6%

23

Expected barriers to growth

• Lack of demand 77% 71% 68% 68% 74% 27

• Legislative/regulatory pressures 54% 50% 46% 48% 52% 27

• Increased taxation 34% 32% 36% 28% 33% 27

• Profitability/decreasing margins 37% 30% 27% 31% 29% = 27

• Lack of qualified workers 22% 24% 24% 23% 29% 27

• Oil/energy prices 33% 34% 38% 29% 27% = 27

• Pressure for increased wages 18% 22% 24% 19% 18% = 27

• Lack of capital for investment 26% 18% 17% 19% 17% = 27

• Strength of the US dollar 19% 19% 18% 16% 13% = 27

• Higher interest rates 12% 18% 18% 17% 12% 27

• Competition from foreign markets 11% 12% 12% 10% 10% = 27

1. Reflects responses from international marketers only.

Economic views


6

27

13 3 9 10

56

54

36

44

55

17

33

61

47

35

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Growing

Unchanged

Declining

25

12 5 8 10

53

52

32

45

55

22

36

63

47

35

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Growing

Unchanged

Declining

View of the US economy, this quarter

Which best describes your view of the US economy this quarter?

In third-quarter 2012, 35 percent of panelists said they believed the US economy was growing, off 12 points from the prior quarter’s 47 percent. Ten percent said the US economy was declining (up 2 points), and 55 percent felt it was about the same.

Economic views

Service companies

All respondents

22

11 8 6 10

49

50

27

46

53

28

39

65

48

37

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Growing

Unchanged

Declining

Chart 2.1 View of the US economy, this quarter

Product companies

Note: In 3Q 2012 All respondents, n=234, Product companies, n=136, Service companies, n=98


24 18

6 12 13

50

48

32

38 43

26 34

62

50 44

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Optimistic

Uncertain

Pessimistic

7

View of the US economy, next 12 months

Looking ahead at the next 12 months, how do you feel about the prospects for the US economy?

The percentage of panelists who are optimistic about the US economy over the next 12 months declined 6 points to 44 percent. Those expressing pessimism increased 3 points to 15 percent, and 41 percent said they were uncertain.

Economic views

24 16

8 12 15

49

45

32

38 41

27

39

60 50

44

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Optimistic

Uncertain

Pessimistic

Service companies

All respondents

22 14 11 11

17

49

39

31 39

40

29

47

58 50

43

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Optimistic

Uncertain

Pessimistic

Chart 2.2 View of the US economy, next 12 months

Product companies



44

29 20

40 40

45

54

47

47 45

11 17

33

13 15

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Growing

Unchanged

Declining

8

View of the world economy, this quarter

Which best describes your view of the world economy this quarter? (international marketers only)

In third-quarter 2012, 17 percent of respondents who market abroad viewed the world economy as growing, up 1 point from the previous quarter. Thirty-nine percent viewed the world economy as declining (up 4 points), and 44 percent viewed it as unchanged.

41 31

18

35 39

43

49

48

49 44

16 20

34

16 17

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Growing

Unchanged

Declining

Service companies

Economic views

All respondents

36 33

16

28 37

41 42

50

52 43

23 25 34

20 20

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Growing

Unchanged

Declining

Chart 2.3 View of the world economy, this quarter

Product companies

Note: In 3Q 2012 All international marketers, n=106, Product companies, n=65, Service companies, n=41


29 21

9

24 19

52 60

64

60

56

19 19 27

16 25

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Optimistic

Uncertain

Pessimistic

9

View of the world economy, next 12 months

Looking ahead at the next 12 months, how do you feel about the prospects for the world economy? (international marketers only)

Of international marketers surveyed in the third quarter of 2012, 23 percent expressed optimism about the world economy’s prospects over the next 12 months, same as the prior quarter. The percentage expressing pessimism dropped 2 point to 21 percent, while 56 percent were uncertain.

Economic views

28 22

10

23 21

51 54

61

54 56

21 24 29

23 23

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Optimistic

Uncertain

Pessimistic

Service companies

All respondents

27 23

12 22 24

48 46

56

47

56

25 31 32 31

20

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Optimistic

Uncertain

Pessimistic

Chart 2.4 View of the world economy, next 12 months

Product companies


Company performance


3 1 0 0 1

11 10 4

5 9

16 20

12 11 12

43 40

49 57

50

21 17

23 13 13

6 12 12 14 15

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

11

Company revenue growth, calendar year

What is your company’s estimated revenue growth rate for the calendar year?

For calendar-year 2012, the composite average own-company growth estimate is expected to correct from 10.0 percent in second-quarter 2012 to 8.5 percent in third-quarter 2012. Of executive officers interviewed, 80 percent reported positive revenue growth through the calendar year, with 34 percent reporting double-digit growth and 46 percent single-digit growth. Ten percent reported negative revenue growth and 9 percent reported zero growth. One percent were not reported.

2 1 0 0 1 10 11 4

5 10

16 17

12 13 9

41 37

48 50 46

22 20 24 18 20

9 14 12 14 14

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

Service companies

Mean 6.5% 7.3% 8.8% 10.0% 8.5%

1 1 0 0 1 8 12 5 6

11

16 14

11 16 6

38 32 48

41 40

24 25

25 24 30

13 16 11 13 12

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

Mean 8.5% 8.5% 8.6% 10.5% 9.6%

Company performance

All respondents

Chart 3.1 Company revenue growth, calendar year

Product companies

Mean 4.9% 6.3% 9.0% 9.5% 7.6%



3 2 2 0 1

17 10 4

6 13

20 24

18 17

15

45 52

62 65

63

14 9 12 8 7 1 3 2 4 1

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

12

Industry growth, calendar year

What is your industry’s estimated growth rate for the calendar year?

Industry sector growth projections for calendar-year 2012 averaged 3.3 percent in third-quarter 2012, slightly below the average 3.6 percent calendar-year projection in second-quarter 2012.

Company performance

3 3 2 1 1

14 11 5 7 10

19 21

18 17 14

45 49 62 62

64

16 12 12 10 9 3 4 1

3 2

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

Service companies

Mean +3.3% +3.6% +3.8% +3.6% +3.3%

5 5 3 1 1

9 11 6 7 7

18 18

18 18 10

45 47 62

59 66

18 15

10 12 13

5 4 1 3 3

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

Mean +4.9% +4.6% +3.7% +3.5% +4.0%

All respondents

Chart 3.2 Industry growth, calendar year

Product companies

Mean +2.1% +3.0% +3.9% +3.6% +2.7%



11 13 6

12 20

45 50

54

57 43

44 37 40

31 37

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

13

International sales

Are international sales up, down, or the same compared with three months ago?

In the third quarter, 35 percent of international marketers increased sales abroad, up 2 points from the prior quarter, but off 8 points from a year ago. Sixteen percent reported fewer sales (up 7 points from the prior quarter), while 49 percent reported no change. The quarterly pattern is notably lower than a year ago.

Company performance

10 14 4

9 16

47 48

53

58 49

43 38

43 33 35

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

Service companies

All respondents

7 17

2 6 10

52

43

50

59 59

41 40 48

35 31

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

Chart 3.3 International sales

Product companies



14

22 19 13 17 18

58 59 71

55 60

20 22 16

28 22

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

Changes in gross margins

Are gross margins up, down, or the same compared with three months ago?

Gross margins tightened in the third quarter, as 25 percent reported higher margins and 21 percent reported lower margins, for a plus 4 percent net change, off 7 points from the previous quarter.

Company performance

22 19 15 18 21

57 59 62 53

54

21 22 23 29 25

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

Service companies

Net -1% +3% +8% +11% +4%

All respondents

Net -2% +3% +3% +11% +4%

Chart 3.4 Changes in gross margins

Product companies


22 20 17 18 23

56 59 55 51

50

22 21 28 31 27

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

Net = +1% +11% +13% +4%


15

Changes in costs and prices

Are costs up, down, or the same compared with three months ago? Prices?

In third-quarter 2012, costs and prices remained moderately high. Costs increased a net 14 percent, as 24 percent reported higher costs and 10 percent reported lower costs. Prices were up a net 8 percent, as 20 percent reported higher prices and 12 percent said they were lower.

Company performance

11 11 10 13 10

61 69 67 70 66

28 20 23 17 24

0%

20%

40%

60%

80%

100% Up

Same

Down

9 8 6 10 12

72 78 78 74 68

19 14 16 16 20

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

All respondents

Costs

Prices

+17% +9% +13% +4% +14%

+10% +6% +10% +6% +8%

12 13 5 12 10

67 74 74 71 69

21 13 21 17 21

0%

20%

40%

60%

80%

100% Up

Same

Down

8 8 7 7 7

79 82 83 78 75

13 10 10 15 18

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

Service companies

Costs

Prices

+11% = +16% +5% +11%

+5% +2% +3% +8% +11%

Chart 3.5 Changes in costs and prices

Net

Net

Net

Net

11 9 13 14 10

55 66 63 70 64

34 25 24 16 26

0%

20%

40%

60%

80%

100% Up

Same

Down

11 8 6 11 15

65 74 73 72 64

24 18 21 17 21

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

Product companies

Costs

Prices

+23% +16% +11% +2% +16%

+13% +10% +15% +6% +6%

Net

Net



16

Finished inventories as a percent of sales

Are finished inventories as a percent of sales up, down, or the same compared with three months ago? (product companies only)

Overall, finished inventories in the third quarter were down: up for 18 percent of product companies and down for 25 percent, for a net 7 percent reporting lower inventories (off 17 points). Fifty-seven percent of respondents said their inventories remained about the same.

Company performance

17 15 23 21 25

58 69 52

48

57

25 16

25 31

18

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Up

Same

Down

Product companies

Chart 3.6 Finished inventories as a percent of sales

Net +8% +1% +2% +10% -7%

Note: In 3Q 2012 Product companies, n=136


1 0 1 2 2 15 14 13 13 13

40 39 38 39

44

44 47 48 46 41

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Near full

About 3/4 capacity

About 1/2 capacity

Not reported

17

1 0 1 1 1 13 14 11 11 14

31 32 30 31

37

55 54 58 57 48

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Near full

About 3/4 capacity

About 1/2 capacity

Not reported

Level of operating capacity

What is your organization’s current operating capacity?

Operating capacity is an estimate of the current level of permanent staffing compared with what is needed for full-capacity output. In the third quarter, the average level of operating capacity for respondents fell to an estimated 80.7 percent, 2½ points below the prior quarter’s 83.3 percent. Forty-four percent reported near full capacity (off 7 points from the prior quarter).

Company performance

1 0 1 2 1 14 14 12 12 14

36 36 35 35

41

49 50 52 51 44

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Near full

About 3/4 capacity

About 1/2 capacity

Not reported

Service companies

Mean 83.5% 83.1% 84.3% 83.3% 80.7%

Mean 85.2% 84.0% 86.2% 85.0% 81.9%

All respondents

Chart 3.7 Level of operating capacity

Product companies

Mean 82.1% 82.4% 82.8% 81.9% 79.8%



18

New bank loans, credit terms and financing

All respondents

3Q

„11

4Q

„11

1Q

„12

2Q

„12

3Q

„12

Any activity 5% 7% 7% 7% 11%

• New bank loans 5% 6% 7% 6% 11%

• New credit terms

(suppliers)

--- 1% 1% 1% 1%

• All other new financing --- 1% 1% 5% ---

• Mean interest rate

(all bank loans)

3.89% 3.90% 3.83% 3.77% 3.70%

In the past three months, has your organization initiated any new bank loans, longer credit terms from your suppliers, or other types of financing? What is the current interest rate you are paying for your bank financing?

Increased banking activity was reported in the third quarter, with 11 percent of panelists reporting financing activity (up 4 points). All 11 percent reported new bank loans, 5 points higher than the prior quarter. The mean interest rate paid on loans by these companies was 3.70 percent, similar to the prior quarter and 19 basis points lower than a year ago (3.89 percent).

Company performance

Chart 3.8 New bank loans, credit terms and financing


Service companies

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12

Any activity 5% 2% 5% 7% 10%

• New bank loans 5% 2% 5% 6% 10%


(suppliers)

--- --- 1% 1% 1%

• All other new financing --- --- --- 4% ---


(all bank loans)

4.14% 3.85% 3.95% 3.99% 3.86%

Product companies

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12

Any activity 5% 10% 9% 7% 11%

• New bank loans 5% 8% 8% 6% 11%


(suppliers)

--- 1% 2% 1% 1%

• All other new financing --- 2% 2% 5% ---


(all bank loans)

3.66% 3.94% 3.72% 3.59% 3.57%


0 1 2 3 2

89 89 88 89 86

11 10 10 8 12

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Increased

Same

Decreased

2 2 2 3 2

89 89 90 87 87

9 9 8 10 11

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Increased

Same

Decreased

19

5 4 1 2 3

87 88 92 86 88

8 8 7 12 9

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Increased

Same

Decreased

Change in credit availability

How has credit availability changed in the past three months for your organization? (based on current banking relationships)

Credit availability in third-quarter 2012 was slightly above than the prior quarter, with 11 percent of panelists reporting an increase, 2 percent reporting a decrease, and 87 percent reporting no change.

Company performance

Service companies

All respondents

Chart 3.9 Change in credit availability

Product companies



3 4 2 2 1 9 5 2

5 7

14 15

5 5 7

52 47

58 60 52

15 21

23 15 19

7 8 10 13 14

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

21

3 5 2 1 8 3 4 3

6 3 10

10

5 10

7

44 38 50

45 40

26 30 28 28 29

14 13 12 10 13

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

Revenue growth, next 12 months

What is your organization’s estimated revenue growth rate for the next 12 months?

Respondents' projected average revenue growth rates for their own companies over the next 12 months increased in the third quarter of 2012, rising from 8.3 percent to 8.6 percent. Eighty-three percent said they expected positive own-company growth, with 37 percent projecting double-digit revenue growth and 46 percent single-digit growth. Only 6 percent expected negative growth over the next 12 months, 7 percent expected zero growth, and 4 percent did not respond.


Service companies

Mean 9.0% 10.0% 9.6% 8.0% 10.1%

All respondents

Chart 4.1 Revenue growth, next 12 months

Product companies

Mean 5.8% 7.3% 9.4% 8.6% 7.5%


3 4 2 2 4 6 5 3 5

6

13 13

5 7

7

48 43

54 53 46

20 25 25 21

23

10 10 11 12 14

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

20% or greater

Between 10-20%

Between 0-10%

Zero

Negative

Not reported

Mean 7.2% 8.5% 9.5% 8.3% 8.6%


What percent of your business’s total revenue over the next 12 months do you expect to derive from international sales? (international marketers only)

Panelists selling abroad projected that the average contribution of international sales to total revenue over the next 12 months would be 18 percent, same as the prior quarter and one point below a year ago.

22 24

26

20 20

0%

10%

20%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

22

International sales, next 12 months

Service companies

19 20 21

18 18

0%

10%

20%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

All respondents


15 14 14 16 15

0%

10%

20%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Chart 4.2 International sales, next 12 months

Product companies



23

Percent planning to hire

Do you plan to add or reduce the number of full-time equivalent employees over the next 12 months? If so, how many? Do you plan to increase hourly wages?

Looking ahead, 55 percent of panelists plan to add employees to their workforces over the next 12 months, up 1 point from the prior quarter and 7 points higher than a year ago. Only 5 percent plan to reduce workers, and 40 percent say their workforce will stay about the same. An overall increase of 1.6 percent is planned for the panel’s average composite workforce, nearly a point below the 2.4 percent last quarter, as a few firms laid off many.

Note that average increases of hourly wages for current workforce is up from 2.05 percent a year ago to 2.57 percent, a half-percent higher.

3 3 3 3 5

49 43

38 43 40

48 54

59 54 55

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Add

Same

Reduce

All respondents

+1.6% +2.0% +1.8% +2.4% +1.6%

Service companies

2 1 1 2 4

41 42 31

36 36

57 57 68

62 60

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Add

Same

Reduce


+1.9% +2.5% +2.6% +2.5% +2.9%

Net hiring

Net hiring

Chart 4.3 Percent planning to hire

Product companies

4 4 4 3 5

54 44 44 48 44

42 52 52 49 51

0%

20%

40%

60%

80%

100%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Add

Same

Reduce

+1.5% +1.7% +1.3% +2.1% +1.0% Net hiring


Mean expected increase, hourly wages

Mean expected increase, hourly wages

2.05% 2.31% 2.51% 2.37% 2.57%

2.00% 2.20% 2.64% 2.56% 2.62% Mean expected increase, hourly wages 2.11% 2.45% 2.34% 2.14% 2.51%


24

Percent planning to hire by type of employee

All respondents

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12

Planning to hire (net) 48% 54% 59% 54% 55%

• Professionals 27% 29% 34% 35% 35%

• Technology/Engineering na na na na 25%

• Business/Finance na na na na 5%

• Sales/Marketing 18% 17% 18% 20% 15%

• Blue Collar Works 11% 13% 17% 15% 21%

• Skilled/Specialized

workers

11% 9% 14% 14% 13%

• Semi-skilled/Unskilled

workers

na na na na 12%

• White collar support 13% 11% 13% 16% 15%

• Middle management na na na na 8%

• Senior management na na na na 3%

What types of employees do you plan to add or reduce over the next 12 months?

Over the next 12 months, 35 percent of the 55 percent planning to hire will be looking primarily for professionals/technicians, same as the last quarter. Twenty-one percent say they are interested in hiring blue-collar production workers (up 6 points), while 15 percent cite interest in hiring white collar workers (off 1 point).


Chart 4.4 Percent planning to hire by type of employee


Product companies

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12


• Professionals 27% 29% 34% 35% 24%



• Sales/Marketing 18% 17% 18% 20% 12%



workers

11% 9% 14% 14% 16%


workers

na na na na 16%




Service companies

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12


• Professionals 27% 29% 34% 35% 49%



• Sales/Marketing 18% 17% 18% 20% 19%



workers

11% 9% 14% 14% 8%


workers

na na na na 5%





37 41 36 33 35

0%

10%

20%

30%

40%

50%

60%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

25

39 38 40 36

28

0%

10%

20%

30%

40%

50%

60%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

38 40 38 34 32

0%

10%

20%

30%

40%

50%

60%

3Q '11 4Q '11 1Q '12 2Q '12 3Q '12

Percent planning major new investments of capital

Are you actively planning any major new investments of capital over the next 12 months? If so, what percent of total sales do you expect to invest?

Over the next 12 months, 32 percent of those surveyed are planning major new investments of capital for business growth, down 2 points from the prior quarter. A year ago, 38 percent were planning major new investments of capital (6 points higher). The mean level of investment is higher than the previous quarter, 6.5 percent versus 5.6 percent of sales.

6.1% 8.2% 7.2% 5.6% 6.5%


Mean investment as a % of total sales

Service companies

All respondents

5.0% 6.9% 7.2% 6.2% 5.6%

Chart 4.5 Percent planning major new investments of capital

Mean investment as a % of total sales

Product companies

7.1% 9.1% 7.2% 5.0% 7.0% Mean investment as a

% of total sales



26

Percent planning to increase operational spending

All respondents

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12

Percent planning to increase

spending (net)

72% 72% 71% 68% 73%

• Information technology 39% 40% 40% 38% 31%

• New product or service

introduction

34% 29% 30% 30% 31%

• Facilities expansion 21% 24% 20% 17% 24%

• Marketing & sales

promotion

23% 25% 26% 21% 23%

• Geographic expansion 22% 23% 24% 17% 21%

• Research and development 16% 14% 14% 13% 17%

• Advertising 17% 18% 15% 14% 15%

• Business acquisition 15% 16% 15% 13% 13%

• Internet commerce 8% 6% 7% 6% 4%

Over the next 12 months, where do you expect to increase spending?

In third-quarter 2012, 73 percent of panelists were planning to increase operational spending over the next 12 months, up 5 points from the previous quarter. Information technology (31 percent) and new product or service introductions (31 percent) lead the way, followed by facilities expansion (24 percent) and marketing & sales promotion (23 percent). Geographic expansion was at 21 percent, and R&D spending at 17 percent.

Service companies

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12


spending (net)

77% 71% 76% 63% 78%



introduction

35% 27% 31% 28% 28%



promotion

23% 29% 31% 17% 24%



• Advertising 18% 18% 14% 12% 15%




Chart 4.6 Percent planning to increase operational spending

Product companies

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12


spending (net)

69% 73% 67% 72% 69%



introduction

33% 31% 30% 31% 33%



promotion

23% 22% 23% 24% 22%



• Advertising 16% 19% 16% 15% 15%





27

Expected barriers to business growth

Over the next 12 months, will any of the following factors represent barriers to business growth?

Lack of demand remained the most-cited barrier to business growth over the next 12 months, cited by 74 percent (up 6 points). Fifty-two percent of panelists said legislative/regulatory pressures might be a barrier (up 4 points). The percentage of those concerned about increased taxation was up 5 points to 33 percent, and oil/energy prices dipped 2 points to 27 percent. Profitability/decreasing margins as a barrier to growth dropped 2 points, to 29 percent, and lack of capital for investment remained low at 17 percent. On the rise this quarter was lack of qualified workers as a potential barrier – up 6 points to 29 percent – indicating some hiring needs are unmet.


Chart 4.7 Expected barriers to business growth

All respondents

11

12

19

26

18

33

22

37

34

54

77

12

18

19

18

22

34

24

30

32

50

71

12

18

18

17

24

38

24

27

36

46

68

10

17

16

19

19

29

23

31

28

48

68

10

12

13

17

18

27

29

29

33

52

74

3Q '12

2Q '12

1Q '12

4Q '11

3Q '11

Note: In 3Q 2012 All respondents, n=234

Lack of demand

Legislative/ regulatory pressures

Competition from foreign markets

Pressure for increased wages

Lack of capital for investment

Increased taxation

Profitability/ decreasing margins

Lack of qualified workers

Oil/energy prices

Strength of the US dollar

Higher interest rates


Service companies

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12

New business initiatives (net) 51% 61% 60% 54% 56%

• New strategic alliance 30% 29% 27% 25% 28%

• New joint venture 19% 20% 27% 17% 16%

• Expand to new markets

abroad

16% 21% 28% 18% 13%

• Purchase of another business 16% 20% 23% 15% 13%

• Bring in new partners 8% 14% 18% 8% 9%

• Sale part/all of own business 6% 9% 10% 6% 8%

• Restructure debt 8% 9% 5% 9% 6%

• New facilities abroad --- 2% --- 1% ---%

• “Angel” investors 4% 2% 2% 1% 1%

• Private placement 3% --- 4% 1% 4%

• Venture capital 2% --- 1% 2% 2%

• IPO 1% 1% 1% --- ---

28

Plans for M&A and other business initiatives

Over the next 12 months, do you expect to participate in any of the following new business initiatives?

Looking at the next 12 months, 54 percent of respondents said they expected to participate in new business initiatives, up 1 point from the prior quarter. Overall, the most prevalent expected initiatives were new strategic alliances (24 percent), new joint ventures (16 percent), and purchase of another business (15 percent). Expansion to new markets abroad was off 6 points from 21 percent to 15 percent.


Chart 4.8 Plans for M&A and other business initiatives

All respondents

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12





abroad

17% 23% 27% 21% 15%





• New facilities abroad 2% 5% 5% 4% 3%


• Private placement 2% 1% 2% 1% 2%

• Venture capital 2% 2% 2% 1% 1%

• IPO 1% 1% 1% 1% 1%

Product companies

3Q

‟11

4Q

‟11

1Q

‟12

2Q

‟12

3Q

‟12





abroad

17% 20% 27% 23% 16%





• New facilities abroad 3% 6% 8% 7% 5%


• Private placement 1% 1% 1% 2% 1%

• Venture capital 2% 2% 3% 1% 1%

• IPO 1% 1% 1% 2% 1%



29

Survey demographics and research methodology

Demographics

Who Leading privately held businesses in the United States

Interview dates July 16, 2012, to October 19, 2012

All (234) Product (136) Service (98)

Average number of employees 1,080 1,228 874

Average business unit revenues $261.4 million $354.5 million $132.2 million

Average enterprise revenues $336.6 million $444.3 million $187.1 million

Five-year growth rate 99% 114% 79%

Industry sectors Products 58%

•Manufacturing 30%

•Trade/Distribution 15%

•All other 13%

Services 42%

Methodology

PwC‟s Private Company Trendsetter Barometer is a quarterly telephone survey

conducted by the independent research firm BSI Global Research Inc.

The survey panel consists of CEOs and their designates from a geographically

balanced sample of leading private companies in the United States, as identified in

the business media.

pwc.com/us/pcs

About the research: The Private Company Trendsetter Barometer is one in a series of quarterly business outlook surveys from PwC. The survey provides a view on the 12-month outlook for revenue growth, new investments, new hiring plans, emerging business barriers, and more. In addition to the business outlook, we hear from our panelists about special issues they face as the business climate changes. Results of the quarterly business outlook surveys and special issue surveys are available from www.pwc.com/us/pcs and www.barometersurveys.com. Visit: www.barometersurveys.com Mobile: wap.barometersurveys.com Email: [email protected]

PricewaterhouseCoopers has exercised reasonable professional care and diligence in the collection, processing, and reporting of this information. However, the data used is from third-party sources and PricewaterhouseCoopers has not independently verified, validated, or audited the data. PricewaterhouseCoopers makes no representations or warranties with respect to the accuracy of the information, nor whether it is suitable for the purposes to which it is put by users. PricewaterhouseCoopers shall not be liable to any user of this report or to any other person or entity for any inaccuracy of this information or any errors or omissions in its content, regardless of the cause of such inaccuracy, error, or omission. Furthermore, in no event shall PricewaterhouseCoopers be liable for consequential, incidental, or punitive damages to any person or entity for any matter relating to this information. © 2012 PricewaterhouseCoopers LLP. All rights reserved. "PwC" refers to PwC LLP or, as the context requires, the PwC global network or other member firms of the network, each of which is a separate and independent legal entity. NY-09-1037.

Contacts: Rich Stovsky Private Company Services US Leader +1 (216) 875-3111 Ken Esch Private Company Services Partner +1 (312) 298-3419 Laurie Kelly Private Company Services Marketing Leader +1 (617) 530-4531

private company services trendsetter barometer · private company services trendsetter barometer...

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