Posted: December 01, 2008
The morning after
After touring wine country, Top Company winners rise early to discuss the economy and their businesses
By Mike Cote
Touring California wine country should have offered the winners of the Top Company awards a refuge from the market chaos. If only they had left their BlackBerrys and iPhones at home.
On what would be declared the worst week in Wall Street history, executives from the winning companies and sponsors UMB Financial and ColoradoBiz visited vineyards in Napa and Sonoma valleys in October, wining and dining and getting to know each other.
But as much as the group of 20 kicked back on the bus and relaxed, they couldn’t help watching the Dow freefall from their phones — and feeling a little like they were fiddling while Rome was burning.
Even if they had managed to push that thought out of their minds, it was there waiting for them the next morning when they convened at 7 a.m. for an economic roundtable at the Fairmont Hotel in San Francisco. This year, Bill Greiner, UMB’s chief investment officer, wouldn’t be making the trip to offer his forecast. He had more pressing duties so UMB CEO Mariner Kemper told him to sit tight.
"We’re running an $11-and-a-half billion shop here," Greiner would say a month later. "I was talking directly to clients a lot, two or three at a time. And clients were calling in. I needed to be available."
So Kemper kicked off an informal roundtable discussion. A lot more would happen in the weeks ahead, from the federal government taking a stake in major banks to the election of President-elect Barack Obama, with plenty more Dow chaos in between.
The general theme was to plan for tough times and be ready to take advantage of opportunities.
"Consumer confidence is what leads this whole thing. People are pulling back," Kemper said. He noted that September sales figures from major retailers were down between 10 percent and 15 percent in September - foreshadowing the dismal consumer confidence report that would come out a few weeks later.
"The consumer is drawing back," Kemper said. "As a banker, I’m pretty concerned about where this is headed. The big question is: Where is the bottom?"
For upstarts like Alpine Waste & Recycling and LEI Companies, both Top Company winners this year, the big question is access to credit. Commerce City-based Alpine relies on financing to purchase trucks.
"Last year we did a phenomenal amount of borrowing," said John Griffith, Alpine’s president. "I don’t really know how dramatically the credit market is going to affect us because everything is fine right now. The trucks we have ordered in January were ordered in advance, and we have everything set up for them. I don’t know exactly what the ramifications will be. I guess we’ll find out with the next truck we try to order."
LEI Companies, a Denver electrical contractor that works on commercial projects, is used to scrapping for financing, CEO Brandon Berumen said.
"We’ve had our same line of credit that we had three years ago when we were doing just under $3 million," he said. "Now we’re doing $6 million, $6.5 million."
But the growth has not led to greater financing options: "Just in the last eight months, we’ve probably submitted three to four different loan packages to different banking institutions. They’ll always come back and say, ‘It seems like you’re getting a good deal right now. I don’t know if we can do any better than that.’"
Because of work already in the pipeline, Berumen expects a strong year for LEI - but the company could face tough times in a year if fewer commercial construction projects come out of the planning process in the coming months.
Media companies found out how tough the coming year will be as they renewed advertising contracts this fall, which tend to be signed for quarterly or annual cycles, said
Dan Wiesner, CEO of WeisnerMedia, which owns ColoradoBiz.
"There are a couple of things going on that make ours a little bit more difficult. There’s the big trend to online and all the changes that happened with Craigslist, which turned our model upside down because they give it away for free," said Wiesner, who sold four national business trade publications to a New York publisher a few months before the market crashed.
"We need to prepare for tough times," he said. "That means trying to cut the cloth to fit the suit, be smart about how you’re going to budget next year both in terms of revenue and expenses." But Wiesner also will be on the lookout for opportunities to acquire other magazines, buying "stuff that’s beat up a little bit but has a lot of promise."
Chris Toll, a partner with the law firm Holland & Hart in Denver, a Top Company sponsor, said the vast majority of law firms are seeing a downturn in business and that one report he saw projected an 8 percent drop in profitability nationwide in 2009.
"You tend to see the transactional side of the practice really slowing down, especially in parts of the country where firms were focused a lot on anything having to do with mortgage-backed securities," Toll said in November. "A lot of East Coast firms have had to lay off large numbers of people, though there has not been much of that here in Colorado."
Heller Erhman, a San Francisco law firm with 500 employees that was more than a century old, voted in December to dissolve. "In recent years the firm had grappled with a variety of challenges, including the financial strains of trying to compete in an increasingly globalized legal industry," the San Francisco Chronicle reported.
"I would suspect it has a lot to do with the current economic situation," Toll said.
For Top Company finalist Catalyst Repository Systems, the financial services meltdown comes with a silver lining. Dubbed "Google for lawyers," the Denver company, which spun off several years ago from Holland & Hart, operates servers that help law firms and corporate legal teams manage the mountain of electronic data used in modern litigation.
"The bad news is a lot of our companies are these financial services entities so we’re concerned about being paid," said Lew Visscher, chief financial officer for the company. "The good-news side is we’re in the litigation business and so we believe there’s going to be a bunch of litigation that comes out of this."
Catalyst grew about 65 percent this year and expects to grow by 50 percent next year, Visscher said.
Nonprofits ready to weather the storm
Visscher, who lives in Lafayette, is on the board of the Emergency Family Assistance Association, a Boulder-based nonprofit. In November it holds a fundraiser that collects about 15 percent of its annual budget. Visscher said the board feared that the event wouldn’t meet its $300,000 goal.
"The board has been very nervous about what’s going to happen with that. They think the number could be $150,000 to $200,000," he said.
The fundraiser ultimately fell just shy of its goal, Visscher later reported, but only because individual donors dug into their pockets to make up for the 15 percent to 20 percent cut in corporate donations tied to the financial-services industry.
For the two nonprofits represented at the roundtable — 2008 Top Company winner Junior Achievement and 2007 winner Big Brothers Big Sisters of Colorado — the economic malaise was certainly a cause for concern. But the business models of the two groups offer some protection from downturns.
"Most of our funding comes from corporations," said Robin Wise, the CEO and president of Junior Achievement, Rocky Mountain Region Inc. "If you compare it to 9/11 we weren’t really impacted by 9/11 because our corporations had already made commitments and they honored them."
Junior Achievement even received some surprise funding gifts this year, Wise said.
"I think the mission helps," she said. "We have a mission to teach kids about economics, financial literacy, work readiness, entrepreneurship. Those are all things that have kept our country strong."
Top Company winner New Frontier Bank, which champions its role in the community as a philanthropic entity, aims to continue that role in the downturn.
"That’s one thing we’ve been conscious of during these hard times is to still keep our name out there and keep involved and active," said Shelley Frogatte, vice president of marketing for the Greeley-based bank.
One of the challenges for nonprofits is that the demand for services rises as the economy — and funding sources — sour.
"Your revenue comes from a different source than your actual clientele using your product," said Dave DeForest-Stalls, CEO of Big Brothers Big Sisters of Colorado. "Our need goes through the roof in a time like this."
DeForest-Stalls took advantage of the contacts in the room to get their opinion on one of his goals for the coming year: to negotiate a new lease for the nonprofit’s offices, which come up for renewal in February. Looks like he’s got a silver lining on that one, the group assured him.
"I’d argue that you’re sitting in a good spot and should get out there and get a good deal," Kemper said.
Mike Cote is the former editor of ColoradoBiz. E-mail him at firstname.lastname@example.org.
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