On Monday of last week, along with eleven other invitees of the Winter Park & Fraser Valley Chamber of Commerce, and with an ominous mantle of one the “Small Business Leaders” in the community, I attended a round-table discussion with Denver Mayor John Hickenlooper on Economic Development Issues for Small Businesses in Colorado.
Now, I’m not a huge fan of meetings of this nature as it is, let alone with a political bent seeing as the Mayor is a Colorado Gubernatorial Candidate, but I thought it would be interesting to attend and see what he had to say.
Prior to that, however, I thought I better be a good boy and do my homework, just in case there was a chance I got to speak and I needed to sound semi-intelligent. Having done quite a bit of research and applied a good deal of thought on the subject, I was pleased to be able to ask a question which was two-part. The first part was actually offered up by one of our Homeowners (thanks Bob) who I approached due to the fact that the subject matter was right up his street. The question was, “Can you draw any parallels between the challenges you faced operating a business in the 80’s with the economic climate experienced over the last 1 ½ years, and” (I added) “what strategies did you employ to overcome these challenges?”
Rather disappointingly, he didn’t really answer the question, other than to say he did see some parallels (although didn’t identify them), plus he bought up a lot of real estate! However, rather than waste the material I collated in the days before the meeting, I thought I would share with you my own Top 10 Economic Development Issues for Small Businesses in Winter Park.
1. Employment Instability: There is no doubt that a shortage of affordable housing, combined with the high cost of living, is inextricably linked with the difficulty employers face in hiring and retaining good quality employees. I’ve often commented on how difficult it is for people to relocate here, not just with the associated costs of moving oneself and maybe family, but also adjusting to the altitude, the long and often harsh winters and concentration of jobs in the tourism industry. At 53%, Grand County is third behind only Summit County (57%) and Gilpin (81%) in the highest percent of jobs in the tourism sector, out of all counties in Colorado.
2. Seasonality: While we make bold efforts at developing our summer business in the form of golf, hiking, biking, rafting and other activities, the ski industry is still our bread and butter, and for Staywinterpark contributes more than 80% of our annual lodging revenue. The downturn of the last two seasons has put even greater pressure on businesses to survive during these times, when cash flow is more like a trickle, and the peaks and troughs of occupancies and consumer spending patterns make it tough to budget effectively.
3. Multiplier effect of spending: Restaurants and retail rely greatly on locals spending in their establishments, especially in the off-season. When vacationers spend less in the shops and restaurants in the valley, and at a time when the American public in general are looking to reduce debt and increase savings (provided they still have a job), the incidence of spending in the community is less because business owners and locals have less to spend due to the fact their businesses have made less money and hours may have been cut.
4. Bank lending decisions: Being an ex-banker (when it was viewed as an honorable profession), I could talk about this one for hours, but the plain fact of the matter is that due to poor decision-making on loans and questionable trading in complex financial instruments that evolved spectacularly fast (because there was money to be made and greed fuelled it’s evolution), the banking industry arrived at an abyss where it was “scared” to lend money any more.
Even sound businesses have been shunned and the focus has been on building up capital reserve ratios rather than lending money to small businesses. Last year, bank lending fell 7.4%, the biggest decline in almost 60 years and there is no sign of a turnaround. Banks face further losses on mortgages and commercial loans so lack the reserves to increase lending. This is a problem because small businesses with fewer than 100 employees accounted for almost half of net job growth during the last two recoveries.
5. Event Sponsorship: In times of recession, charities usually see decreased inflows of contributions from the public who either cannot give, or reduce the amount they are able to give due to their own changing financial situation. In our community, the Chamber of Commerce relies on small businesses as benefactors to put up the cash or donate whatever they can in trade to sponsor the big events of the summer, organized as they are to attract visitors. Cash-strapped local businesses are facing increasing difficulty in committing funds or resources to support and sponsor these community events, and two tough seasons in a row poses a real problem for our Chamber in securing the financing necessary to put these events on.
6. Construction Industry: The current housing glut, with unsold new homes and foreclosed homes on the market, has precipitated a downward pressure on prices, created negative equity for many and brought a near halt to new builds. All of this has had a knock-on effect within the various construction trades and businesses and stores supplying fixtures and fittings for homes.
7. Lodging booking trend: This season, we have actually seen more stays (more cleans and higher housekeeping costs) and more overall nights, although the actual average length of stay has declined and all at significantly reduced rates with people shopping more, booking much later in order to get the better deal, evidencing less brand loyalty and ending up spending less while they’re here. None of this is good news. Winter Park’s average daily rate is, I think with only one exception, the lowest of all the major ski resorts reporting to the Mountain Travel Research Program, and with a new psychology ingrained in the consumer that encourages them to shop and wait, it will be years before we can start to push those rates up again.
8. Tax Cuts: The March editorial by Pat Weisner in Colorado Biz Magazine made the argument that government can only create jobs by making life easier for businesses. It can give tax credits, it can subsidize a market like it has for new home buyers, or it can incentivize businesses by easing the tax load. These things give more profit to businesses so they can invest in themselves. The bottom line, he contests, is that government should ease the tax burden, particularly on small business so it can prosper and provide more people with jobs.
9. Consumer Confidence and Spending: Ultimately, my feeling is that only when things on a macro-economic level improve will things get better for small businesses. Consumer spending, which accounts for 70% of gross domestic product, has a direct correlation with the consumer confidence index. That will only start to go up appreciably with an improvement in labor market conditions, an upturn in the housing industry, and full restoration of credit availability without punitive terms. Until then small businesses are grinding it out, for the most part, on their own.
10. The purpose of business is to win respect: I read an excellent article recently by Michael Skapinker in the Financial Times which was sparked by readers’ e-mails indicating a deep unease with the way companies (the prime example being the banks) have been run and the role they play in communities. The relationship between business and society prompts a broader question: what is business actually for?
To some, he argues, the answer is easy: to make a profit. “Profits are certainly essential. Without them, businesses cannot survive. Making money is also the pleasure of business. Money matters to individuals too. You can buy houses, holidays and financial security. But money can’t buy you love, or (arguably) happiness”.
So, if making money is not the purpose of business, what is? Peter Drucker, the great management writer, said it was to serve customers. Without satisfied customers, companies cannot survive either.
Skapinker draws on the American psychologist Abraham Maslow’s hierarchy of needs to supply the answer, the second highest need – to achieve esteem and respect – which he suggests people most crave from work: “Respect not just from colleagues but from the world. No one wants to cringe when they tell people where they work.”
So maybe business is all about making profits and serving customers by doing something we can be proud of.