Approaching Changes in the Political Landscape

Maybe you love arguing politics. Maybe you hate it. My personal take is that you should focus your energy on your business, your family, and your community, because that’s where you’ll have the biggest impact. But no one can pretend that your business isn’t affected by what’s happening on the international, national, and political stage.

Now that we’ve established what I consider to be the wasted energy of political debate, the question is, how do you approach politics as it relates to your business when it comes to creating value for and protecting your company?

Avoid Building Around Partisan Programs

If your business is built around a government program that is highly popular with one political party but not the other, you should reconsider your business strategy. You could be at serious risk of seeing your business disappear due to an election. One example that comes to mind is renewable energy subsidies. These were offered abundantly by the Obama administration beginning in 2009, but ultimately dried up under the first Trump administration in 2017. Many companies in the wind and solar sectors struggled or failed as a result of building a business plan that relied extensively on government financial support, while having no support from Republicans.

In other words: Don’t make your business vulnerable to election cycles.

Related Read: Should I Sell My Business During an Election Year?

Don’t Rely on Temporary Programs

Build your business on a solid foundation rather than one that can topple in an instant.

Milton Friedman’s old adage was, “There is nothing as permanent as a temporary government program.” But your company may very well be exposed to a program that really is temporary.

In recent memory, the Trump Administration, along with Congress, passed the Paycheck Protection Program (PPP), which was instituted during the COVID-19 lockdown period in 2020.

This program provided temporary relief to corporations forced to lay off their workers, as most state governments forced employers to cease operations beginning in March of that year. For most businesses, this allowed them to continue to employ their workers during a period where they saw a collapse in revenue.

That said, many so-called “non-essential” businesses still failed as the COVID-19 lockdowns decimated their business prospects. For them, the PPP money was not a permanent solution.

Temporary programs can offer a lifeline, but they’re not a foundation. You can’t build a lasting company on short-term support.

Understand the Programs and Regulations Your Company Relies Upon

At first glance, you might not think that your company has exposure to the political landscape. However, upon a deeper dive, I see this is rarely the case in the United States.

Here are a few examples:

• Corporate average fuel economy (CAFE) standards - In the auto industry, product design is often driven by CAFE standards, which force increased fuel efficiency, regardless of consumer preferences. We once worked with a company that manufactured components for Exhaust Gas Recirculation (EGR) systems required under emissions regulations. The business existed because of those regulations.

• Medical insurance approval - If you make a medical device or provide a medical service, to get the buy-in of private insurance companies, you may need to first convince the Centers for Medicare and Medicaid (CMS) of the medical necessity of your innovation, as most private insurances take their cues from CMS. This process can take years and is not always successful. One company we worked with in the past had an incredible innovation, but ultimately, CMS did not issue the necessary billing code. After many years and perhaps over $100 million invested, the project failed.

• Environmental protection - Many businesses are driven by environmental regulations. A number of years ago, we learned about a company that repaired wastewater pipes for municipalities. We discovered that the EPA would sue a municipality and win a judgment that required the repairs, creating a very solid basis for long-term demand. Similarly, in the area of asbestos remediation, there is an entire industry around properly demolishing old buildings that have asbestos in the materials used to build them.

The takeaway: As you understand the programs and regulations that your company relies on, it’s important to think through the stability of this demand, how fundamental it is to your business, and how likely it is to change.

Ask the Right Questions

If you want to build long-term value in your company, you can’t ignore the role of government. Ask yourself:

• What regulations or programs does my business rely on?

• Are they bipartisan and stable, or temporary and politically volatile?

• Am I prepared for changes that could affect demand?

• Can I shift toward trends that are more secure?

Stepping back and surveying the whole political landscape is an invaluable part of your business strategy. If you’d like more in-depth analysis of how changing trends might impact your particular business, book a consultation with Doescher Group today.