4 Major Reasons Why Entrepreneurs Should Not Mix Their Businesses with Politics To be a successful entrepreneur, it is important to focus on what you do best.
By Dr. Anthony M. Criniti IV Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
There was a reason why many saloons during the Wild West era listed "no politics" as a house rule—like oil and water, they never seemed to mix. The same could be said for businesses and the political beliefs of their owners. With the presidential election season happening at the same time as the Great Pandemic Depression, it is very tempting for entrepreneurs to want to publicly support their political viewpoints using their businesses as platforms.
Although it might be alluring, many financial problems can arise with mixing politics and your business; unless your business is the business of politics. Let me demonstrate with a recent example. One of my local restaurants had a very strong following of patrons for at least a decade. You could often see people waiting in a line the size of a city block to get a table, especially on the weekends. When the quarantine for Covid-19 began, the restaurant completely closed down for several months. Instead of pivoting, it did not offer any take-out or delivery services to make up for lost revenue.
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By the time restaurants were allowed to reopen, you would have thought that the owners would have had a good plan to get back on track. Actually, they started a massive political campaign instead. That is, they covered every inch of their storefront with political material—so much so that you could barely see the name of their business. As this behavior progressively increased, they eventually scared most of their customers away. Currently, the inside of the restaurant is almost always empty. From the outside, it appears that they won't survive much longer. While many competing local businesses have opened their doors to everyone and have pivoted well, the owners here have chosen the path of most resistance.
If you are an entrepreneur, I would like to help you to avoid the inevitable fate of the restaurant mentioned in the example above. We will now take a look at the four major reasons why you should not mix your business with politics. All of these reasons are interconnected and should happen in succession.
1. Your business could lose customers
The first thing that could happen if you publicly flaunt your political party's flag all over your business is a severe loss of customers. The logic can be demonstrated with basic mathematics using the presidential election as an example. For simplicity, let's pretend that half of your customers were Democrats that voted for Joe Biden and the other half were Republicans that voted for Donald Trump. If you were to promote either party's campaign material in your store windows, then there is a high probability that half of your customers that support the opposite party might get offended and never return.
Are you willing to risk half of your customers to go into the business of politics? This is a personal decision of course. However, the mathematics of finance generally does not provide a favorable outcome. Assuming that all customers spend equally at your business, if you lost 50% of them, then you lost 50% of your income.
In reality, though, not all customers spend equally. You might have a few customers that spend more than the majority of your customers combined. These are the big accounts. The loss of these customers can really be the tipping point for your business. For example, if you lost half of your customers and one of them provided 80% of your revenue source, then it might be game over for your company. This is especially true during a time when Covid-19 and the Financial Coronavirus are running rampant.
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Sure, it is possible that you could replace the lost customers with others who share the same political party. However, if it took you ten years to gain these customers, then how much more time and advertising money will it take you to replace them? As Principle 1 from The Most Important Lessons in Economics and Finance book 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 a safer proposition to focus your business on its specific goals and mission. Why did you open this business initially? What is your company's real purpose for existing? This is a great time to revisit your company's roots to ensure that it is 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 relaxing cup of coffee and ended up enduring an unwanted political spiel. If you want to be a restaurateur, then be a restaurateur. If you want to be a plumber, then be a plumber. However, when customers need a product or a service, regardless of what it is, they might not want all of the extra-political bells and whistles that might be offered free of charge. They could already be feeling overwhelmed by other relentless political propaganda that they are exposed to. Ironically, they might have visited your establishment to escape politics.
Unless you're in politics, it is best to save the business of politics for the political businesses. People are more inclined to vote against your company in a blink of an eye just because of party differences. Your business could lose out on its maximum potential revenue stream that could be earned from long-term loyal customers. Further, from a humanitarian standpoint, your customers are your biggest fans; many of them might also be very loyal patrons and friends. Their love and support for your business over time might be invaluable.
2. Your business could minimize its income
Similar to an individual, a business has three choices when it comes to managing its wealth. This was demonstrated best in the book The Survival of the Richest: "…there are three major wealth-management possibilities…First, you can minimize your wealth below the level of your bare minimum survival essentials necessary to survive (this will now be referred to as the edge of survival). Second, you can live on the edge of survival and have just enough wealth to survive. Finally, you can maximize your wealth above the level of your bare minimum survival essentials necessary to survive" (Criniti, 2016, p. 162). The conclusions of that book demonstrate that both minimizing wealth and surviving alone are not good enough. We must always try to stay ahead of our struggles—this is done only by wealth maximization (a concept that was demonstrated to be the primary focus of economics and finance).
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If you enter your business into the political arena and publicly choose to advertise your personal political beliefs, it is very possible that you might lose many former customers/clients. You might also repel many potential new ones away. These actions could lead to a significant loss of income. When you lose income, you are minimizing wealth. The minimization of wealth over time will eventually lead to business death. Let's now explore that point further.
3. Your business could die
The third major reason why entrepreneurs should not mix their businesses with politics is that their businesses could die. This reason is usually the final result of the first two points above. If companies lose many of their customers, then they will lose revenue. If they lose a substantial amount of revenue, then they might have to close up shop.
Business suicide has become very common during the Great Pandemic Depression for a variety of reasons, especially due to a loss of revenue. There are already enough restrictions put on businesses because of Covid-19 that are causing severe financial strain on them. As an example, let's use the restaurant industry. In many places, currently, there is a maximum 50% indoor occupancy rate. If only half of a restaurant's customers can be inside at one time, then this business already has its revenue reduced in half (assuming it only offers indoor dining services and that all customers spend equally). If this same restaurant was to push its political views onto its customers (for example with political ads and signs all over its building), then it might lose another half of its revenue (assuming its customers were an even split between Democrats and Republicans).
The bottom line between the cost of the Covid-19 restrictions and the political promotions is that this restaurant could now only be earning around 25% of its potential revenue. This amount of income is certainly in the category of wealth minimization and would not be sustainable over time. Any business that does not move in the direction of wealth maximization will eventually approach death.
4. Your personal wealth could suffer
The fourth major reason why entrepreneurs should not mix their businesses with politics is that their personal wealth could suffer. When a business dies, the owner still needs to rely on some source of income to pay her bills. If she does not have any other income, then she will probably need to get another job immediately. Until that income is replaced, she will need to use her existing wealth to stay alive. This might translate to using an emergency fund or even selling property (i.e., a car or a house) to get by. As Principle 206 from The Most Important Lessons in Economics and Finance book states: "Being alive is expensive" (Criniti, 2014, p. 239).
Keep your politics to yourself
In summary, the four major reasons why you should not mix your business with politics are: your business could lose customers; your business could minimize its income; your business could die; and your personal wealth could suffer. In these unprecedented times, politics are at the top of mind for many people. Passionate differences are demonstrated even amongst immediate family members. The purpose of this article is not to convince you to switch to any political party, but to illustrate the potential financial problems that could occur if you cross the line and reflect your political beliefs on your business.
The consequences are severe and may not be worth the risk, regardless of the size of your business. Considering the conclusions above, it is shocking that many large, wealthy corporations have completely commingled their businesses with their owners' political views—and because of it, they are suffering severely. Just because they are big, does not mean that they are immune to the principles of finance; these universal rules apply to everyone.
You probably have many personal examples of people who will not shop at certain stores anymore because of their political viewpoints. Only time will tell if these businesses can figure out how to bring their lost customers back. The damage may already be permanently done.
By respecting the possible sensitivity that your current and potential customers might have to being pitched different political beliefs, you can maximize your target audience. In the end, when all of the political smoke clears and the Great Pandemic Depression is over, it is important that your business is still surviving, and hopefully, thriving. A good diversified customer base might just be that edge that you will need to prosper as a successful entrepreneur.
