Dealing with local government regulations (and regulators) is part of running a business. The National Center for the Middle Market recently looked at how important it is for middle-market CEOs to ensure they have reached out to their federal and state elected officials. These officials need to know who you are, what you do, and how your company benefits the community. But the same goes double for local (i.e., city and county) elected officials because laws and regulations they pass can make or break your business.

For just a few of many examples, local officials could (1) decide to improve the roads right in front of your business, which affects a customer's ability to come and go easily; (2) increase a sales tax, which makes your products or services more costly and therefore less attractive to local consumers; (3) raise the minimum wage, which Albuquerque, San Jose, and Long Beach did last year, which increases the cost of doing business; or (4) pass a law or sign a contract that, whether intentionally or unintentionally, helps your competitor or limits your ability to compete.

Do not let local government regulations adversely affect your business.

What's the best way to deal with these challenges?

Former Dallas Mayor Tom Leppert, who has run several national and international companies focused on construction, real estate, financial services, and now education, says one of the biggest challenges facing the middle market is that regulatory agencies are becoming much more involved in business, particularly with respect to financial services and manufacturing. Plus, many of the government regulations are becoming more strict, especially with respect to safety and health and the environment.

These regulations can be a big challenge for middle market companies because they may not be able to afford the team of lawyers that large companies have to fight back. And they have less revenue over which to spread those legal and regulatory costs. Middle market CEOs must be proactive in order to mitigate any potential problems. Leppert suggests the following:

  1. You have to know what's happening. Getting information at the local level can be difficult, but you have to track developments.
  2. Build up a proactive file on the issue. Leppert points out that middle market CEOs often don't take the time up front to ensure they will be able to address regulators' concerns. That's shortsighted. When regulators come calling with new government regulations, you need to have a file that demonstrates you have been taking appropriate steps.
  3. Rely on your trade association(s). Trade associations have the people who can track the issues and address them with local officials.

Texas State Senator John Carona is president and CEO of Dallas-based Associa, a middle market company that is the largest residential realty management company in the country. Because he has offices in many states, he brings a "multi-local" perspective to the issue.

Carona says that legislation and regulations at the state and federal levels often move slowly, whereas at the local level, "things can happen quickly." That means CEOs need to know their city council members and county commissioners, a point that Leppert also stresses.

Of course, if the company has branch offices elsewhere, branch managers need to introduce themselves to local elected officials. The CEO can come in when needed, but the branch manager is the one who has to develop the primary relationship.

One of the most important things a middle market CEO can do is fill a knowledge gap. State legislatures have a lot of people with divergent backgrounds and expertise. City councils, by contrast, are much smaller, and it's possible that some of the elected officials have little or no business expertise to draw on.

Because of this vacuum, your middle market executive team needs to become educators — about their business and industry. The best lobbying, says Carona, is preventive in nature, before a crisis arises.

Once a company is large enough, Carona suggests it sets up a government affairs department. It may need to rely on independent lobbyists who are on the ground in other geographic regions and can address local issues directly.

Former Democratic Speaker of the U.S. House of Representatives Tip O'Neill coined the now-famous phrase "All politics is local." He might with equal justification have said "All business is local."

Merrill Matthews is an NCMM contributor and a resident scholar at the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter and circle him on Google+.