Looking ahead: Thoughts in preparation for 2021

Well, we haven’t seen many decades open up like the roaring 2020’s! With a global pandemic, an economic downturn, a breakdown of supply infrastructure, food scarcity like we have not seen in generations, and a presidential election; it is little wonder that most of the world is closing out the year in a state of fear and emotional fatigue. The business community has either seen growth through capitalization of a new consumer reality or, is on the brink of closure eagerly awaiting word on what the newest phase of federal stimulus will bring. Add to that the change in leadership in the White House, and increasing nationalistic sentiments globally, and it has never been more important to begin the new year with a plan. This article is an attempt to read the tea leaves and to identify some of the greatest opportunities and biggest threats facing lower middle market businesses in the coming year. I will address these from the perspective of four major categories: policy, economy, supply chains, and sociology.


With a new President preparing for a January 20 inauguration and a party change in the Executive Branch, a principal concern for many business owners is “How will the shift in policy impact my operation?”. The good news in this case is that we have forty years of political history from which to ascertain at least the broad strokes of what we can anticipate. It is also important to keep in mind that the Democratic majority in the Senate is only attainable by a vote from the VP, so this will impact the ability of this administration to make any major changes, especially those that require a 60% supermajority, at least for the first two years.

With all of that said, there are a few areas where we can expect President Elect, Joseph Biden to push an agenda early on. He has a history of promoting green tech and renewable energy, so plan on seeing federal money pushed back in those industries. It is also fair to anticipate some rolling back of the Trump-era deregulation, especially in the energy and finance sectors. Mr. Biden also presented a number of bills throughout his time as a Senator and given the present environment for the “non-essential” workforce, you can expect that he will be looking at programs to support this demographic.

So far, the tax and jobs reform act of 2017 has not generated the economic growth and production repatriation that was anticipated. What’s more, for international operations, the tariffs exercised on many imports have either counter-balanced the tax benefit and/or reduced revenues on exports. The reform has also exacerbated deficit spending by decreasing tax revenues even while the government increased its spending in the areas of defense, border security, and others. Add to that more than a trillion dollars in emergency relief in 2020, and the federal budget is deeply into the red. With all of this taken into account, it is reasonable to anticipate that the new administration will be looking to get closer to balancing the budget. While another major tax overhaul is unlikely in the first year for political reasons, it is also not out of the question. It would be safe to anticipate that defense spending will take a haircut. 


Given the state of our economy and the havoc that the COVID pandemic continues to wreak on our ability to get back to work and the shops, it is reasonable to expect that stimulating the economy and supporting our workforce will be the top priority for the new administration. Congress’s efforts thus far to achieve this through the PPP, the CARES Act, and stimulus checks to the general population have not delivered. By and large, they have barely put a dent in the overall need while further expanding our federal deficit. With few levers to pull, I would expect that Capitol Hill starts to give serious consideration to re-engaging our federal infrastructure and works programs. If this is where the new relief efforts turn, it will be a boon to all companies within the construction and civil engineering sectors. If put into effect early, it may even offset the impact of which is likely to be a precipitous decline in commercial and residential real-estate development as the downturn continues.

The economy was much less stable than Wall Street made it seem going into 2020, and many of these instabilities are being fleshed out as our society bears the strain of a pandemic and social discord. It remains to be seen whether our political leaders will come together to address these weaknesses, or whether they will push that burden onto business owners to address. Some items that are critical to address include the lack of employee wage purchasing power. This results largely from the nominal growth in employee wages compared to productivity growth. This lack of buying power is impacting manufacturing and retail leading them into decline. International trade tensions and tariffs have further hindered growth prospects. Businesses opting to take tax benefits and use them to buy back stock rather than reinvest in wages and infrastructure have counteracted the stimulus efforts by not allowing the funds to recirculate into the economy through their staff and service providers. It is also important to recognize that this downturn is happening in the reverse of a typical recession with industries normally hit in the later stages of a downturn being impacted early, and many industries that usually indicate recessions benefitting from “essential business” status. In this case, flattening the curve will most likely mean that businesses currently unaffected should brace for a rocky 2021.

Finally, look for banking and credit to tighten up significantly in 2021. The PPP and CARES Act programs put a heavy burden on banks and a large load of no-recourse loans on their balance sheet. It is unclear how the banks, businesses, and federal government are going to settle these debts, but until banks are free of the liabilities, expect that they will be reticent to issue credit for any request that strays outside of the exceptionally low-risk requests. It is likely that this issue will not be resolved before 2022, if even that is possible.

Supply Chains

Nationalistic sentiments across the globe, trade wars, and the global pandemic have culminated to decimate our logistics infrastructure. Tariffs are causing pricing instability in international supply lines, and there is not enough individual liquidity to pass all of these costs on to the consumer. Many production facilities have suffered shutdowns and delays due to COVID. When this happens anywhere within the supply chain the entire production and delivery mechanism is threatened. It is more imperative than ever that businesses assess their exposure to international, geographic, and concentration risks with respect to their supply chains. Secondary sourcing to mitigate these risks is a critical practice. It is also imperative that businesses consider the larger supply chain from well to them in order to better understand exposure to secondary risk. Finally, there are many resources in heavy demand that are reaching a point of global scarcity. While recycling as a whole has failed to achieve significant impact in the area of cost-effective resource supply, any company that succeeds in developing an efficient process for recovery of many of the specialty metals utilized in battery and printed circuit production will see substantial green field in front of them.


The country has weathered many periods of extreme polarization before now, and there is no reason to believe that we cannot overcome this season of discord. However, with politicians showing no signs of working toward unification, it is going to be up to us to demand and display a sense of community.  It will fall to business owners as leaders within their communities to face ideological and socio-economic divides. We need to rise above the rhetoric to recognize that we are all human beings with fundamental needs and a role to play in the successful realization of our country’s potential. For news media and politicians, there is money and power in division and hyperbolic representation of opposing ideologies. However, for the average human being and privately held business, such divisive tactics lead only to lost revenue and personal hardship. As leaders within your community and markets, you are in a unique position to listen, learn, and unify. Leaders who take in all voices within their team, client population, and professional peers will quickly recognize that we all have much more in common than we do that separates us. Leaders who find a way to drive open discourse, positive change, and to revitalize a sense of community will reap extraordinary benefits in staff and customer loyalty, and impact growth. This is an issue too important to trust to parties incentivized by discord. It is up to the leaders of every community to demand and to demonstrate better.

It goes without saying that 2021 is going to be an exceptionally arduous year but just like metal pounded in a forge, we can use these challenges to grow stronger as a nation. I challenge each and every one of you to reflect on the opportunities that difficulty presents. Remember that we as a human society have always achieved our best when our backs were to the wall, and that as humans, our community and ability to collaborate is our greatest strength. Please let this be a living dialogue throughout the year. I wish you all the very best and we would love to hear your thoughts and experiences so that we may serve you better.


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