Craig Evans, President The Opportunity Phase of the Business Cycle 10 Lessons for Advisors and their clients… Lessons for Advisors and their clients….. Lessons for Advisors and their clients…..

Expectations of the Professional Advisor “Help me look around the corners…” “I need to know what may happen in the near future” “My business needs to plan for the future” “As my advisor your perspective is broader than just my company or industry”

How the U.S. Measures Economic Activity Gross Domestic Product (“GDP”) = The market value of all final goods and services produced within our economy in a given period of time. “Nominal GDP” = The value of all goods and services measured at current prices. Source: Macroeconomics 7 th Edition N. Gregory Mankiw

How the U.S. Measures Economic Activity “Real GDP” = The value of goods and services, adjusted for price changes through the use of a measure of inflation known as the “GDP Inflator” Source: Macroeconomics 7 th Edition N. Gregory Mankiw

How the U.S. Measures Economic Activity GDP = Consumer Consumption “C”+ Business Investment “BI”+ Government Purchases “G”+ Exports “E”- Imports “I” Annualized Q data =$ Trillion = C $ BI $1.907+G $3.047+E $2.119-I $2.681 Source: Bureau of Economic Analysis Press Release December 22, 2011

Real GDP Through Q Table Percent Change From Preceding Period in Real Gross Domestic Product

Real GDP Through Q Table Percent Change From Preceding Period in Real Gross Domestic Product

Four Phases of the Business Cycle –A = Recovery –B = Growth - Opportunity –C = Profitability –D = Decline or Recession

9 Four Phases A A B B C C D D Expansion Bankrupt ITR Trends Report

10 US, Colorado, & Rocky Mountains Annual GSP Growth Rate

11 US Industrial Production to Non-Residential Construction Data Trends

Tips to avoid bias Whenever possible, use Source Data relevant to your client and location to avoid media bias and incompetence. The media predominately live in New York, Washington, D.C., and Los Angeles. Is it any wonder that their view of the U.S economy is colored by their local perspective? A mentality of “if it bleeds it leads”, suggests that crisis and turmoil sells, and the media understands the formula.

1.What actions have you recommended to your clients during the last quarter to capitalize on the Opportunity phase? a)Alternative: what recommendations would you make after today’s discussion? 2.Your client suggests there is just too much uncertainty to take action. The reasoning is that “if I do nothing, I can’t make a mistake”. What is your guidance? Table Challenge Questions

1.Model a Positive leadership attitude – things are improving! 2.Set new Goals consistent with a recovery mentality 3.Align compensation plans with new Goals 4.Invest in customer market research, objectively determine your customer needs and preferences (external Strategy) Ten Lessons for Advisors

5. Evaluate your company’s (firm’s) strengths and competitive advantages or disadvantages (internal and external Strategy) 6. Phase out marginal (volume or profits) products or services 7. Review service or production capacity to ensure your ability to provide additional services or products

Ten Lessons for Advisors 8. If productive capacity allows, add new service or product lines demanded by customers 9. Begin or expand cost effective advertising and sales promotion efforts 10. Carefully evaluate all key employees and upgrade as appropriate

Parting thought “Those who cannot change their minds cannot change anything.” George Bernard Shaw Craig Evans, President The Colorado CFO Group