As someone who has been involved in personally buying and selling businesses and advising buyers for over thirty years, it comes as no surprise to me that I have received numerous inquiries recently about whether it is prudent to buy a business in an election year. Outside of the volatile economy in the 2008 election year, my response has been standard throughout the past three decades.
I turn the tables on this question and ask, “what is it specifically that would cause you to hold off on a purchase because of the upcoming election?” The answer is generally related to potential uncertainty. Seems reasonable enough; however, one must evaluate exactly what is this alleged uncertainty? Moreover, one must address if the macro economy has any influence at all on the type of business and/or sector being considered.
The other thing I have learned since moving to the USA in 1996 and becoming a proud American citizen in 2007, there always seems to be an election in progress and the campaigning for the next election feels like it starts the day after a new President is sworn in so we are not dealing with anything new here.
Here we go again…
Â©Jim Vallee – stock.adobe.com
Focus On The Specifics
As noted above, while one must evaluate the macro effects, it is the micro, the “nitty gritty” of the business type being considered that must be analyzed.
For example, with the tariffs in place with China as of this writing, if a buyer is considering the purchase of a business for sale that relies on imported goods from that country, it must be weighed heavily. While there has not been a ton of press recently on this issue, some sectors are being slammed including distributors, manufactures and agriculture related segments.
It would be easy to either dismiss these matters as likely to be resolved at some point, but who knows when that will be and at what cost? Further, a buyer must be extremely cautious about relying on the word of the seller or a business broker or the press and certainly of the politicians on both sides as to how this will evolve – one just does not know.
A buyer should also take the temperature of business owners to get a sense of their expectations. After all, they are the ones in the trenches right now. A recent FOX article suggests the climate is very positive with over 80% of small business owners expecting their sales to increase in the next twelve months.
Will The Next President Impact The Business?
If there are specific issues that could substantially alter a business as a result of whoever wins the White House, then certainly a prospective buyer must address those. If, for example, you are considering the acquisition of a medical billing company or ancillary service to the insurance industry, would a “Medicare-for-all” plan change the dynamics? Could it potentially render an entire industry obsolete? Or, are there potential opportunities from the fallout? (hint – there are always asymmetric opportunities).
Expect The Unexpected
Election or not, one of the most important attributes of a successful business buyer is to examine the complete landscape. This means conducting flawless due diligence and research. The best business buyers know that it is not what one expects will happen that generally derails a business, it is what you do not anticipate that generally causes the most significant impact. This can happen irrespective of an election or change in the ruling party.
The Entrepreneur’s Mindset
Great entrepreneurs understand risk. They mitigate whatever they can, but there is no such thing as a risk-free acquisition. Learning to live with, or better yet, to embrace risk, is a fundamental attribute a true entrepreneur must possess. People who are completely risk adverse never end up buying a business. They spend their time searching endless business for sale listings and will always find a reason not to complete a transaction.
This does not mean you should be reckless. Of course not. Consider everything, and especially how potential new government policies under new or existing leadership may influence certain business types. However, if you want to get to the finish line and close a deal, put issues into their proper context. Weigh what could the absolute worst case scenario if any of the proposed policies of any candidate becomes law.
Above all else, to be a true entrepreneur, you have to make tough decisions, pull the trigger, and effectively deal with the consequences.