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There was a reason many salons during the Wild West era listed "no politics" as a house rule – like oil and water, they never seemed to mix. The same applies to companies and the political beliefs of their owners. With the presidential election happening at the same time as the Great Depression, it is very tempting for entrepreneurs to publicly support their political positions by using their companies as platforms.
While it may be tempting, many financial problems can arise with mixing politics and business. unless your business is the business of politics. Let me demonstrate using a recent example. One of my local restaurants had a very strong following for at least a decade. On the weekends in particular, people were often seen waiting in line the size of a city block to get a table. When the quarantine for Covid-19 began, the restaurant was completely closed for a few months. Instead of panning, no take-out or delivery services were offered to make up for lost revenue.
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By the time the restaurants were allowed to reopen, you'd have thought the owners had a good plan to get back on track. In fact, instead, they launched a massive political campaign. That is, they covered every inch of their store with political material – so much so that the name of their store could hardly be seen. As this behavior grew, they eventually turned off most of their customers. Currently the interior of the restaurant is almost always empty. From the outside, it seems that they will not survive much longer. While many competing local businesses have opened their doors to everyone and done well, the owners here have taken the route of greatest opposition.
If you are an entrepreneur, I want to help you avoid the inevitable fate of the restaurant mentioned in the example above. Now we're going to look at the four main reasons why you shouldn't mix your business with politics. All of these reasons are related and should occur one at a time.
1. Your company could lose customers
The first thing that can happen when you publicly flaunt your political party flag across your company is severe customer loss. The logic can be demonstrated using the basics of mathematics using the example of the presidential election. For simplicity, let's say half of your customers are Democrats who voted for Joe Biden and the other half are Republicans who voted for Donald Trump. If you advertise one party's campaign material in your storefronts, there is a high chance that half of your customers who support the other party will be offended and never return.
Are you ready to risk half your clients to get into politics? This is of course a personal choice. However, financial mathematics does not generally give a favorable result. For example, suppose all customers spend equally on your company. If you lost 50% of them, then you lost 50% of your income.
In reality, however, not all customers spend the same amount. You may have some customers that more than the majority of your customers spend combined. These are the big accounts. Losing these customers can really be the turning point for your business. For example, if you've lost half of your customers and one of them provided 80% of your revenue stream, your business may be over. This is especially true at a time when Covid-19 and the financial coronavirus are widespread.
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Sure, it is possible for you to replace the lost customers with others who share the same political party. However, if it took you ten years to acquire these customers, how much time and advertising money would it take you to replace them? Principle 1 of the Key Lessons in Business and Finance states: "It can take a lifetime to build a solid business and moments to destroy it" (Criniti, 2014, p. 32).
As this is one of the most politically charged times in the history of the United States of America, it is safer to focus your company on its specific goals and tasks. Why did you originally open this business? What is the real purpose of your business for existence? This is a great time to rethink your company's roots and make sure it's on the right track.
Mixing business and politics can make your customers feel very uncomfortable. A customer could have shown up at your diner for a relaxed cup of coffee and endured unwanted political play. If you want to be a restaurateur, be a restaurateur. If you want to be a plumber, be a plumber. However, when customers need a product or service, regardless of what it is, they may not want all of the extra-political bells and whistles that may be offered for free. You may already be feeling overwhelmed by other relentless political propaganda to which you are exposed. Ironically, they may have visited your establishment to escape politics.
When you are not into politics it is best to save the business of politics for political business. People are more likely to vote against your company in an instant just because of the differences between the parties. Your business could lose its maximum potential source of income that could be achieved with long-term loyal customers. From a humanitarian perspective, your customers are your biggest fans. Many of them could also be very loyal patrons and friends. Your love and support for your business over time could be invaluable.
2. Your company could minimize its income
Much like an individual, a company has three ways to manage its wealth. This has been best demonstrated in the book Surviving the Richest: “… there are three important ways to manage your wealth … First, you can minimize your wealth below your survival minimums (now referred to) as the margin of survival ). Second, you can live on the edge of survival and have just enough wealth to survive. Ultimately, you can maximize your wealth beyond the level of your survival that is necessary to survive ”(Criniti, 2016, p. 162). The conclusions of this book show that minimizing prosperity and survival alone are not good enough. We must always try to stay one step ahead of our struggles – this can only be done through wealth maximization (a concept that has been shown to be at the heart of economics and finance).
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If you step your company into the political arena and publicly promote your personal political beliefs, there is a very good chance that you will lose a lot of former clients / customers. You could also fend off many potential new ones. These measures could lead to significant income losses. When you lose income, you minimize wealth. Minimizing wealth over time will eventually lead to the death of the company. Let us now examine this point further.
3. Your business could die
The third major reason entrepreneurs shouldn't mix their businesses with politics is that their businesses could die. This reason is usually the end result of the first two points above. When companies lose a lot of their customers, they lose sales. If they lose significant sales, they may have to close the store.
Corporate suicide has become very common during the Great Pandemic Depression for a number of reasons, including lost revenue. Due to Covid-19, there are already enough restrictions on companies that are putting a heavy burden on them financially. Take the restaurant industry as an example. In many places there is currently a maximum occupancy of 50% indoors. If only half of a restaurant's customers can be in-house at the same time, that company's revenue has already halved (assuming it only serves indoor dining and all customers spend the same). If the same restaurant were to broadcast its political views to its customers (for example, with political ads and signs throughout the property) it could lose another half of its sales (assuming its customers were evenly divided between Democrats and Republicans).
The bottom line between the cost of the Covid-19 restrictions and the political promotions is that this restaurant could only be making around 25% of its potential sales. This level of income certainly belongs to the wealth minimization category and would not be sustainable over time. Any business that doesn't move toward wealth maximization will eventually near death.
4. Your personal wealth could suffer
The fourth major reason entrepreneurs shouldn't mix their businesses with politics is that their personal wealth could suffer. When a business dies, the owner still has to rely on a source of income to pay her bills. If she has no other income, she probably needs to get another job right away. Until that income is replaced, she must use her existing wealth to stay alive. This could mean using an emergency fund or even selling real estate (i.e. a car or house) to get through. Principle 206 of the book “The Most Important Lessons in Economics and Finance” states: “To be alive is expensive” (Criniti, 2014, p. 239).
Keep your politics to yourself
In summary, the top four reasons why you shouldn't mix your business with politics are: Your business could lose customers; Your company could minimize its income. Your business could die; and your personal wealth could suffer. In these unprecedented times, politics is paramount for many people. Passionate differences are also evident among immediate family members. The purpose of this article is not to convince you to switch to a political party, but to illustrate the potential financial problems that can arise if you cross the line and reflect your political beliefs about your business.
The consequences are severe and may not be worth the risk, regardless of the size of your business. Given the above conclusions, it is shocking that many large, wealthy corporations have completely mixed their businesses with the political views of their owners – and as a result, they suffer badly. Just because they are big doesn't mean they are immune to the principles of finance. These universal rules apply to everyone.
You likely have many personal examples of people who will no longer shop in certain stores because of their political views. Only time will tell if these companies can figure out how to bring back their lost customers. The damage can already be done permanently.
By taking into account the sensitivity with which your current and potential customers may have different political beliefs, you can maximize your target audience. In the end, it is important that your company still survive and hopefully thrive when all the political smoke clears and the Great Depression is over. A well-diversified customer base could be exactly the advantage you need to thrive as a successful entrepreneur.