(This column originally appeared in the Washington Times)
OPINION:
When it comes to making good business decisions, my smartest clients leave politics in the voting box.
Agree or disagree with President Trump’s policies, we have businesses to run. Let’s not argue why Mr. Trump is doing what he is doing. Let’s instead look dispassionately at his policies and make decisions with them in mind. We can’t let our emotions get in the way of how we run our businesses; too many people are depending on us.
As business owners, here are some actions we should take right now.
Navigate tariffs
Tariffs may increase the costs of materials we buy. We must ensure we’re fully aware of how they will impact our margins. We should prepare to pass these costs to customers. We should communicate with them now so they are prepared. We should consider storing our materials in a bonded warehouse or a warehouse in a free trade zone where tariffs can be potentially delayed. If possible, maybe we can switch our suppliers for better pricing, and we’d better do so now. If you sell into overseas markets where you have faced higher tariffs in the past, you should prepare for these tariffs to come down in the future, which could open up more opportunities. Look for lower-cost international suppliers and new markets using organizations such as the World Trade Center Association.
Hire former federal employees
Tens of thousands of federal employees are being laid off, and many will be looking for jobs. For years, we have been complaining about labor shortages and a limited workforce. Now, we have the opportunity to hire good people. Revisit your hiring plans and reach out to recruiters. Start looking again at online sites such as LinkedIn and Indeed.
Buy capital equipment
There will be many tax changes this year when Congress legislates to either extend or make permanent provisions of the 2017 Tax Cuts and Jobs Act. One thing I’m very certain about is that first-year deductions for the purchase of capital equipment, which includes vehicles, machinery and technologies, will significantly increase to the levels we saw when the legislation was initially passed. This means you will receive a big tax break this year by investing.
Buy used assets
If you are following the above advice and buying more capital equipment this year, either do it over the next few months or pivot to buying used equipment. Thanks to tariffs, new items will likely come at a higher cost, so used equipment will be more affordable. You can still get the same tax benefits but at a lower price.
Plan for continued elevated interest
The Department of Government Efficiency is cutting federal expenditures but still has a long way to go to dent our $2 trillion annual deficit. Inflation will continue to persist thanks to tariffs on ballooning debt. Markets will be volatile over the next one to two years. Unless unemployment spikes or we head into a serious recession — neither scenario is likely — the Fed will probably keep interest rates around where they are. Capital is still readily available. Get financing from banks backed by the Small Business Administration (you will find loan approvals to be easier) and make sure there is a return on investment.
Get your immigration paperwork in order
Immigration and Customs Enforcement is focused on deporting illegal immigrants, and they are working off a long target list. Ultimately, however, more attention will be paid to businesses. If you’re willingly employing undocumented workers, you’d better change that strategy soon. If you’re not sure, now is the time to get your documentation and support (I-9s, E-Verify) together and make sure it’s up to date. Ultimately, it’s still your responsibility as an employer to have documented workers on your payroll. If this is not the case, you could face stiff fines regardless of the reason.
Harvest your losses
Regardless of why the market is fluctuating, the reality is that many stocks have fallen in value over the past few months. Now is a good time to consider “tax loss harvesting” and exercise something called “wash sales,” where you can sell your stocks at a loss now, offset those losses against any gains (and take up to a $3,000 deduction against your ordinary income) and then wait 30 days and purchase the stock back. This way, you get a tax benefit and can still participate in the stock’s longer-term growth.
Promote your employees
There has been a lot of media attention about how big companies are abandoning their diversity, equity and inclusion programs. That’s nonsense. The Equal Employment Opportunity Commission, now controlled by Trump appointees, issued rules that clarified the implementation of DEI policies. The bottom line: Everyone, regardless of skin color, religion, gender or group, is entitled to the same treatment. That’s a sensible business policy you should now have and promote to your current and prospective employees.
Be careful with your independent contractors
Labor Secretary Lori Chavez-DeRemer, an Oregon Republican, has stated her support for California’s union-friendly PRO Act and for federal proposals that would have changed worker classification rules and forced many employers to reclassify more independent contractors as employees. That legislation failed, but the Department of Labor issued new rules around this topic that were unfavorable to employers. Although certain Biden-era rules, such as overtime, are reverting to before his administration, I predict the Department of Labor will still look hard at employers who use independent contractors. Review your worker classifications because if you’re misclassifying a contractor, you could face higher taxes, penalties and potential back pay of benefits.
Prepare your business for sale
According to a recent Gallup survey, more than half of business owners are older than 50, yet only around 40% have made succession plans. Under Mr. Trump, now could not be a better time. You can be assured that taxes, particularly capital gains taxes, will remain low for the next few years. Also, millennials are getting older, more experienced and looking to buy. Property values, the largest share of most small businesses’ assets, are elevated. According to the business brokerage site BizBuySell, business sales are rising fast. Now is the time to make your plans.
Finally, don’t worry about Trump
Although public policy does play a role in many executives’ decisions, it’s not as important for most small businesses. Of course, some things may impact your business — tariffs, for example — but don’t let what Mr. Trump is doing get in the way of your strategy for growing your business.
I predict that much of what’s happening today, particularly as it impacts the economy, will settle down over the next few years. It’s likely the actions he has taken, while disruptive, will ultimately generate growth and more stability.
It’s why small-business optimism remains at historical highs, regardless of what’s happening in Washington. They know something.
