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How Aspen Groves Are Driving Economic Growth in Colorado’s Mountain Communities

Sharing a massive root system, the aspen grove atop Kebler Pass between Crested Butte and Somerset is one of the largest living things on Earth. When its leaves turn from green to gold and red, it’s also a tourism engine.

Andrew Sandstron, marketing director for the Gunnison-Crested Butte Tourism and Prosperity Partnership, says the county’s lodging tax income reflects the trend. “September is second only to July for us and has been consistently for a number of years,” he says.

READ: Top Company 2023 — Tourism & Hospitality

In September 2015, the county’s lodging tax receipts totaled $209,000. That’s roughly doubled to $400,000 in recent years. 

“Historically, we have our shoulder season when kids go back to school, and not until we open the ski resort does it bump up again,” says Sandstrom. “The biggest growth area in the last 10 or 15 years has been that late summer shoulder season. We still see a big drop-off on August 15 when all the kids go back to school, but September pops up again.”

Between annual events like Vinotok and the Mt. Crested Butte Beer and Chili Festival — not to mention uncrowded fly-fishing and mountain biking — the Gunnison-Crested Butte Tourism and Prosperity Partnership has strategically aimed to push some of the area’s peak summer traffic into fall. 

“One of the issues in these mountain communities is the booms and busts of business, where July is slammed and October, there’s nothing, then December is slammed, then April, there’s nothing again,” Sandstrom says. “By building up those shoulders — and that fall shoulder season is our biggest growing one — it helps us level out the booms and busts of our economy and allows our businesses to better stay open and offer jobs year-round. It helps us to smooth out our economy.” 

It’s not just Kebler Pass. The state’s other aspen hotspots also reap economic benefits from the turning leaves. The aspen on Kenosha Pass “are important to the Bailey business economy, and people do count on seeing them,” says Robb Green, president of the Platte Canyon Chamber of Commerce in nearby Bailey. “We always joke that we go from the summertime RV and boat show on U.S. 285 to the leaf peepers. Once the leaves are done, winter’s in. Winters are tougher for businesses up here.” 

Jim Myers, proprietor of Sasquatch Outpost, a tourist attraction in Bailey, says the fall colors drive visitation after the peak summer season. “Things would normally slow down mid-September to mid-October, which is when the leaves are at their height, because the kids are back in school, summer traffic has died down, but we’ve found we definitely have an uptick in that period because of people coming through to go look at the leaves.” 

In a good year, the bump lasts for about two weeks, Myers adds, but Mother Nature doesn’t guarantee anything. “It depends on the year. There are years when we don’t have the leaves. It depends on the rain. There are years where the leaf season almost is nonexistent, because it comes and leaves — no pun intended — very quickly.”

 

Denver-based writer Eric Peterson is the author of Frommer’s Colorado, Frommer’s Montana & Wyoming, Frommer’s Yellowstone & Grand Teton National Parks and the Ramble series of guidebooks, featuring first-person travelogues covering everything from atomic landmarks in New Mexico to celebrity gone wrong in Hollywood. Peterson has also recently written about backpacking in Yosemite, cross-country skiing in Yellowstone and downhill skiing in Colorado for such publications as Denver’s Westword and The New York Daily News. He can be reached at [email protected]

Unprecedented Impact of Soaring Interest Rates: What It Means for the Economy

You would have to be living on another planet not to feel the deleterious impact of higher interest rates. Just when we thought annus horribilis 2022 was finally in the rear-view mirror, the bond vigilantes have resurfaced to wreak havoc on both stock and bond markets simultaneously.

Since the Federal Reserve has been steadfast in its commitment to get inflation under control, inflation has dropped significantly from 9% to 3%. This is a huge positive, but the negative of these aggressive interest rate increases is starting to be felt everywhere by Americans looking to borrow money. If you haven’t been paying attention, these are the areas where higher rates hurt the most. 

READ: Higher Interest Rates — What Does It Mean for Consumers, Bond Investors and the Stock Market?

Home mortgage rates 

The latest 30-year mortgage rates have just hit 7.5%, the highest level since 2007. At these levels, first-time home buyers have effectively been shut out of the housing market and have no choice but to rent or live with their parents. So much for the American dream of home ownership.

Moreover, why would anyone move and give up their 3% 30-year mortgage unless they absolutely had to? Many wouldn’t. These factors have caused the inventory of homes on the market to stay low and prices high. Now there is serious talk of 8% 30-year mortgages, which was unheard of just two short years ago. These high rates have a massive impact on the economy; if people aren’t buying or selling homes, they aren’t buying items to fill up these homes, and consumer spending makes up 70% of GDP. 

READ: How Do Interest Rates Impact Real Estate Investing? 

Variable rate debt 

If you have loans that are floating or variable rate, then you better start paying attention to when this debt comes due. Americans got very comfortable with adjustable-rate debt. You might have borrowed money at 2% a few years ago, but that loan will adjust in the next 3-7 years.

The higher new rates could easily double or triple, which means your interest payments could double or triple when these loans readjust. You better have a plan for when that happens. Either save more money to pay these higher interest rates or sell your home or car and rent or lease. Neither option sounds very appealing. 

Credit cards, auto loans, margins or lines of credit 

If you can’t pay your credit card on time, aren’t paying cash for a new car, or need to borrow on a line of credit or margin, you are in for a rude awakening. These interest rates have skyrocketed.

Interest on credit cards is well over 20%, auto loans are 7%, margin rates typically start at 7.5% and lines of credit loans are approaching 9%. It is incredibly expensive to borrow money for anything. If you don’t need to borrow, don’t. And definitely pay your credit cards on time. 

Silver lining 

The silver lining with the massive increase in interest rates is that you can finally get paid a decent return on your savings or cash.

READ: Finding the Silver Lining Amidst Rising Interest and Inflation Rates

CDs and short-term treasury bills now pay well over 5%. This is simply a matter of supply and demand. Too much supply and not as much demand. Don’t leave too much money in your checking account at your bank. Move excess cash to a brokerage account. Ask your advisor about rates on CDs and treasury bills. With the Federal Government borrowing more and more money to fund the ever-increasing national deficit, short-term interest could stay higher for longer than expected.

The three major buyers of U.S. debt in the past have been the Federal Reserve, China and Japan. Now, all three have either stopped buying bonds completely or have significantly cut back their purchases, which means new buyers need to emerge to take their place, and now at much higher rates. These new buyers will most likely be institutional or retail investors who like treasury bills at these much higher rates. 

It is always darkest before the dawn. When interest rates get too high, consumers stop borrowing. If they stop borrowing, demand dries up, the economy slows, companies stop hiring and may, in some cases, lay off employees to cut costs. This is exactly what the Federal Reserve wants.

The only way to kill inflation is to slow things down dramatically; the only tools it has at its disposal are to stop buying government bonds and keep raising the short-term FED Funds rate. Today, this short-term interest rate is at 5.25-5.50%. Could it go higher? That is the question driving markets these days.

As Fed Chairman Jerome Powell likes to remind us at every press conference, moves in interest rates are data dependent, but rest assured if inflation doesn’t get back to its 2% target, interest rates will remain higher for longer.

 

Fred Taylor UPDATED

Fred Taylor is a Partner, Managing Director at Beacon Pointe Advisors, LLC. The information contained in this article is for general informational purposes only. Opinions referenced are as of the publication date and may be modified due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Past performance is not a guarantee of future results. Beacon Pointe has exercised all reasonable professional care in preparing this information. The information has been obtained from sources we believe to be reliable; however, Beacon Pointe has not independently verified or attested to the accuracy or authenticity of the information.

Navigating Economic Downturns as a Business Owner: A Guide to Sustained Growth

Small- and medium-sized enterprises account for 90% of the U.S. business population. And when the economy takes a nosedive, as it’s doing now in some sectors, many of these companies can suddenly feel like a drummer who’s lost their rhythm — there’s a beat, but they aren’t hitting it. Instead of a coordinated symphony of growth, there’s a disjointed scramble just to keep pace.

Economic downturns can be either a slippery slope that knocks a flourishing company off its feet or a unique opportunity to pivot and continue to thrive in totally new ways. Flexibility is essential in business, and being ready to throw plans out the window to make deals happen is crucial.

So, let’s roll up our sleeves and dive in. We’ll explore the principles behind sustainable growth and discuss strategies for keeping your company afloat and thriving when the economy takes a turn. Spoilers — it’s about being nimble, creative and committed to meeting needs, even as those needs shift. 

READ: Preparing for Economic Downturn — 4 Tips for Colorado Business Owners

How well are you expressing your business identity?

First things first — are you clearly communicating your business offerings? As a publicist who spends much of my time decoding messaging to help companies better illustrate their services to key targets, I regularly see a gap between how companies think they’re being perceived, and how they actually are. It’s easy to get caught up in the way you talk about your business, but changing your viewpoint can be seriously effective. 

For instance, a few years ago, our clients often asked us for recommendations on graphic designers, SEO agencies and web development firms when we actually offer those services. Understanding that we weren’t communicating that clearly to our targets prompted a recent rebrand (and company name change) that has since helped us grow those areas by orders of magnitude in the last 18 months. 

In short, don’t play hide and seek with what services you can provide. Did your company design a snazzy new rebrand for a business? Be loud, be proud and say clearly, “Hey, we do that!” Leave no room for clients to seek additional services elsewhere. When the tides begin to shift, be sure to look inward to audit your own offerings and take advantage of any gaps. 

READ: Boost Your Organization’s Impact with a Successful PR Strategy — A Guide for Purpose-Driven Businesses

Position yourself as a “need,” not a “want”

Your business isn’t just providing a product or service — it’s solving a problem. As the old saying goes, “Your customers don’t want a quarter-inch drill – they actually want a quarter-inch hole.” Did you know nearly half of companies fail due to a lack of market demand? That’s why understanding your market is essential. If there’s a gap between what’s needed and what you provide, it’s time to close it and take hold of these missed opportunities for growth.

Audit your company messaging to ensure you’re speaking directly to your target audience. Use language they can connect with and make sure the value of your solution is evident. I’m here to tell you that while landing the New York Times is great, you might see more direct value in speaking to a group of highly targeted “buyers” through opportunities in a trade publication. Know your audience and meet them where they are.

A persuasive message isn’t always enough on its own — you need to back it up with proof.  By showcasing tangible results, whether it’s through success stories, case studies, demonstrations, awards or more, take the initiative to assure potential customers that you’re not just talking the talk but also walking the walk.

READ: 4 Easy Tips to Avoid Missed Business Opportunities

The right people, the right clients, the right approach

My dad always told me, “Sometimes you’re the big wheel and sometimes you’re the little wheel. Never forget what it feels like to be either.” It can be easy to get caught up in things when you’re doing well. Maybe your billable rates no longer work for one of your early clients so you’re inclined to replace them with your newer, larger clients — but the clients who stuck by you when you were starting out are the ones who helped you grow. Stay loyal to them, and they’ll be there to lend a hand when the economic winds change.

A business cannot survive without the right people and the right clients. A CNBC poll found that an alarming 52 percent of the respondents stated labor quality was their most significant problem. With this data in mind, stop and take a good, hard look at your team. Are the right people in the right seats on the bus? Are you able to adapt skill sets to meet services that are in demand (in our case, our designers work on everything from websites to infographics to presentations – depending on the needs of the client and the project)? Remember: A solid, well-fitted team isn’t just a luxury. It’s a necessity for success.

It’s time to think outside the box, get creative with hiring strategies and consider solutions like downsizing the office footprint, offering hybrid or remote opportunities and seeking out contractors or interns. Be wise, be resourceful and your cash reserves will thank you. 

READ: 5 Tips for Building a Strong Company Culture in a Hybrid Work Environment

Balancing the scales

Navigating the delicate relationship between your company’s resources (staff) and its demands (clients) is not just critical — it’s an art form. Think of your business as a scale with employees on one side and clients on the other — it’s your job to ensure each side is weighted equally. Your business will quickly suffer if one side becomes unbalanced. Whether the market is rich in opportunities or lacking them, creating a customized plan that aligns with industry trends is vital to achieving sustainable growth. Just as an idle staff is a drain on company resources, disappointing client expectations due to inadequate staffing will hurt your ability to keep current clients and add new ones. 

Last but certainly not least, know your industry inside and out. When the first-year failure rate in the professional, scientific and technical services industries stands at a scary 19.4%, you need to know the industry and target market like the back of your hand.

Sure, there’s no quick fix for economic downturns. Still, these turbulent periods test our resilience and resourcefulness, demanding us to adapt to survive or be washed away by the tides of change. While a slow market may be daunting, it also provides a unique but challenging opportunity for growth and transformation. Remember, it’s not the strongest that survive but those able to adapt. 

 

Melissachristensen Vpofpublicrelations 1Melissa Christensen is the Vice President of Public Relations at Comprise.

Preparing for Economic Downturn: 4 Tips for Colorado Business Owners

Approaching the mid-way point of 2023, the economic downturn that many predicted would characterize Colorado’s economy this year hasn’t materialized. Despite uncertainty and rising interest rates, economic indicators appear to show a resilient market. But, there is a natural cycle of economic highs and lows that all business owners have to confront at times. As we approach the second half of the year, it’s a good time to examine your position and ensure you have some intentional strategies in place to avoid “survival mode” when a downturn does present itself. 

Balancing various economic variables in a way that protects profits and cash flow, especially in a downturn, is one of the biggest challenges that business owners must address. The most successful business leaders keep a finger on the pulse of economic cycles and are prepared with both short- and long-term plans to respond to variable market conditions. 

READ: 5 Ways Small Business Owners in Colorado Can Survive Inflation

Here are four tips that can help Colorado business owners prepare for a downturn: 

Proactively manage production, sales and workforce

These three functions of business, more than any other, can provide a steadying ground for businesses during periods of economic downturn or sustained declines in demand. Business owners can create a cushion to protect themselves from the market and avoid making knee-jerk reactions by getting ahead in these areas.

Look to optimize your accounting department and focus on data-driven forecasting. With better data, executives will have the upper hand when it comes to predicting slower periods. This information gives you more time to prepare and make sound decisions before you feel the full impact of a downturn. 

Human resources is another key area that can make or break a company’s ability to weather a downturn. Set up systems to ensure you have flexibility in managing your workforce. Avoid costly hiring-firing cycles that economic swings can set off by creating an all-the-time loyal workforce. Invest in workforce development. Look for opportunities to decentralize your management structure to offer more autonomy for decision-making. A culture that engages people will always be more resilient in tough times.

Work to ensure your product or service is creating essential value for your customers

Companies that create products or deliver services that people cannot live without will protect revenue during a recession because you’re unlikely to see major changes to demand. When the economy forces Coloradans to look for more ways to save, we naturally start evaluating needs and wants. Business owners who’ve positioned their product or service firmly in the ‘need’ category will fare better because a downturn has little impact on the value of something that consumers deem essential. 

Business owners can adapt their products and services to create more essential value by paying close attention to consumer trends and responses to market conditions. We saw many examples of this phenomenon during the COVID-19 pandemic. Companies shifted business models to stay relevant and meet changing needs; restaurants prioritized takeout programs while in-person dining was restricted; retailers developed the curbside pickup option; gyms pivoted to create on-demand programs for home fitness. Even though these industries likely experienced a decline, companies survived by adapting their offerings to hold value. 

If you experience a decline in sales, you can avoid rock bottom so long as your product or service provides essential utility for your customers. 

Diversify revenue streams

The ebbs and flows of the business cycle tend to vary across industry. The threat of a recession doesn’t necessarily mean doom and gloom for every industry as macroeconomic trends tend to affect different industries in dynamic ways. It’s an exceedingly rare economic event that challenges companies across all industries. 

What’s more common is that a downturn for some will be a boom cycle for others. Diversifying your business and creating multiple, and varied streams of revenue will minimize the impact of any slowdown.

READ: What Are the Safest Industries to Start Your First Business in 2023?

Solidify your capital management strategy

The old adage that cash is king holds true today. It’s no surprise that companies with reliable access to capital are going to be the best positioned to survive and thrive during economic downturns.

Analyze your working capital to identify opportunities for improvement. Can you decrease the amount of cash you have tied up in inventory with better data that allows you to predict demand and make your ordering of products more efficient? Another tactic to improve working capital, sit down with your vendors to identify opportunities for better terms. Finally, diligent credit procedures with your customers may allow you to more quickly convert sales to cash.

As with any area of business, relationships matter when it comes to capital, too. Having a strong relationship with your lenders is essential. Communicate with transparency and form a partnership with those who you borrow money from, ensuring that you are both ready to weather an economic storm together successfully.

If you have a solid financial foundation with accessible capital during a downturn, it can be an excellent time to take advantage of growth opportunities as acquisitions tend to pick up during recessions. Many companies need backing and support when times are tough. For example, the initial success of our business at Kodiak Building Partners was largely established as a result of the 2008 recession and housing crisis. Many of our first operating partners signed on with Kodiak as a holding company during a down period to access the financial strength the model offers. If you have a sound capital management strategy in place, your business is more likely to thrive during a recession. 

READ: Recession Ahead — How to Protect Your Financial Plan

Navigating economic downturns is a critical skill for business leaders. No one can predict with 100% certainty where Colorado’s economy will go in the next cycle, but business owners who work to create some protections with well-planned strategies will be better prepared to withstand a downturn, regardless of when the economic headwinds shift. 

 

Steve Swinney headshotSteve Swinney is Co-Founder and CEO of Kodiak Building Partners, one of Colorado’s largest privately owned companies. His experience as a financial executive spans more than two decades, with expertise in mergers and acquisitions, private equity-backed ventures, financial analysis, investor relations and overall business strategy.

Surviving Food Inflation — How Colorado Restaurants Adapt to Rising Costs and Labor Challenges

Like countless other industries, the restaurant industry has been completely redefined by the pandemic. Restaurant owners felt optimistic about the post-COVID world but were immediately presented with a continued headline problem — food inflation.

READ: 5 Ways Small Business Owners in Colorado Can Survive Inflation 

According to new data released from the U.S. Bureau of Labor Statistics, prices for food away from home, which include restaurants, vending machines, schools and other foodservice facilities, increased 8.4% year over year in the first quarter of 2023.  

Same-store sales began decreasing in July 2022 after 17 months of continuous increases, according to the National Restaurant Association. Many operators also reported lower customer traffic beginning in June, which was when gas prices hit record highs. 

Other supply chain-related events, which spanned from restaurant equipment (creating issues for restaurant development and timing) to the Avian flu and eggflation issues, also negatively impacted the industry. 

Where are restaurants now? 

Inflation has had a far-reaching impact on the restaurant industry — affecting everything from the cost of materials to wages. 

Although average food prices had decreased slightly by the end of summer 2022, they increased 16.3% from July 2021 to 2022, according to Bank of America. Locally, according to the Colorado Restaurant Association, food prices increased more than 11% in 2022, the most in four decades. Many critical food items like eggs, cheese and butter have seen even more dramatic increases, leaving restaurants no choice but to increase menu prices in response.  

READ: Plant-based Protein is Taking Root in Colorado’s Food Economy

Climate issues like drought, fires and record-setting heat have also limited the availability of crops, exacerbating the food inflation problem. Food brands have found themselves short on vital food products like potatoes and other grains. 

One especially stressful part of the equation for restaurant owners today is how much food inflation passes on to customers. Restaurants need to remain competitive while still retaining a profit. If your restaurant is taking a 10% menu price increase and competitors are only taking 5%, you’re out on a limb.  

In addition to struggling to combat increased food costs, restaurants are also navigating increased labor costs. Although restaurant industry employment has rebounded, employment is still 5% below pre-pandemic levels, according to the Bureau of Labor Statistics. Two-thirds of operators said their restaurants still don’t have enough employees to support higher customer demand. In Colorado, 8 out of 10 local restaurants are struggling to hire enough staff even as industry wages have risen an average of 20%, according to the Colorado Restaurant Association. 

Together, food and labor costs account for about two-thirds of every dollar of a typical restaurant’s sales, according to the National Restaurant Association, which is why 2022 has proved so challenging for restaurant operators and their bottom lines.  

Restaurants have increased wages not only to attract workers but also to compete with other employers, particularly retail outlets. When major employers like Target, Amazon and CVS move to a $15 wage, it doesn’t matter what the federal minimum wage is. Restaurants must compete. 

READ: Rising Food Costs Create Unique Challenges for Hunger-Focused Agencies

What’s next? 

Although the outlook is uncertain with the threat of a possible recession on the horizon, indicators are displaying that any recession will likely be modest and manageable. Restaurants should take advantage of the lessons they have learned in the past few years and find hope in the signs that the worst is behind us. 

Grocery store costs increased at a higher rate than restaurant costs in the summer of 2022. Now, that widening price gap makes restaurant meals a better deal for many consumers. With about half (46%) of adults reporting that they are not eating at restaurants as often as they would like, the higher cost of groceries could drive customers back to restaurants. 

What’s more, chicken prices are expected to decrease in 2023 due to a significant improvement in production, although the impact of a lengthy war in Ukraine still hovers over future supplies and prices. And the labor situation seems to be stabilizing as well, as stimulus payments have ended, and people are reentering the workforce. Job openings peaked in March but tumbled by 1.1 million by August. 

The key components for restaurant owners are employees and partners, making labor and training significant factors for restaurants. The labor market continues to be tight but there are signs of hope. Restaurants have learned to operate with fewer people and rely more on technology which is necessary as the labor market continues to tighten. Unemployment appears to be on the rise which allows for more workers to be available to work in restaurants, serving as line cooks, servers and hosts, among a number of other services. 

READ: Veteran Unemployment: Untapped Workplace Resources

Restaurants must learn how to quickly pivot, whether that means embracing innovation or improving their services by being more flexible and adaptable. Restaurants must also learn to operate with fewer employees and rely more on technology.   

While restaurants have faced countless challenges and rising food inflation in the past few years, the setbacks have only proven how resilient the industry is. Those that made it through 2022 relatively unscathed should be proud. The future seems promising for brands that can weather these storms and welcome eager consumers back to their tables.

 

Cristin O’Hara headshotCristin O’Hara is the Managing Director and Head of Restaurant Group at Bank of America.

 

 

 

 

 

 

 

 

 

 

 

Ty M. Aslin headshot

 

Ty M. Aslin is the Colorado Market Executive for Business Banking at Bank of America 

 

 

Level Up Your Savings: Fun Challenges and Games to Achieve Financial Independence

In a time where many are feeling the impact of inflation and the rising cost for a variety of goods and services, some are also finding it difficult to make progress or even establish their savings goals. In fact, a recent survey found that 49% of adults in the U.S. have less or no savings today compared to this time last year. 

Savings goals are often directly tied to the stage of life you are in and evolve over time as goals are met, income changes and life circumstances change. For example, in your 20s and 30s, a savings account may be used to ensure you can handle an emergency expense, or to reach a goal such as paying for a wedding or the down payment on a first home. As you get older, savings can help you plan for the future. Having a plan in place to save money for not only a rainy day, but also those short- and long-term goals is the foundation of financial independence. 

READ: Mapping Out Financial Success with Retirement Planning

Making saving fun could be a great way to jumpstart your goals. This idea is called financial gamification — when you create a system of challenges or competitions for yourself in order to motivate and meet financial goals. It can turn the everyday tasks of personal finances that might not seem that fun into an enjoyable experience that also gives you rewards. 

To start with your “Savings Challenge,” get serious about the game. First, conduct a financial review so you have a good idea of your income and expenses. Next, create a challenging but realistic savings goal that aligns with your income and expenses. The point is to set achievable milestones for yourself to get the ball rolling. 

Then, give yourself a set time to hit certain goals, like saving $1,000 in the next three months. You could also challenge yourself to move $10 a week over from your checking to your savings account. However, you decide to challenge yourself, focusing on smaller goals first can be motivating in reaching and establishing larger ones. 

Here are five other fun “Savings Challenges” to try:

The Friendly Competition 

Encourage your friends to participate in their own savings challenge and see who can save the most. This game can be as structured with rules or flexible as you want it to be. Gather your friends, set a time frame and whoever has the most saved at the end of the month wins. 

Set up an Automatic Transfer 

This one is easy because it only requires upfront work with your bank and then you get to check in and reap the benefits of the game. If you have something specific you are saving money for, like a car or a down payment on a house, create a savings account with your financial partner that is specific to that goal. Then, set up an automatic draft to that account out of each of your deposits. It can be as little as $5 a deposit, but you’ll be surprised at how much easier it is to sock money away when it’s happening automatically. 

READ: Securing Your Financial Future — Key Considerations and Questions for a Solid Plan

No-Spend Weeks

Give yourself a challenge to not spend any money for a week. Keep track of each time that week that you considered or would have normally spent money and how much it would have been and at the end of the week, transfer that money into your savings account. This challenge can also bring focus to your spending habits and can help you make better financial decisions moving forward. 

Round-up challenge

When you do need to spend money, make each purchase work for you with a round-up challenge. Try for a month to note the amount of money it would take to round up to the nearest dollar every time you make a purchase. When you look at such a small amount of money per purchase, it feels doable to put those extra cents somewhere else. But at the end of the month, you may be surprised at how those cents add up! There are apps available that can help with this game as well but be sure to talk to your bank or do your research first to ensure that any app you are using is safe and secure, and to be aware of any fees you may have to pay for services.

READ: Exploring Opportunities in the Global Stock Market: Unlocking Profit Potential in 2023

Try New Savings Solutions

Once you master these games or start to hit your original goals, kick it up a notch by working with your financial partner to discuss any new savings solutions such as money market or time deposit accounts. These are specific savings accounts that can boost your goals even more and can be a fun way to contribute and watch your inputs grow.

Whether you play one or all of these games and whether you fully succeed in them or not, this is the kind of sport where you get a participation trophy proudly. Taking steps to concure to your savings challenge and give yourself a cushion is incredibly important to achieving financial independence and helping your future self. Be sure to connect with your bank in this process as well, so they can help you achieve all of your financial goals.

 

Wendel AbbyAbby Wendel is the president of consumer banking at UMB Bank.

Buying a Home in 2023 — High Mortgage Rates, Low Inventory and Tougher Approval Process

Have you tried buying a home lately? The pandemic days of 20 offers, waiving inspections and closing prices 15% above asking prices may be gone, but major issues remain. I am married to a realtor, so I can assure you I hear about it all the time; it still isn’t easy to buy a home. The new issues are high mortgage rates, low inventory and a tougher approval process. However, if you can navigate all the headwinds, owning a home can still be a terrific long-term investment.

READ: The Pros and Cons of Investing in Real Estate During a Recession

High mortgage rates

During the pandemic, mortgage rates on 30-year mortgages were below 3%. Today, they are around 6%. Variable rates were even lower. That is a significant difference for a first-time homebuyer. In fact, many younger people may not qualify because home prices haven’t come down commensurate with the rise in mortgage rates. This difference in mortgage rates could mean hundreds of dollars more on a monthly basis. As of March 31, nearly two-thirds of primary mortgages had an interest rate below 4%, and about 73% of primary mortgages had fixed rates for 30 years, according to Black Knight data.

No inventory

If homeowners don’t sell, “the movement up the ladder is sort of grinding to a halt,” said Sam Khator, Chief Economist of Freddie Mac. “It is getting much harder for first-time home buyers to jump into the market because of the lack of supply.” According to the National Association of Realtors (NAR), a healthy housing market has between four and six months of supply at current sales rates. The existing home market, which makes up most of the housing market, hit a record low of 1.6 months’ supply in January of 2022 and stood at only 2.6 months’ supply in March of 2023. 

Can’t move

People that were lucky enough to lock in a low mortgage rate of under 3% now don’t want to move because they can’t afford to pay double the interest payment. It doesn’t matter if their house is too small, in a bad location, or if aging baby boomers want to downsize. They are stuck in a home that may no longer work or be appropriate for their needs. They may have considered selling last year, but now it doesn’t make any financial sense to do so. Until interest rates drop, they have no choice but to stay where they are.

READ: LLCs and Real Estate Investing: Pros and Cons You Should Know in 2023

Tougher approval process

One nasty side effect of the recent regional banking crisis is that local banks and mortgage companies are under great scrutiny in terms of loans on their books. Buying a home requires more money down, higher credit scores and a longer job history to qualify today. The number of lenders that even want your business may have shrunk, too. Be prepared for approvals to take longer with even more paperwork than before.

Good investment

Is buying a home even a good investment? Odds are if you can stay in your home for more than five years, buy in a good location and don’t overpay, homes can potentially be one of the best investments you can make. Homes have acted as a great inflation hedge as well. If prices for goods and services keep going up, the price of your home should, too.

Baby Boomers who are selling their homes now after living in them for 20-30 years are making a small fortune. Typically, 70% of Americans’ net worth is tied up in their homes and because they are paying down the principal every month, they are building up equity in their homes over time. However, the cost of selling your home can be as high as 6% if you use a realtor, so you want to make sure you really need to move.

The good news is that your mortgage should be tax deductible. If you move but keep your home, you might be able to create a source of rental income and increase your cash flow. You would also be able to offset this rental income with depreciation and other expenses, so you shouldn’t have to pay taxes on the rental income.

READ: Purchasing a “Second Home” as Your First Property

The solution

Hire the best realtor you can find in your local market who might have pocket listings (they know about homes not currently listed but sellers would sell at the right price), have a mortgage lender letter ready showing you are a qualified buyer and finally take advantage of the 2-1 buydown concession. This buydown is a new financing tool because of higher mortgage rates.

Sellers are now subsidizing, in escrow, at the time of closing the first two years of the buyer’s mortgage at a much lower interest rate, 4% instead of 6%. After the two years are up, the mortgage goes back to the original rate. However, if mortgage rates are lower at that time, the buyer can refinance at a more favorable rate. Buyers must make sure they can afford the higher rate in case interest rates don’t come down.

Although buying a home has been difficult historically, artificially low-interest rates in 2020 and 2021 made it an incredibly attractive time to lock in a long-term mortgage. Today that isn’t the case. Higher rates are probably here to stay for the foreseeable future. My first mortgage in 1985 was at 13%, and when I refinanced at 10%, I thought it was as good as it would ever get. From that perspective, a 6% mortgage still looks like a great rate; we were just really spoiled for those two pandemic years.

The American Dream is still buying a home, and over the long term, has been a great creator of wealth in this country. I don’t see why this time in history is any different just because of higher interest rates. It could be much worse, like 1985.

 

Thumbnail Fred Taylor HeadshotImportant Disclosure:

Fred Taylor is a Partner, Managing Director at Beacon Pointe Advisors, LLC. The information contained in this article is for general informational purposes only. Opinions referenced are as of the publication date and may be modified due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Past performance is not a guarantee of future results. Beacon Pointe has exercised all reasonable professional care in preparing this information.

Batten Down the Hatches: Fine Tune Your Small Business Plan for Any Economic Environment

In recognition of the more than 33 million small businesses in the U.S., we are sharing helpful best practices to fine-tune your small business plan to weather economic shifts. 

Responsibly manage your business debt

Interest rate changes have significant impacts on business lending. To effectively manage your debt, consider these financial tactics before applying for a business loan: 

READ: Higher Interest Rates — What Does It Mean for Consumers, Bond Investors and the Stock Market?

Convert floating debt

Consider converting any floating-rate debt to fixed-rate debt, which flips the mindset from short-term financing to a longer-term solution that may be more suitable for your small business paln. Although many borrowers use their investment portfolio as a natural hedge for floating-rate debt, it may still make sense to lock in a low, fixed-rate now for any variable-rate debt you may have.

Consolidate debt

If your company has extensive overhead costs with bills and outstanding balances, debt consolidation could be a smart strategy to move existing debt into one streamlined payment. Debt consolidation can potentially provide a longer repayment period and/or lower interest rate — both of which can help improve available liquidity. 

Clean up your credit and tax liens

A tax lien is the government’s legal claim against your property when you fail to pay a tax debt. Make sure your credit and tax debt are up to date and tidy to ensure you’re getting the best rates available. 

Transition from alternative lending sources to conventional

If your business has alternative financing on the balance sheet, but you’ve been able to stabilize your profits and expenses, now may be the right time to convert your debt to more traditional loans and lending. 

READ: How Colorado Businesses Can Benefit from Nontraditional Funding and Private Equity Firms

Be honest with your banker

This may seem obvious, but you’d be surprised how many business owners inaccurately fill out loan applications whether intentionally or inadvertently. Filing for bankruptcy or having a tax lien is not an automatic disqualifier in the application process. With that in mind, it’s better for your relationship with your banker to be transparent about details. 

Strategies to improve income

If cash flow is top of mind, take inventory of your equipment and see if there is anything old or outdated that can be sold, refinanced or salvaged. Also, spend time reviewing your assets to determine how they can help the business work smarter and improve liquidity with your small business plan in mind.

If your business is inventory-based, assess your supply regularly and consider buying in bulk or shopping around to get the best purchase price. Another option is to restructure your pricing to align with the current market, inflation and competitors. However, be wary of aggressive price increases to avoid upsetting your current customer base. 

Another way to improve cash flow is to streamline your accounts payable and accounts receivable processes. Review timing, steps and ways to reduce your business bank account churn. 

Combat supply chain challenges

Small and large businesses alike are being impacted by supply chain disruptions like slow manufacturing and delayed shipping. As a result, we continue to see increases in shipping costs, storage expenses, delivery delays and logistics issues.

To combat the supply chain challenges, consider ordering material further in advance than typical so you can more confidently predict what you need. This can impact upfront costs, but can also help assuage concerns about products, parts and shipping timing. 

Implement employee-retention strategies

With unemployment in the U.S. at 3.5%, it’s important as a business owner to develop employee-retention strategies to not only keep your employees but ensure they are happy in their roles. With nearly historical lows and despite some recent softening, the labor market remains competitive.

READ: Navigating the New Era of Employee Engagement — Everything You Need to Know

Here are some financial considerations in today’s labor market: 

  • Invest in and strengthen your current team through talent development, wage reviews, internal promotions and hires to help retain your current workforce. 
  • Recognize that hiring costs have increased and plan accordingly. If raises and promotions are not in your small business plan, focus on benefits to make up any difference in salary or hourly pay.
  • Embrace the hybrid home-office schedule and provide flexible work environments. Consider how the work-from-home shift can help you cut costs if your industry allows for virtual or asynchronous work.
  • Be shrewd in your resourcing forecasts knowing you may not have the upper hand in resignations and new hire negotiations.

Maintaining an effective small business plan requires an immense amount of discipline and perseverance, even in the best economic conditions. In today’s volatile environment, this is more important than ever. As a business owner, you must be willing to adapt to any changes that come your way and pivot to ensure your business is successful. Strategize and plan well by having a strong relationship with your banking partner, managing your debt, improving cash flow, finding alternative financing options and focusing on employee retention.

 

Jake Hymes HeadshotJake Hymes is the senior vice president, director of small business at UMB Bank.

The Pros and Cons of Investing in Real Estate During a Recession

Regardless of your finances, investing in real estate during a recession might be a hard concept to wrap your head around, and understandably so. Although a potential 2023 recession won’t be like the Great Recession of 2008, which was directly related to the housing market, people and businesses alike are tightening belts in anticipation of financial hardship on an unknown scale.

READ: What Does a Recession Mean for Your Finances? 

A recession is broadly defined as an economic contraction or two consecutive quarters of GDP decline. A potential 2023 recession would impact various individuals and industries, especially the real estate industry.

Home prices rose in 2021 and stayed high in 2022 as more people sought new homes further away from city centers. Now, rising interest rates and daily layoffs will have some bearing on real estate in the coming months.

This doesn’t mean all hope is lost if you want to invest in real estate this year. Real estate buyers in good financial standing will still have options to invest in property. Here are some of the pros and cons of investing in real estate during uncertain economic times.

Pros of Investing in Real Estate During a Recession

1. Lower purchase prices for home buyers

Even the rumors of an economic downturn can be enough to drive down the demand for residential real estate. This decline in demand will likely lead to a decline in real estate prices, which spiked in 2022.

Home prices are not as threatened as they were in 2008, but interested and prepared buyers can take advantage of a likely dip in listing prices in hot real estate markets like Colorado’s.

2. Diversified assets

The stock market is one of the most visible ways a recession manifests for consumers. People who have money invested in the market may benefit from investing in real estate and other alternative assets while stock prices are on the decline.

3. Reduced competition

Despite the pros, investing in real estate isn’t part of most people’s recession finance strategies. Recessions often lead consumers to reduce their discretionary spending and instead shore up cash and emergency funds. 

The result could be the opposite of the buying frenzy many markets have seen since the start of the pandemic. With less competition for real estate, you won’t have to take as many risks to win any potential bidding wars.

Cons of Investing in Real Estate During a Recession

Higher interest rates

Many recession fears began when the Federal Reserve quickly drove up interest rates in 2022 to ease the effects of inflation. These high interest rates are still in place, making it more expensive for potential buyers to borrow money. Lenders are also likely to be more selective when evaluating candidates for a mortgage, prioritizing higher credit scores and increased down payment requirements.

READ: Higher Interest Rates — What Does It Mean for Consumers, Bond Investors and the Stock Market?

Increased personal financial risk

Recessions are unpredictable, but they often trigger an increase in unemployment as businesses let go of employees to cut costs. Before making a real estate purchase, make sure you have enough cash flow and stable income sources. If you were to lose your job or face any other short-term financial hardships, it could jeopardize your ability to pay for essentials. 

Real estate is still a costly purchase when you consider the associated closing costs and broker fees. Find ways to reduce some of these costs, such as working with a discount real estate agent or negotiating the total price.

Fewer people selling homes

If you’re planning to sell a property you already own in favor of a new one, a decline in listing prices could mean lower profits from the sale. Smaller profits will make it harder to buy a new, high-value investment property. 

Best types of real estate to invest in

If you have cash flow and income stability, a recession shouldn’t stop you from investing in Colorado real estate. Aside from a single-family home purchase, here are some alternative types of investments to consider.

READ: What Is the Difference Between Class A, B, C, and D Properties?

Rental Properties

A recession may slow down first-time home purchases, but people will still need housing. Purchasing a rental property provides another source of income for your household, whether it’s a short-term lease or a consistent vacation rental. Colorado in particular has become a desirable destination for remote workers who value the flexibility of short-term and vacation rentals, and an economic downturn might mean rental property owners are ready to sell.

As with any property investment, owning a rental property also means taking on landlord responsibilities and maintenance costs. Be sure to factor those in as you evaluate whether a rental property purchase is right for you.

Properties you can “flip”

For those with time, patience and the real estate knowledge to flip a house, banks and owners selling homes for cash provide an opportunity to turn a respectable profit on a real estate investment. But flipping a house isn’t as simple as reality television makes it seem. Ensure you have the cash on hand to make the purchase and cover any expenses incurred during the renovation.

If you’re not ready to take on the financial risk of a fixer-upper, try wholesaling to earn extra income from real estate during a recession. Wholesaling is a short-term strategy similar to flipping but that doesn’t require the wholesaler to purchase the property. Instead, wholesalers work as intermediaries to help eager sellers let go of their properties, accumulating capital in the process.

READ: How to Sell Your House in a Down Market — 6 Easy Tips

Real estate and REIT ETFs

Investors who want the financial benefits of real estate investing without the burdens of home or property ownership should consider real estate or REIT exchange-traded funds (ETFs). REIT ETFs add the diversity that real estate investment offers in a financial portfolio without the surprise costs of physically owning and managing a property. These ETFs are also often low-cost, an added benefit during a period of economic downturn.

Investing in real estate during a recession is still possible

A recession shouldn’t mean an end to your dreams of real estate ownership. Potential buyers with cash flow and strong credit can take advantage of the decrease in competition and listing prices. Real estate investment, like any investment, comes with risk. As a potential investor, it’s important to evaluate how much risk you are willing to tolerate in exchange for the addition to your portfolio.

 

Screen Shot 2021 12 28 At 113128 AmLuke Babich is the Co-Founder of Clever Real Estate, a real estate education platform committed to helping home buyers, sellers and investors make smarter financial decisions. Luke is a licensed real estate agent in the State of Missouri and his research and insights have been featured on BiggerPockets, Inman, the LA Times, and more. 

Polis Administration Announces: Cannabis Business Loan Program

Earlier this week, Gov. Polis and the Cannabis Business Office (CBO) within the Colorado Office of Economic Development & International Trade (OEDIT) announced the Cannabis Business Loan Program for social equity licensed cannabis businesses in Colorado. The CBO has partnered with mission-based lender NuProject to provide financing that is not otherwise available to cannabis businesses through traditional lenders.

“This landmark loan program will create and retain 239 good-paying jobs and promote equity in the cannabis industry by providing growing businesses access to funding,” Gov. Polis said. “I am committed to saving small businesses money and ensuring our state remains a great place to start and run a business in every industry. Thank you to NuProject for partnering with Colorado on this exciting milestone and working to support innovation in Colorado’s cannabis industry.”

READ: Native Roots Guest Commentary — Inclusivity in the Cannabis Industry

Traditional funding sources designated for small businesses often preclude the cannabis industry, causing cannabis business owners to experience increased difficulty accessing capital as they grow their businesses. To help fill this funding gap, the Cannabis Business Loan Program will provide loans between $50,000 and $150,000 for renovations or expansions, the purchase of equipment, real estate or use as working capital. Loans will have favorable and manageable terms based on borrower needs.

NuProject, which has a proven history of lending to cannabis businesses, specializes in mission-based and character-based lending. These practices help business owners obtain loans even if they have limited cash flow, lack the traditional assets necessary to secure financing or have experienced other challenges obtaining financing. NuProject also provides educational assistance and mentorship to assist business owners in preparing for loan applications.

“NuProject is committed to redirecting the typical flow of financing so that small business owners in the cannabis industry, especially those who’ve been historically excluded from access to capital, can access the resources they need to grow their businesses. When cannabis business owners have access to financial support and the know-how to put that funding to work, they can run better businesses and have the opportunity to build generational wealth through the cannabis industry,” said Jeannette Ward Horton, NuProject CEO.

NuProject and the CBO will manage the Cannabis Business Loan Program as a revolving loan fund. As loans are repaid, the interest generated will be reinvested into the fund to support future borrowers. The initial $1 million investment is expected to lend $2.9 million over the next 10 years, creating and retaining important jobs in Colorado.

“Colorado’s Cannabis Business Loan Program is at the forefront of the cannabis industry, creating a new model to help these small business owners access the resources they need to grow and thrive. Together with NuProject, the Cannabis Business Office is making it possible for cannabis businesses to grow, create new jobs and contribute to a Colorado economy that works for everyone,” said Eve Liberman, OEDIT Executive Director.

The Cannabis Business Loan Program announced this week is the third CBO funding source available for Colorado’s social equity licensed cannabis businesses. The Cannabis Business Grant, launched in 2021, provides $25,000 Foundational Grants to help early stage cannabis businesses with their startup needs and $50,000 Growth Grants to support existing cannabis businesses as they grow or refine their operations. The Cannabis Business Loan Program is designed to support larger, more established cannabis businesses as they continue to grow.

Recipients of Cannabis Business loans are required to be social equity licensed cannabis businesses that have been awarded a regulated business license from the Marijuana Enforcement Division. To be notified of future rounds of grant funding or developments related to the loan program, subscribe to the Cannabis Business Office newsletter.

 

About NuProject

NuProject works to build generational wealth and opportunity via the legal cannabis industry for the communities most harmed by cannabis criminalization. To that end, NuProject provides diverse-owned cannabis businesses with funding, coaching, and connections. Since founding in 2018, NuProject has delivered more than 1900 hours of coaching and funded $2.3M in loans and grants to historically underserved entrepreneurs. 100% of NuProject’s loans have been funded to socially and economically disadvantaged-owned businesses across five U.S. states and Canada. Culturally responsive and mission-driven, NuProject’s lending approach was designed for equitable funding. Visit www.nuproject.org for more information.

About Colorado Office of Economic Development and International Trade

The Colorado Office of Economic Development and International Trade (OEDIT) works with partners to create a positive business climate that encourages dynamic economic development and sustainable job growth. Under the leadership of Governor Jared Polis, we strive to advance the State’s economy through financial and technical assistance that fosters local and regional economic development activities throughout Colorado. OEDIT offers a host of programs and services tailored to support business development at every level including business retention services, business relocation services, and business funding and incentives. Our office includes the Global Business Development division; Colorado Tourism Office; Colorado Outdoor Recreation Industry Office; Colorado Creative Industries; Business Financing & Incentives division; the Colorado Small Business Development Network; Cannabis Business Office; Colorado Office of Film, TV & Media; the Minority Business Office; Employee Ownership Office; and Rural Opportunity Office. Learn more at oedit.colorado.gov.