Michigan's business climate has taken a turn for the better
(Editor's note: This story was written by Ann Arbor resident Robert H. Holland, chairman and CEO of business group Vistage Michigan.)
We have ample reasons to be optimistic about the Michigan economy. While it may take a while longer for it to play out, as our nation continues its recovery from a deep and prolonged recession, we are making substantial progress in improving Michigan’s overall business climate. In fact, Michigan recently enjoyed the largest improvement in its jobless rate of any other state in the country.
Their achievements include a balanced state budget, without resorting to any one-time fixes; putting municipalities and the needs of children ahead of special interest groups; and creating a sound environment in which businesses can compete. The latter is highlighted by a new business tax system, which replaces the onerous, unfair and anti-competitive Michigan Business Tax.
While being equitable to Class C corporations, the new system, in eliminating the double taxation previously imposed on individual businesses, partnerships and LLCs, will be a great boost to small- and mid-sized entities and professional corporations.
Coming from a business background, Gov. Rick Snyder gets it. Municipalities and schools must be run efficiently. Workers must possess the skills and motivations required of the modern, global economy. We can’t invest well for the future while mired in past debt. Businesses must have sound reasons for coming to or staying in Michigan.
An improved economy is already apparent. Manufacturing has rebounded with the Big Three and their suppliers returning to solid employment levels. These entities are profitable and making substantial investments in our area in new or expanded operations, which also boosts feeder businesses like health care and personal services. Educational leaders like the University of Michigan, Michigan State University and Wayne State University are unleashing new businesses from their research and consultancy activities that look to “stick” beyond the startup stage, including in medical devices and alternative energy.
As a result, businesses in Michigan have grown over the last 12 months. Our Vistage Michigan members, alone, experienced an average 5.8 percent growth in revenues, year over year for the last five years. This rate of growth has actually been sustained through 2008 and 2009 and will continue through 2012 and 2013, if current economic projections hold.
While the Occupy movement grabs headlines, it is important to note that many responsible small- to mid-sized business owners in Michigan have exercised restraint during difficult times, tightening their own belts in concert with their staffs. These leaner organizations are prepared to grow meaningfully as our economy once again expands.
The recovery period for recessions has averaged 12 to 15 months in recent decades; the 2001 recession being an exception, at 39 months. Until now. We project that it will take until the end of 2013, more than five years, to achieve 85 percent of the 2007 employment levels.
Regardless, Michigan added 28,000 jobs last year. Economists are projecting 32,000 new jobs in 2012 and another 37,000 new jobs in 2013, for a three-year total of about 100,000 new jobs. These include solid positions in health care, training, business services, consulting, engineering development, product design and alternative energy.
As the new taxing principles kick in, this business growth will be augmented by commercial and residential construction, which is starting to move into development and financing pipelines, including in Livingston, Washtenaw and Oakland counties. With job growth and improved discretionary income, retail and other secondary services should pick up by the end of this period.
To exploit this improved economic climate, business leaders should:
- Invest in growth. Hire employees for future needs. Be confident and positive about moving ahead as a business.
- Acquire equipment and technology, along with the people who are skilled in those technologies, to be more efficient, productive and change the way business is done.
- Diversify product lines and markets. Some companies may be able to enhance the way they service their product lines, increasing competitiveness and net sales. Others have great products or services that could be expanded to new markets.
- Learn how to deploy the new digital integrated marketing techniques, in order to reach new customers and markets.
With improved commercial lending sources for small- to mid-sized businesses, better schools, stable taxation and more productive government, buoyed by strength in automotive and emerging industries, Michigan can once again join the ranks of economic over-achievers. Let’s get to work.
Vistage Michigan is part of a chief executive organization, providing business leaders with access to new business perspectives, innovative strategies and actionable items for making better decisions and achieving better results. For more information on Vistage Michigan, call 586-443-5880 or visit www.vistagemichigan.com.