The Big Picture of Buying A Business

For those who are on the path to buying a business we have good news and bad news for you.

The good news is that you're focused on buying the business of your dreams, something that can change your life forever.. 

That bad news is that the business of your dreams can quickly turn into a nightmare if you acquire with blinders on.

Why’s that?

Well there’s this little thing called the Federal Government.

They are the main driver of the broader economic environment that your newly purchased business will live and survive in. 

Therefore, having some pulse on the economic bigger picture is vital.

Your broker, attorney, and finance will be able to help along the way but if you’re just beginning the journey you want your mind to start think about the following three things;

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• Understanding fiscal policy and Government Debt 
• Industries most affected by Federal fiscal policy
• 6 things to keep top of mind in your buyer’s journey

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Let’s tackle them quickly…

Understanding Fiscal Policy and Government Debt

Put simply, fiscal policy refers to the government's use of spending and taxation to influence the economy. When the government spends more than it collects in taxes, it results in a budget deficit, contributing to national debt. High levels of government debt can lead to increased borrowing costs, potential tax increases, and reduced government spending in the future, all of which can impact the business climate.

Our country has seen significant increases in government debt over recent years, raising concerns about long-term economic stability. This debt level can signal potential changes in fiscal policy, such as pending tax increases or spending cuts.

Acquisition Industries Impacted by Fiscal Policy and Government Debt

Healthcare: Government spending cuts often target healthcare subsidies and programs. This can result in reduced consumer spending on healthcare services and increased operational costs for businesses in this sector.

Defense and Aerospace: These industries heavily rely on government contracts. A shift in fiscal policy leading to reduced defense spending can significantly impact revenue for companies in this sector.

Construction and Infrastructure: Government-funded infrastructure projects are vital for these industries. Reduced government spending can lead to fewer projects and lower demand for construction services.

Education: Public funding is a crucial component of the education sector. Budget cuts can affect public schools, universities, and educational service providers.

Renewable Energy: This industry often benefits from government subsidies and tax incentives. Changes in fiscal policy can influence investment and growth within this sector.

Technology and Innovation: Technology firms, especially those involved in research and development, often depend on government grants and contracts. Fiscal tightening can reduce these funding opportunities.

Financial Services: Government debt and fiscal policy directly impact interest rates and borrowing costs, affecting the profitability of banks, lenders, and insurance companies.

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Some Factors to Consider When Buying a Business

Economic Big Picture(duh): The fiscal health of the nation can dictate the overall economic climate. High government debt can lead to economic uncertainty, affecting consumer(your customers) confidence and spending.

Interest Rates: Government debt influences interest rates. Higher interest rates can increase your borrowing costs for purchasing and operating a business.

Tax Policies: Be aware of current and anticipated tax policies, as they can affect your business's profitability. Higher taxes to offset government debt can reduce disposable income and consumer spending.

Government Contracts and Subsidies:* If the business relies on government contracts or subsidies, be mindful of potential cuts or policy changes that could impact these revenue streams.

Regulatory Environment: Fiscal constraints can lead to changes in regulations affecting business operations, compliance costs, and market opportunities.

Long-Term Growth Prospects: Consider how government debt and fiscal policy might influence the long-term growth prospects of the industry you're entering.

Avoid the temptation to get so locked in on that target business that you tunnel vision.

The environment you buy in won’t be the environment that operate and ultimately grow and scale within.