Are California firms closing or leaving?

More than one in five (21%) of California small-business owners do not expect to be in business in California in three years, according to a recent survey by Small Business California, an advocacy group in San Francisco.

It's a number Small Business California President Scott Hague calls "scary."

Yes, if California lost a fifth of its small businesses it would be scary. About 83% of California's businesses (78% of Orange County's) have fewer than 10 employees.

But here's the question: Are they closing their businesses forever or moving away? Some respondents thought the question was asking whether their businesses can survive and others put the emphasis on whether they would stay in California or move their businesses out of state.

The answer either way is yes for many of the 342 of the 1,335 poll respondents who gave longer explanations when responding to a recent Small Business California poll.

"I think taxes, regulations, access to  capital and the feeling of a hostile business climate all contributed," Hague said.

I recently reported on another aspect of that poll in which owners noted the problems they wanted state legislators and Gov. Jerry Brown to tackle. But this single question is worth exploring further.

Many of the responders seem to be on their way out the door, one way or another.  Fifty-three — 15.5% of those who gave fuller explanations of their response — specifically mentioned moving out of state.

Here are samples:

• "We will go where we can operate profitably."
• "The way things are going we'll have to move out of state just to survive."
• "Nevada and other states offer a much more friendly climate."
• "Ease of communication, travel and shipping make relocating less onerous."
• "If I am (still in business in 2014), it will be in another state. The business and regulatory climate in CA is too oppressive."
• "I already moved as much as possible out of CA, but I will not abandon my clients here and will keep a satellite office."

A few of those leaving the Golden State mention their destination: Texas, Nevada, Arizona, the Midwest or Oregon.

These small guys are usually overlooked in news reports, but they're not alone. In recent years so of California's biggest companies have announced moves to other states including Apple expansion to North Carolina; Beckman Coulter in Brea expansion to Indianapolis, Ind.; Edwards Life Sciences in Irvine added 1,000 jobs in Draper, Utah; and Fluor moved its corporate headquarters from Irvine to Texas.

Others in the Small Business California poll plan to close completely, many by retirement. Here's a sample of what the others said:

• "Can't afford to quit but not making much; I'm 63 and may just give up."
• "The business climate here is punishing and not conducive to small-business success. We've been in business for 16 years, but conditions keep worsening."
• "We're holding on by a thread and playing it day by day."
• "CARB (California Air Resources Board) will force us to shut our doors. Over-regulation and extremely high costs of doing business."
• "Way too difficult to do business here...everyone has their hand in your pocket. CA needs to get a grip on the fact that small business is the driver and without it, we are doomed."

Note: Alliance members who want to review the full issues survey [click] here.

Source: Orange County Register
March 8, 2011

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