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Open for Business — Four Priorities for Maintaining Colorado’s Economic Competitiveness

It’s easy to forget that Colorado businesses aren’t buildings, they are real people — employees, business owners, suppliers, investors — that make up the foundation of Colorado’s economic success. It’s also easy to forget that the economic concerns affecting individuals and families, like inflation, high interest rates, supply chain issues and more, also impact business. Additionally, recent surveys have reported that business owners share some apprehensive feelings toward Colorado’s economic competitiveness.

The most recent Leeds Business Confidence Index from the University of Colorado reported that business leaders show more pessimism today than this time last year when it comes to the state and national economies.

READ: Our Economy in 2023 — What to Expect

When asking large employers in Colorado for their priorities that state leaders should consider for building a stronger economic outlook, these are the items that rose to the top:  

Prioritize a competitive tax and regulatory agenda.

Colorado’s economy has been among the strongest in the country and consistently ranks high in comparison to other states. However, new regulations, taxes and fees at the state and local levels have contributed to a higher cost of doing business in Colorado. 

READ: How Will FTC’s Proposed Ban on Non-Compete Clauses Impact Colorado Law?

Public policy has a profound impact on these costs. One recent example is the enacted Family and Medical Leave Insurance Program (FAMLI). On January 1, Colorado employees started seeing paycheck deductions for FAMLI and businesses are also footing the cost. While the numbers may seem innocuous, adding yet another cost to employers will not go without effect. This payroll impact is one of many that increases the cost of doing business in Colorado and speeds up a costly trend that, if gone unchecked, could cause employers to find more affordable places of operating.

Modernize training pipelines and ensure a cohesive partnership between academia and business.

A trend currently being experienced across nearly all industries in Colorado is the number of businesses facing workforce shortages. For companies looking to retain talent and attract a strong workforce pipeline, this is an issue that needs to be addressed.

Building a “tomorrow-ready” workforce requires modernizing training pipelines, embracing technology and strengthening post-secondary education options to allow Coloradans to be trained to fill critical job openings. 

Partnerships between the private sector, traditional education systems and talent producers are critical to meeting the current and future talent demand and providing relevancy. If Colorado leaders want to create a strong future, they must continue to focus on building strong training pipelines. 

READ: 6 Ways to Find New Employees During the “Great Resignation”

Invest in future-forward infrastructure.

A future-forward infrastructure system is critical to unleashing Colorado’s long-term competitive potential. Colorado must focus on issues such as sustainability of our natural resources — including water quality and quantity, transportation mobility, aviation, energy, broadband and 5G access. These essential pieces of modern infrastructure are the backbone supporting a strong economy, business growth and quality of life.

Lead with purpose: Support communities and people in need

Many companies and nonprofit organizations that serve our Colorado communities take ongoing, meaningful action to support individuals in need and improve their quality of life. The shared passion that surrounds philanthropic giving, community engagement and a commitment to environmental and social responsibility has a profound impact on the lives of thousands of Coloradans. This work needs to continue.

Some of our biggest state challenges — affordability, community safety, health and wellbeing — can only be confronted when leaders from many sectors work together to find and implement solutions. 

READ: Maximize Your Charitable Giving Donations —Aligning With Your Budget and Passions

Colorado has a strong foundation for growth. We are a hub for countless industries, a home for world-class higher education and medical institutions and, most importantly, we share a community spirit grounded in growth and helping those in need. Looking ahead, we can secure our footing in a global economy by championing Colorado’s economic competitiveness through the priorities outlined here, and doing so will ensure our state remains a thriving place to live, work, play and innovate.


Debbie Brown is the President of the Colorado Business Roundtable.

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

Do you have entrepreneurial dreams? Good for you! Going into business for yourself is exciting and challenging. It can also be very rewarding and profitable if you choose the right business at the right time. 

Don’t worry if you don’t have a “dream” already. Your dream might just be to get into business, period. This can actually be an advantage since you’ll be able to look at different business opportunities and choose the one that’s most likely to succeed. 

If you’re just getting started, then it’s smart to start your first business in a “safe” industry. Choosing the right industry for your first business will allow you to build your entrepreneurial skills and confidence while making money. Here are some of the safest industries to start your first business in 2023.

READ — Why It’s Important to Invest in Yourself, and 4 Ways to Do So

Digital Products 

Digital products are great for new entrepreneurs — they’re easy to create, require very little infrastructure to sell, and don’t require any supplies or overhead. They create passive income because once you’ve created a product, you can sell it over and over again. You’ll never run out of stock or worry about supply chain issues! 

There are lots of platforms out there that allow you to sell digital products. If you sell on a marketplace, you might not even need to maintain your own website. 

Print-On-Demand Items 

If you’re great at coming up with eye-catching designs or clever jokes, you can start a print-on-demand business, selling all kinds of items, like t-shirts and mugs. Print-on-demand businesses are great for new entrepreneurs because you don’t have to take the risk of keeping lots of stock on hand — you only produce what you sell. 

Professional Services 

Many entrepreneurs start off by selling their own skills. Whether you’re a writer, graphic designer, social media manager, artist, or virtual assistant, your first business can involve nothing more than you and your laptop. You can even sell your skills in areas like travel, home organization, or animal care, which are growing in popularity. 

Wellness & Personal Training 

People are becoming more health-conscious and they want to improve their lives through better wellness. If you are encouraging and knowledgeable, you can start a business as a personal trainer or wellness coach.

Right now, there’s a lot of uncertainty in the world. People are struggling with the impact of unstable politics, the fallout of the pandemic, tech overload, and a looming recession. They need someone to help hold them accountable for their health goals so they can feel better and improve their lives. A fitness or wellness business can be a great way to start your journey as an entrepreneur. 

Food Truck 

Although it requires more in terms of start-up funding than some other entry-level businesses, a food truck is a great choice for foodie entrepreneurs. Starting a food truck is much more affordable than starting a restaurant and can turn a great profit. 

Since food trucks usually have a small menu, food costs are reduced. It’s easy to drive a food truck wherever there are customers, whether it’s a wedding, a festival, or just the side of the road near office buildings and construction sites. Food trucks are fun, popular, and relatively easy to start up. 

Start a Business That Aligns with Your Skills and Interests 

Even if you’re looking for the safest industries to start your own business instead of a passion project, it’s still important to start a business that aligns with your skills and interests. Not only will this help you offer the best possible products and services, but it will also help you keep going when things get tough. When considering which business to start, be sure to consider all your relevant skills. 

Being in business isn’t for the faint of heart. If you start a business in an industry you enjoy, however, you’ll be more likely to continue through the difficult moments and persevere.

READ — Avoiding Founder Burnout: A Guide on Fighting Hustle Culture for Entrepreneurs

Minimize Your Risks to Maximize Your Profits 

Starting a business is always a risk. You don’t really know how successful you’re going to be until you try. Your success will depend on a lot of factors, including your persistence, skills, and a bit of luck. However, you can always increase your odds of success by reducing your risks in any way you can. 

The safest industries to start your own business involve minimal or no overhead. Once you’ve started to earn money from your first businesses, you can use what you earn to start another business, maybe one with more startup costs and more potential profit. 

If you’re ready to make 2023 your best year yet, now’s the time to start thinking about your first business as an entrepreneur!


Andrew Deen HeadshotAndrew Deen has been a consultant for startups in a number of industries from retail to medical devices and everything in between. He implements lean methodology and is currently writing a book about scaling up business.

How Life Sciences Are Fueling the Real Estate Demand in Colorado

Colorado is home to 720 life sciences companies and organizations that directly employ 32,089 people earning an average annual salary of $96,460 for a total annual payroll of $3.09 billion, according to the Colorado Bioscience Association. And at 33 facilities, it also has the largest concentration of federal laboratories in the United States. 

“We’ve seen the growth happening over the last five years,” said Elyse Blazevich, president and CEO of the Colorado Bioscience Association. “Colorado historically has been strong in medical devices and diagnostics, and we’re continuing to see growth in that segment. Now we’re starting to see more cell and gene therapy growth, and Fitzsimons is leading many of the efforts in this area.” 

READ — Fitzsimons Innovation Community: Research, Tech Transfer and More 

That growth has obvious implications for commercial real estate. Life science companies are searching for about 1.2 million square feet of space in a market that has just 87,821 square feet available.  

The vacancy rate for metro Denver’s approximately 4.8 million square feet of space is 4.3%. 

“In Boulder, up until the past few years, life science real estate transactions were more viewed as industrial,” said Erik Abrahamson, senior vice president with commercial real estate firm CBRE which focuses on life sciences. “They had low lease rates, low tenant improvement (TI) allowances, and the landlord expected tenants to put all the money into the space.” 

But that’s changed. Now, developers recognize the value of life science tenants and are sinking money into projects designed specifically for them.  

Developers are building projects in Denver’s north metro area specifically designed for life science companies.

Lincoln Property Co. is building a 450,000-square-foot life sciences campus at 235 Interlocken Blvd. in Broomfield. Three of the four buildings at CoRE — Colorado Research Exchange — will range from 110,000 to nearly 200,000 square feet. The fourth 15,960-square-foot building will house the campus’ amenities, including a fitness center, locker rooms, bike storage, a tenant lounge with fireplace, an outdoor terrace, state-of-the-art conference and training center and a food market.  

PMB and Montgomery Street Partners are building a $280 million life sciences campus in downtown Superior — the first purpose-built life sciences campus in Boulder County. Plans call for three office/lab buildings ranging in size from 85,000 square feet to 150,000 square feet and a fourth building with ground-floor retail and structured parking.  

Last year, Medtronic broke ground on a 42-acre campus in Lafayette that will be a hub for research and development. About 1,100 employees will work in two five-story buildings totaling more than 400,000 square feet. 

Others are converting existing properties into spaces life science companies can use.  

Koelbel and Co. is conducting an extensive renovation of a former 80,000-square-foot Kohl’s building at 191 W. Dillion in Louisville for Biodesix Inc., a data-driven diagnostic testing solutions company dedicated to improving medical care for patients with lung disease.  

Real estate company Blackstone Inc.’s BioMed Realty Trust unit paid more than $600 million for Flatiron Park, a 1 million-square-foot, 22-building life sciences campus in Boulder. It plans to invest about $200 million for capital improvements to the campus.  

READ — Lab Digitalization: 5 Key Trends to Watch

Companies are drawn to Boulder County because of its educated workforce and its burgeoning tech community, Abrahamson said.  

“Life science follows tech, and we’re seeing that firsthand,” he said. “Two years ago, we started seeing the first life science-focused real estate developers building out these facilities on spec and offering TI packages that were meaningful enough to reduce the cost. 

“Now they’re getting leases signed before the space delivers because there’s a lot of demand and not a lot of places for these companies to go.” 

Abrahamson said Colorado has the opportunity to build relationships with West Coast companies similar to how the Research Triangle Park in North Carolina — the largest research park in the United States — has attracted researchers and companies from the Boston and Cambridge areas of Massachusetts.  

“They’re doing the research, but they need the facilities,” Abrahamson said. “Fitzsimons and Boulder can accommodate this.” 

But who are the forces behind the growth?

Growth in Colorado’s life sciences industry is being fueled by its success in raising funds, access to an educated workforce and research coming out of the state’s universities.  

The state’s life sciences ecosystem raised $2.4 billion in 2021, a record for the fast-growing community and double the $1.2 billion that companies raised in 2020. The state has come a long way from the 2014 to 1016 period, when the eight-state mountain region struggled to hit the $1 billion mark. 

Funding comes in many forms. About $450 million of the 2021 funding came from venture capitalists, while federal grants accounted for more than $500 million with the largest recipients of the grants being the University of Colorado, Colorado State University and the companies that have spun out of the institutions, said Elyse Blazevich, president and CEO of the Colorado Bioscience Association.  

The state of Colorado also awarded $8 million in Advanced Industries Grants to 31 life sciences companies and university researchers in 2021. 

Life science companies also have raised money through initial public offerings and special purpose acquisition companies (SPACs).  Edgewise Therapeutics Inc., for example, raised $250 million in its IPO, and SomaLogic got $630 million through a SPAC. 

As Colorado’s life science industry continues to boom, companies are expanding and relocating here — and that’s resulting in demand for lab space and clean manufacturing space that developers are responding to.  

Cancer therapy company ViewRay announced Denver as its new headquarters in August, and Virta Health, a healthtech unicorn, announced in October that it would relocate from San Francisco to Denver. 

“There’s certainly a lot of discussion in the ecosystem about the growth and momentum and the need for lab space to grow at a comparable rate to make sure we can serve those companies’ needs,” Blazevich said. “We’re seeing a large number of investments to solve those challenges.” 

While the Boulder area and Fitzsimons Innovation Community have the largest concentration of life sciences companies, Blazevich said businesses are expanding across the Front Range.  

Terumo Blood and Cell Technologies, for example, recently opened a second manufacturing facility in Douglas County. Production at the $250 million, 170,000-square-foot plant will serve plasma collections customers with single-use collection sets for the recent Food and Drug Administration (FDA)-approved Rika Plasma Donation System.  


Margaret JacksonMargaret Jackson is an award-winning journalist who spent nearly 25 years in the newspaper industry, including seven years as a business reporter for The Denver Post covering residential and commercial real estate. She can be reached at [email protected].

Colorado Construction Industry Forecast: Increased Negotiations and Cost-effective Builds in 2023

The Colorado construction industry, like many others, has faced numerous challenges created by the pandemic, which are now being exacerbated by inflation and rising interest rates. Labor costs have been high, the price of materials has steadily increased, a recession is expected, and concerns about delayed projects are growing. All these factors are contributing to several critical changes in the Colorado construction industry for 2023.

READ — Top Company 2022: Construction and Engineering

Contracts Will Face More Scrutiny

Contracts executed in the past two to three years haven’t fully accounted for the increase in costs – and contractors are taking a hit. From the increase in material costs to more than a $1 per gallon increase in gas prices since 2019, construction costs are significantly higher, and contractors are taking on the brunt of the costs.

As a result, we’re advising our clients to review current contracts to find opportunities for price escalation or riders for items such as fuel costs. In 2023, it’s likely contractors will add language to new contracts to further mitigate risk or pass some of the risk to the owner and developer. When the uncertainty of the economy is putting added pressure on developers, it’s important to stay focused on what can be controlled, and contracts are a prime example of that.

Contractors May Consider Switching Sectors

If the Colorado construction industry and market slow down due to economic uncertainty, private sector projects like multifamily housing, office buildings, distribution centers and more, are typically the first jobs to face delays or cancellation. On the other hand, public sector jobs, like infrastructure, hospitals or schools, tend to move forward as the government works to pump money back into the system to improve the economy.

This momentum swing between sectors can tempt contractors to switch from private to public sector. However, UMB Bank advises our contractor clients to stick to what they know. Each sector has different risks and bids completely different, so it’s not just a simple switch. Consider the risks and the opportunities before moving forward with long-term business changes, including performing a financial forecast and discussing the switch with your financial partner.

Developers Are Tightening Purse Strings

When money was flowing in early 2022, developers may not have been as concerned about costs. However, according to a recent survey from The Federal Reserve, banks are reporting tighter standards for all commercial real estate loan categories, as well as commercial and industrial loans.

Now that funds are tighter, developers will be looking for ways to cut costs throughout the building process. We anticipate more general contractors will be involved in projects during the design phase to identify cost-effective measures. This could mean actions like top-of-the-line finishes being swapped for more cost-effective options or an owner downsizing an office space from a 12-by-12-foot area to a 10-by-10-foot floorplan.

READ — 2022 Trends in Colorado Residential Homes

Value engineering will take precedence as developers strategically reduce the costs of new builds in the coming years. With this in mind, work toward a balance of helping your clients’ dollars go as far as possible, while maintaining your profit/loss margins.

Projects Will Likely Continue in 2023, But Concerns Are Growing

While there have been concerns about a recession in 2023, many projects are still moving forward in Colorado. Thanks to the demand created during the pandemic, and funding provided by the government, many subcontractors and contractors have jobs lined up. Nevertheless, they’re still uncertain about the demand for new jobs in the future.

According to data from the Colorado Secretary of State, Colorado continues to rank above average for economic growth despite the headwinds of the current market. We’re optimistic that projects will continue to move forward to meet the need created by the increase in residents and businesses coming to the state.

We may not know all that the new year holds for Colorado construction lending, but we do know that the industry will continue to learn and adapt to the new challenges at hand. Having a strong lending partner is a crucial step for successfully navigating any environment.


Greg Hottman HeadshotGreg Hottman is the senior vice president, construction trades lender, at UMB Bank.

How to Prepare Your Business for Success in 2023 — Financial Forecasting Insights from Founder and Fractional CFO, Dan DeGolier

Year-end planning is imperative for all businesses, especially as they navigate a changing and uncertain business environment. Over the last six months, rising inflation and a likely recession has created fear and panic for some companies as they look to 2023. While business leaders have little control over macroeconomic cycles, they do have the ability to truly understand the specific components of their business, adjust and be flexible in their goals and spending, and navigate uncertainty with greater confidence through proper financial forecasting.

READ — Our Economy in 2023: What to Expect

Ascent CFO Solutions’ Founder and Fractional CFO Dan DeGolier shares his insights on how businesses can take advantage of year-end planning and financial forecasting, how to handle financial uncertainty and ways to elevate your business for greater success in 2023.

What is Ascent CFO Solutions Seeing Now as We End the Year?

CEOs are still reaching out to Ascent CFO for guidance and assistance with Fractional CFO needs to help them grow, but there is a level of uncertainty in the business environment now that wasn’t present a year ago. With the threat of recession looming, increased uncertainty has led to a decrease in revenue growth and fundraising valuations, and some deals taking longer to close.

While this could sound worrisome for many, the uncertainty has pushed leaders to look deeper into their businesses. They are digging into their company’s current financial standings, relying on us to help them set up robust financial forecasting, and using all of this knowledge to inform their 2023 goals.

What Can CEOs and Founders Do to Address Their Concerns About Financial Uncertainty in the New Year?

First, understand that this is not the time to panic. It’s the time to be in tune with your business and how it functions. Rather than give into the fear, CEOs and founders should take the time to finetune their visibility into their company’s cash flow for the upcoming quarters. Companies need to be aware of how fast they are burning cash so they can understand how quickly they can grow.

READ — Half Full or Half Empty? Denver Business Owners Split on Optimism

Budgeting vs. Financial Forecasting — When Do You Need One or the Other?

The annual budget is a static forecast at a particular point in time, with management and board members signing off on it annually. The rolling forecast is a month-by-month view of likely scenarios of your cash flow, and it’s frequently updated with actual financial results as the business changes.

I’ve always considered a rolling financial forecast to be one of the most valuable tools available to management. If revenue starts to go in an undesirable direction, the rolling forecast can offer scenarios on where to cut costs, pause growth, and save cash.

How Can Companies Effectively Preserve Cash?

The two primary areas where companies can make mid-year adjustments are headcount and discretionary spending in areas such as marketing. You can also freeze hiring and salary increases or let employees go to decrease your monthly burn rate. If you’re a capital-intensive company, like a manufacturer, then capital expenditures is another lever you can pull. Finally, see if you can renegotiate your real estate lease(s) to get a price break. The pandemic showed us a perfect example of this in the real estate market as individuals advocated for and obtained lease cuts.

How Can Companies Remain Agile in Their Financial Operations?

Agility in finance is about having visibility into your business so you know when to act. It’s about managing your balance sheet and staying on top of bank debt or bank covenants if you have them. If you think you might miss a bank covenant, alert the bank in advance. The key is don’t surprise your board, investors, or bankers! The better your financial forecasting, the better visibility in your future balance sheet, which will help you ask forgiveness before you’ve already fallen into default.

What Opportunities Can Businesses Pursue in 2023?

The recent decline in real estate costs could present an opportunity to buy a building for your company. There may be circumstances to acquire new businesses as competitors may be more motivated to sell. It may also be a good time to accelerate buying equipment because vendors might offer discounts.

I urge any CEO or company leader to pay attention to the numbers to really know your business. Have a plan B and be ready for a slowdown, so if you need to cut costs, you’re ready to pivot. Pay attention to your sales pipeline and be sure to have good visibility into your future cash flows via a robust rolling forecast.

Be really in tune with your business. Know when to pump the brakes or push forward into new opportunities in 2023.


Dan Degolier Headshot 1With nearly 30 years of experience, Dan Degolier has operated as a CPA with a global accounting firm, full-time CFO with multiple private companies and now as a Fractional CFO and Founder. His Fractional CFO experience includes partnering with companies in many industries including Technology & SaaS, manufacturing, e-commerce, professional services, financial services, construction, and real estate.

Our Economy in 2023 — What to Expect

In 2023, the Federal Reserve will continue to battle inflation and hike rates reaching its terminal rate in the first half of the year, while inflation slowly dissipates. This will cause economic activity to slow, perhaps to a recession-like pace, causing financial markets to be choppy, yet producing positive returns.

Will the economy experience a soft landing, as the Federal Reserve is suggesting, or will stubborn inflation and rising interest rates cause the economic landing to be a bit bumpy?

We think the economic landing will be bumpy, experiencing a short-lived, mild recession…prepare for landing.

READ — 2023 Will Be the Year of the Earndown: What Every Colorado Small Business Owner Needs to Know

The events over the past few years have led to an economic environment plagued with uncertainty. We expect the economy to slow significantly with a high probability of experiencing a recession. Real GDP may be negative in the second or third quarter, however we expect GDP to be approximately 0.6% for the year. In 2023 there are numerous reasons why we expect the economy to slow and enter a recession:


Persistently high inflation continues to be a threat to economic growth. Even though there are signs that peak inflation was in the spring and inflation is abating, inflation begins the new year at a stubbornly high level. A consolation is that lower inflation and weakening economic growth will convince central banks to slow the hiking cycle, pause, and pivot, moving to cutting rates.

A material risk to our forecast is if inflation moves lower slower than the Fed or the market expects, or if inflation comes down and gets “stuck” at a level higher than the Fed target. This would cause the Fed to react and more than likely shove the economy into a recession.

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

Aggressive Monetary Policy

The Fed’s interest rate hiking cycle that began in March has been extremely aggressive. Understandably, since the Fed’s goal is combating spiking inflation. Consumption has been resilient, keeping the hopes of a soft landing alive. High interest rates will eventually weigh on consumers’ consumption behaviors and investment, particularly, residential investment slowing economic growth.

Historically, the only way the Fed orchestrated a soft landing was to lower interest rates. That would suggest the Fed will be hiking rates early in the year and cutting rates in the second half of the year. Unfortunately, the odds of a soft landing are stacked against the Fed.

We believe that the Fed’s aggressive tightening campaign will be the catalyst for a recession. Fed action has a pronounced lag — the full impact on inflation and the economy will not be felt until Spring/Summer of 2023. US consumers have an enormous amount of excess savings, and balance sheets are clean, leading us to forecast the recession will be short-lived and mild.


COVID no longer appears to impact consumer consumption in the US. However, China continues its zero-COVID policy. As China shuts down regions, cities and ports, the global economy suffers due to shortages and inflation. If lockdowns continue, economic activity slows. However, it appears the Chinese will relax their COVID policies in 2023, this could be a positive catalyst for economic growth around the world.

Fixed Income

We think the Federal Reserve will continue hiking short-term interest rates, affecting the economy in 2023. We expect a step-down in rate hikes, back down to 0.25% per hike, and Fed Funds to peak at 5.0%. We then expect the Fed to pause and hold rates constant for the remainder of the year. Along the way, the Fed’s narrative may cause turbulence in the financial markets.

The long end of the yield curve believes the Fed will be successful in fighting inflation. The 10-year Treasury yield of 3.6% at the end of November suggests the financial markets believe that inflation will be transitory. The bond market experienced a difficult year in 2022, we expect the 10-year Treasury yield to end 2023 around 4.0% and once again see positive returns in the bond market.


The financial markets have been discounting a meaningful slowdown in 2023. In September of 2022, the S&P 500, being a leading indicator, was down 25% pricing in an economic slowdown or recession. Given the Fed is hinting at a softer rate-hiking approach, we believe that 2023 will see positive returns in risk assets.

We expect the S&P 500 to end 2023 between 4,200 and 4,400, or a 5-10% total return. We expect a bumpy flight, with market volatility.

The Bottom Line

Prepare for landing. The global economic cycle is transitioning from an environment of accommodative monetary and fiscal policy, supporting moderate growth, to restrictive monetary and fiscal policy, supporting a contraction in growth. We expect the economy in 2023 to be affected by the projected real GDP, which is less than 0.6%. Additionally, anticipate a short-lived, mild recession.

Risk-based assets are expected to produce positive returns and be one of the best-performing asset classes. Our S&P 500 target at end the year is between 4,200 and 4,400 or 5-10% total returns. We expect to see volatility in the equity markets, with corrections greater than 10%.

Interest rates will be on the rise and inflation is expected to subside. We think the entire yield curve will shift higher, Fed Funds will end 2023 around 5.0% and the 10-year Treasury yield will move modestly higher to close the year at 4.0%.

Prepare for landing…buckle up.


KC Mathews, CFA, is the Chief Investment Officer at UMB Bank.

2023 Will Be the Year of the Earndown: What Every Colorado Small Business Owner Needs to Know 

Even with whispers of a possible recession on the rise, there continues to be high demand in the Denver metro and Front Range areas from buyers looking to buy all kinds of small businesses, at any price point. However, as we look ahead to 2023, small business owners in Colorado hoping to sell their business soon should know that we are about to enter a very interesting time in the transactional marketplace. I’ve coined 2023 “the year of the earndown.” So, what does that mean, and what do small business sellers and buyers need to watch out for?

READ — What Does a Recession Mean for Your Finances?

The Pandemic’s Impact on Small Business Revenues

It’s no secret that some businesses absolutely killed it during the pandemic. One example is businesses in the home renovation space.  During the pandemic, consumers found themselves stuck at home and unable to spend money on travel, dinners out, sporting events, cultural events, etc. The result? They plowed their money into improving their homes. As a result, many businesses in the home improvement space likely have three years of financials showing significantly better numbers than their previous three years. What will that mean when those businesses come to market in late 2022 and 2023?

Increased Pandemic Revenue – Is It Sustainable?

Every seller who had a great three years will want a sales price that reflects the business’s performance during this timeframe. But potential buyers looking at the company will likely have concerns. Will the business stay at 2020 – 2022 levels, or will it revert to pre-pandemic 2019 levels? Will the business decline due to the dual problems of inflation and recession? And, with higher interest rates increasing the cost of loans to pay for the business, how much purchase price are they able to offer? Each of these factors is likely to negatively affect the purchase price a buyer is willing to pay.

Doing the Deal – Earnouts vs. Earndowns

So, how does this relate to the term “earndown”? To explain, let me back up and tell you what an earnout is. An earnout is a provision in a transaction that provides that the purchase price will go up based on the performance of the business after closing. I coined the term “earndown” to refer to what happens when the purchase price is reduced after closing due to the performance of the business after closing.

For example, let’s imagine a business that the seller thinks is worth $5,000,000 based on its 2020–2022 performance. However, the buyer thinks it’s only worth $4,000,000 based on its 2019 performance, and the buyer is not willing to guaranty the seller $5,000,000 because the buyer is concerned that the 2020–2022 performance is not sustainable. What’s the solution?

Traditionally, the solution would be the inclusion of an earnout provision in the sales contract, which provides that the purchase price will be payable as follows: $4,000,000 at closing, and additional payments after closing, up to an additional $1,000,000, based on the performance of the business after closing. However, the fly in the ointment with earnout provisions and small business transactions is that many small business purchase and sale transactions are financed with SBA-guaranteed loans—and Small Business Association rules prohibit earnouts in deals financed by SBA-guaranteed loans. But, SBA rules permit earndowns.

So, what does an earndown provision look like? The buyer could offer the seller $5,000,000, but pay $4,000,000 at closing and $1,000,000 in a promissory note, with the promissory note having terms that could cause the amount paid under the note to be reduced to zero if the business’s post-closing performance does not exceed 2019 levels.

If you are thinking about buying or selling a small business soon, it’s essential to understand how these factors may impact the deal. As an expert in small business purchases and sales who has closed over 1,000 deals, I have seen earndowns used many times to bridge the gap between a buyer’s and a seller’s expectations.

READ — Exit Planning: New Study Shows Most Colorado Business Owners Are Not Ready to Sell Their Businesses

Still, both buyers and sellers need to be realistic about the valuation of a business being sold. While sellers will hope that buyers see their increased revenue as a sign of continued growth and pay top dollar for their business, buyers are likely to be more cautious due to concerns about whether or not the increased revenue is here to stay. A great potential solution is including an “earndown” provision in your purchase agreement to help address the concerns of both buyer and seller.

Julian IzbikyJulian Izbiky is an exceptionally experienced and well-respected mergers and acquisitions attorney. Throughout his career, he has closed more than 1,000 business purchases and sales, varying in size from several hundred thousand dollars to tens of millions of dollars.

7 Investment Strategies for 2023

In 1992 Queen Elizabeth was famous for saying “annus horribilis” when three of her four children’s marriages dissolved and Windsor Castle caught fire – a horrible year. The same could be said about 2022 for investors and investment strategies. A portfolio invested 60% in stocks and 40% in bonds was down double digits, one of the worst years for these types of balanced accounts since the 1930s. Investors lost more money in the iShares 20+ Year Treasury Bond ETF than the S&P 500 Equity Index. This is an extremely rare phenomenon; investors, and their typical investment strategies, typically don’t lose more money in bonds during equity bear markets.

With the Federal Reserve aggressively raising short-term interest rates since March, there has been nowhere to hide in either the stock or bond markets. Wall Street analysts recently readjusted their FED Funds estimates higher. It appears short-term interest rates are headed to 5% by the end of the first quarter of 2023. So, with this as a backdrop, how do maximize your investment strategies in the new year?

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

Time is on Your Side

There is an old adage: It is time in the market that makes you money, not timing the market. This is particularly relevant in the case of 401(k) and IRA accounts. If you are five or more years away from retirement, you can afford to have a higher allocation to stocks than bonds, and quite frankly, you should. One way to take advantage of the current bear market is to dollar cost average by adding more equities in your 401(k)s with every paycheck or to your IRAs annually. If you choose this option, be sure to set up a dividend reinvestment plan. If the markets continue to get cheaper, at least you are adding additional shares at lower prices. Eventually, when the markets turn around, you will have added to your equity holdings during a tough bear market.

Diversification May Work Better Next Year

This is the first year in three decades where diversification did not work. You lost less money in the S&P 500 ETF than in a 60/40 balanced account comprising stocks and bonds. Bonds normally act as an effective hedge against a weak stock market or financial crisis; however, in 2022, bonds were hurt by rising interest rates.

There could be good news though for 2023. After all these rate increases, and with treasury bills yielding 4% (a year ago, they were zero), the odds of bonds producing positive returns next year have improved dramatically. With the yield curve being inverted, you can take less duration/interest rate risk because short-term treasuries pay more in interest than 10 and 30-year treasury bonds today. Once the Federal Reserve stops raising rates, you can buy longer-term bonds and lock in rates, but until that happens, there is no reason to add interest rates or credit risk to your bond portfolios.

READ — Does an Inverted Yield Curve Portend a Recession?

Maximize Retirement Account Contributions

Bear markets are the best time to optimize your investment strategies and invest the maximum you can. Try to put 10%-12% of your paycheck into your 401(k) every month. Not only is it a great way to save money, but it lowers the amount you get taxed from paycheck to paycheck. For example, if you make $100,000 a year and put $10,000 into your 401(k), you will only get taxed on $90,000, not the full $100,000 – A win-win. If you haven’t opened a Roth IRA or regular IRA yet, now is a great time to do so. Next year you can contribute an extra $500. If you are over 50, you can contribute $7,500 in 2023.

Pay Off Debt

If you have cash earning close to zero in a checking or savings account at a bank, use this extra cash to pay off high-interest credit card balances. If possible, it is best to avoid paying double-digit interest rates. Additionally, if you have any adjustable-rate loans, like a home equity line or an auto loan, you could see a considerable increase in your monthly payments if your loans are set to readjust higher. If you have student loan debt above 6%, it may be best to pay that off too.

Buy Dividend-Paying Stocks

Technology and other riskier stocks were great investments when interest rates and inflation were low, but now that has changed. With massive inflation and interest rates up 4% in 2022, these stocks are down twice as much as dividend-paying stocks. The market is now favoring companies that pay dividends, and more importantly, have the cash to increase their dividends annually. If we have a recession in 2023, defensive sectors such as healthcare, energy, and consumer staples will be a safer place to focus your investment strategies until conditions improve.

Buy Short-Term Bonds vs. Cash

For the first time in 14 years, you can get paid 4% on your cash if you invest in treasury bills that mature in less than one year. You buy them at a discount, and when they mature, you get all of your principal back. For example, if you invest $10,000, you only pay $9,900; six months later, you get your $10,000 back with a $1,000 gain (yield or interest earned/accrued).

Buy I-Bonds-Savings Bonds

These savings bonds offer a very attractive interest rate of 6.89% until April 2023. However, there are two things you need to know: 1) you can only buy them in $10,000 increments per family member, and 2) you can only buy them directly from the U.S. government on their website.

The Bottom Line

No question about it: 2022 was a challenging year to be a conservative investor. As Winston Churchill was famous for saying during the start of World War II, “Now is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” The same could be said for the Federal Reserve’s mission to bring down inflation by raising short-term interest rates. If inflation continues to come down next year, they can stop hiking interest rates. Once this happens, investors may feel more comfortable investing in bonds with higher yields and stocks with lower price-earnings ratios. Wouldn’t that be a nice change in 2023?



Thumbnail Fred Taylor Headshot CurrentFrederick 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.

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