2017 business outlook

2017 business outlook

The good, the bad and the (sometimes) ugly truth about the year ahead

By Alison Bailin Batz

To say that 2016 is going out with a bang is an understatement.

But now, with the presidential election behind us, it is time to look forward.

We sat down with business leaders from across the Airpark to discuss critical issues facing businesses and individuals in Arizona in the coming year.

Banking

Washington Federal reports that Arizona Banks are in good shape with capital ready for lending to commercial, business and consumers.

“Real estate-related lending will continue to be a big driver in 2017, in new multi-family apartments, residential housing developments and commercial and industrial,” says Washington Federal’s Mike Brown, an Airpark resident. “The middle market had robust growth in 2016 and we expect the same this year.

“There is capital and equity coming in from investors already here in Arizona and from out of state, as well, to continue looking for opportunities.”

It should be noted, however, that the regulatory and compliance environment has raised the cost of doing business dramatically.

“To keep pace with the ever-increasing rules and new interpretations has meant we needed to hire more compliance and legal staff and set up more thorough reviews of our practices to ensure that we stay in compliance,” said Brown. “Hopefully, we will see some relief with the new administration.”

And what about the never-ending talk about automation in banking?

“We believe that automation isn’t a bad thing, as long as it is to support and enhance the delivery of services in a personable way, particularly when that service is delivered via our smart phones,” Brown says. “We have recently overhauled our entire core system, thus allowing us to offer a new level of service and enhanced delivery. The conversion was not without some pain, but it sets us up very well for the future.”

Labor and employment/human resources

The biggest legal issues facing the human-resources industry continue to be from wage and hour compliance.
“More and more of these lawsuits are filed each year from either the misclassification of workers as ineligible for overtime when they actually should be getting paid time-and-a-half for hours worked over 40, or not correctly calculating and paying overtime,” says Stephanie Quincy, an attorney at Quarles & Brady, which operates in the Airpark. “These lawsuits are usually filed as collective action, and are very expensive.”

What seems like only a few dollars per employee or violation snowballs quickly.

“Employers must ensure that their employees are properly classified and paid,” said Quincy.

The new regulations from the Department of Labor, increasing the amount a salaried employee must make to be considered exempt (to $47,476 on Dec. 1), will push employers to paying more of their workforce on an hourly basis.”

Construction

“Finding skilled and qualified labor will be the biggest issue facing the construction industry in 2017,” says Shawn Goetzinger, of Form Third Design-build. “The shortage of skilled labor will impact overall construction cost, schedules and project quality.”

According to Goetzinger, who is a resident of the Airpark area, the Arizona construction labor force was obliterated during the recession, dipping to 110,000 workers in September 2010. Department of Labor statistics show Arizona still has fewer than 140,000 workers in the construction industry as of the end of September this year.

In addition, construction costs are forecasted to continue to grow in 2017, with the cost of labor as the main driver. Subcontractors do not have the skilled labor force to meet market demand.

“Solving these problems will require a focus on technologies, such as building-information modeling, job training and increased collaboration with trade partners,” adds Goetzinger.

Marketing and advertising

As they say, if the key to marketing and advertising was an easy, one-size-fits-all formula, we’d all be rich.

“Customization is critical, but there do appear to be trends for 2017 that should be factored into every plan,” said Airpark resident and marketing veteran Kristin Boston.

The goal of marketing is to first be seen, notes Boston, marketing director for several Airpark-area businesses, including Zerorez of Phoenix and Pathtap. Second is to connect in a meaningful, credible way.

“But being seen is not as easy as if once was,” she says. “To throw out enough impressions to dominate any one platform has become cost prohibitive, so more than ever it will be important to narrow and understand your target market and be deliberate on how you reach them. Quality of the content will be as important as the quantity of eyeballs and ears that are exposed to it.”

Digital marketing will continue to be a hot topic.

“The buzzword for content marketing in 2017 is videos,” Boston says. “It’s not enough to tell the story, you need to show it, which engages the consumer and boosts Search Engine Optimization. Live video streaming will also grow in popularity”

Snap, formally known as Snapchat, is making a play with its Spectacles.

“We’ll see if Snap’s Spectacles — glasses that can record video closer to how the human eye really sees it — continues the trend toward the demand for virtual-reality experiences,” said Boston.

Traditional media is still viable, according to Boston, but making an impact will take more forethought.

“Integrating all your marketing avenues into campaigns that tie together and push the consumer on to your next touch point, and then back again, will have the best residual results and give you most bang for the your buck as your campaign will work for you harder and longer,” said Boston.

Health insurance

Leah Tinney, an attorney at Quarles & Brady LLP, says that without changes to the Affordable Care Act from the incoming Trump administration, more providers will stop offering plans in the health-care exchange due to mounting losses from participation.

“UnitedHealth has indicated that it intends to exit most state exchange markets in 2017, and a number of insurers from the lowest-cost bronze plan are expected to follow suit,” Tinney says.

According to Tinney, insurer exchange participation controls plan pricing, and existing carriers already have announced hikes of approximately 10%.

“Providers will experience increased False Claims Act litigation,” Tinney says. “The U.S. Supreme Court recently confirmed the viability of the ‘implied certification theory’ that treats providers’ payment requests as an affirmation of compliance with relevant statutes, regulations and contract requirements.

“Importantly, a failure to disclose material deviations from statute, regulation and contract requirements may render a provider’s payment claim false or fraudulent. This theory will likely make it easier for False Claims Act litigation to reach a jury because it only requires a common-law fact analysis.”