Small Businesses Seeing Fewer Manufacturing Sales

Small businesses have been struggling somewhat in recent years even as the national economy continues to recover, and that was recently reflected in a downturn in sales numbers of independent manufacturers.

Manufacturers' sales growth stood at a rate of 2.3 percent through the end of September, and while that's still in positive territory, it's also a significant dropoff from the 10.5 percent improvement seen at the end of the same month a year earlier, and 15 percent from September 2011, according to the latest data from Sageworks. In addition, manufacturers with annual sales totaling less than $5 million have actually seen a 3 percent drop in these rates.

"We're a little bit concerned, because privately held companies overall during this expansionary cycle have grown sales by about 10 percent a year for the past [three and a half] years or so, but over the past six to nine months, those growth rates have been going down," said Sageworks chairman Brian Hamilton. "No one knows for sure why companies in aggregate slow down, why their sales growth rates start going down. This gets into the cyclical nature of the economy and so on. But remember, we have been in this expansionary cycle for about four years, and on average in the U.S., typically, our economy tends to slow down at that time, so we're a little concerned."

Small businesses in other industries are likewise seeing lower sales rates as well, the report said. Across all sectors, privately-owned companies had annual sales growth of 3.8 percent through the end of September, which likewise compared unfavorably to the double-digit increases seen in the same month in the previous two years. Likewise, the smallest companies are also suffering the smallest growth, with theirs coming in at just 1 percent.

Despite these issues, small manufacturers added about 19,000 new jobs with a seasonal adjustment, the report said. However, that only brought employment in the sector up less than 1 percent in the previous year.

Owners who want to shore up their companies' financial positions in light of waning sales growth may want to do more to make sure their costs are as low as possible. This may include finding low-cost small business insurance that fits each enterprise's unique needs. Cutting costs for liability insurance, for example, may by itself save companies thousands of dollars per year.