Recently there has been an increasing appetite for information and results around working with the smallest manufacturers. Not just the generally defined small manufacturer with under 500 employees, but the very small manufacturers with under 20 employees1. MEP is focusing more on serving the very small manufacturer, but to do so we need more information. How do you define these very small manufacturers? What support do they need? Is it different from the needs of the regular small and medium manufacturing base? These questions are important to define if we are going to increase our positive impact with this select group.
When I began to think through this, The National Federation of Independent Businesses put out a report entitled Small Business Economic Trends2. This report surveyed small businesses, regardless of industry, and gauged their outlook on the present and future. Many interesting things can be gleaned from this report, but what stood out to me were the single most important problems faced. Small businesses reported their biggest problems, with financing and taxes ranking the highest. This got me thinking about MEP data from smaller manufacturers, and how we can do a similar type of analysis specific to our clients.
As part of the NIST MEP client survey process, MEP center clients are asked to identify the top three challenges their companies face over the next three years. We’ve been asking this question for almost 7 years and tens of thousands of center clients have responded. They identify a host of issues they are facing, which gives us insight into manufacturers’ thinking. Below is a snapshot of the client challenges reported to us over the last year and compares the challenges of the very small manufacturing client to the entire population of clients.
- The top three challenges facing very small MEP clients over the next three years are: 1) Ongoing Continuous Improvement, 2) Identifying Growth opportunities, and 3) Product Development/Innovation. This is consistent with the population of our survey respondents over the past year, who reported the same top three challenges in the exact same order.
- The most notable differences between very small client respondents and all respondents occurred on the topics of identifying growth opportunities, ongoing continuous improvement, employee recruitment and retention, and financing.
- One in five very small manufacturers foresee financing as being a challenge, whereas only one out of ten manufacturers overall envision this as a challenge moving forward. I would suspect that this is due to where the businesses are in their life cycles. The smallest businesses usually lack capital, have more expensive loans, and have a higher chance of default.
- A surprising difference occurred when asking about the export/global engagement challenge. A greater percentage of very small clients (9%) anticipate the challenge of exporting than the population of client respondents (7%). One would think that as a company grows leaders will begin to think about global expansion, so it is interesting to see that the smaller companies are thinking about exporting a bit more than manufacturers as a whole.
The MEP program is committed to strengthening U.S. manufacturing by continually evolving to meet manufacturer’s changing needs. A starting point in the continual evolution of the program is understanding, defining, and projecting these needs. The differing concerns of our client base reflects where different businesses are in their life cycle, underlying economic conditions, industry trends, and specific company requirements. When you take a look at data such as this, you find that it provides a useful view on how clients are projecting their future. From this we know that the challenges differ in importance in significant ways across industries, firm size, and other characteristics. And by better understanding the significant differences between the smallest of the “small” companies, we can better tailor our services to reach and assist more manufacturers.
This post builds on one written earlier in the year, What Keeps You Up At Night? by Ken Voytek, and will be followed up by a series of blogs analyzing the challenges of clients across different characteristics. Be on the lookout for future posts.
1 NIST MEP uses the SBA definition for small manufacturers. For our own program management purposes at NIST MEP, we further segment small manufacturers in terms that are commonly used by the U.S. Census Bureau↩
2 Dunkelberg, W., & Wade, H. (2015). NFIB Small Business Economic Trends. National Federation of Independent Businesses, (Sept. 2015). Retrieved October 1, 2015, from http://www.nfib.com/↩