Incentives & Economic Challenges: Key Insights For Manufacturers

September 23, 2025

National CPA Meeting Highlights Strategies For Maximizing Incentives & Strengthening Profitability In A Dynamic Manufacturing Landscape

GBQ recently participated in a national meeting of CPAs serving manufacturers. Active involvement in industry-specific organizations is integral to GBQ’s approach. In doing so, GBQ can deliver timely, strategic insights that help manufacturers navigate evolving challenges and capitalize on opportunities within today’s dynamic manufacturing landscape. Below is a summary of some of the key highlights from this most recent meeting.

Incentives: Opportunities & Challenges

Manufacturing companies continue to face opportunities and obstacles in leveraging economic development incentives across the U.S. While incentive packages can offer substantial returns, often 3-5% of net new jobs created and 5-10% of investment value, the reality is that up to 50% of offered benefits go unclaimed due to compliance challenges and insufficient monitoring. This underscores the need for rigorous oversight, strategic timing, and partnership. Manufacturers should begin incentive discussions six to eight weeks before final project decisions, especially during the letter of intent or due diligence periods, to maximize their returns.

Key triggers for eligibility may include any of the following:

Adding more than 25 jobs within five years
Investing at least $3 million in new equipment
Acquiring or relocating facilities, or expanding operations

Merger and acquisition activities may also qualify, particularly if the seller previously secured incentives or if the activity is creating net new jobs in the state for the acquirer. Generally, retail operations are excluded from state-level programs. This includes automation initiatives, which may not generate as many new jobs and require additional allowance for incentive qualification. Manufacturers should educate economic developers about the strategic value of automation and consider scenario planning to ensure projects align with available incentives.

Manufacturing Industry Conditions: Economic Realities

A recent study of middle market manufacturing activity and outlook highlights a persistent “wait and see” sentiment, driven by uncertainty surrounding tariffs, geopolitical risk, and interest rates. Most manufacturers are not yet adjusting fixed costs. This is despite two-thirds forecasting flat or declining revenues and nearly nine out of ten anticipating flat or dropping profits. These trends are currently at odds with only one in four contemplating current capacity and making adjustments to or reducing the workforce. This raises concerns about the long-term profitability, suggesting many businesses remain oversized for current and forecasted demand.

Raw material tariffs, rising costs, inflation, and recession risk dominate executive concerns. Robust scenario planning, validated demand forecasts, which may require applying a 20-25% discount to customer projections, and sharper quoting processes (factoring in aging assets and market pricing, not just “cost plus”) are essential for stability.

With the current landscape and outlook, manufacturers are encouraged to decisively move away from a passive, “wait and see” approach by harnessing operational data for robust forecasting and scenario planning. Practical strategies include applying a 25% discount to current year projections (and an extra discount considering 2024 volatility), right-sizing labor for actual demand, and implementing quality-of-earnings assessments driven by data. Evaluating cost-plus quoting against market price and capturing efficiency gains are more crucial than ever for profit sustainability. By aligning strategies with broader business planning, manufacturers can better weather industry turbulence and position themselves for growth.

Reach out to GBQ’s Manufacturing Team for insights and answers.

By Mike Purcell, CPA, Partner, Assurance & Advisory