Why do O.C. business owners stay here?

March 10th, 2009, 5:00 am · 10 Comments · posted by Jan Norman, small-business columnist

What are California’s biggest advantages and challenges for small businesses? Union Bank recently put those (and other) questions to 2,000 business owners throughout the state.

Take our poll, then read what Orange County business owners told Union Bank:

What is the top reason to run a business in California?

In Union Bank’s 9th annual Small Business Survey, here are the top reasons O.C. entrepreneurs gave for doing business in California:

60% Favorable climate
55% Opportunities for growth
48% Family ties

These have been the top three reasons the state’s business owners have given for nine years. Ouch. Sunshine and living near the relatives hardly seem like strong drivers for profit.

The biggest challenges that O.C. owners identified for running a business in California (the survey was conducted Jan. 12 to 23) are:

47% California economy
35% U.S. economy
31% state and local business taxes (California businesses pay $74 billion in state and local taxes per year)

Clearly the recession is weighing on local business owners’ optimism. More than one in five (21%) are pessimistic about their business prospects in 2009 and expect their profits to decline. In 2008’s survey, 8%

Joseph Benoit

were pessimistic.

Just 35% expect their profits to increase this year compared to 58% in the 2008 survey.

It is the lowest rate of optimism and highest pessimism in the history of the survey, Union Bank said.

“The year-over-year data show that 2008 was about accepting the (economic) downturn; 2009 is about survival,” said Joseph Benoit, Union Bank’s small business banking executive.

Perhaps these owners are mindful that O.C. bankruptcies rose 94% in 2008.

At the Orange County Venture Group meeting in January, equity investors were also projecting a bleak 2009.

In a separate nationwide survey, small-business owners reacted to continuing bad economic news and sent the National Federation of Independent Business Small Business Optimism Index for February to the second lowest level (82.6) in the 35-year history of the survey.

“Reports of modest increases in earnings and sales measures were good news for owners, though likely only temporary,” said NFIB Chief Economist William Dunkelberg, “but it is clear that the first quarter of 2009 will be as bad as the fourth quarter of last year.”

Other Orange County findings of the Union Bank survey:

15% expect to add jobs in 2009 while 11% expect to cut jobs
47% are cutting operating costs
20% plan to reduce capital spending (equipment, building etc.) in 2009, compared to 8% in 2008
12% plan to increase capital spending in 2009, compared to 27% in 2008
49% offer healthcare coverage for employees, down from 56% in 2008 (Statewide, 46% offer employee health insurance, up one percentage point)

“I’m not surprised by these results; it’s what I’m hearing almost daily from many of our customers as they work to keep their businesses afloat,” Benoit said. “I also see optimism and a thriving entrepreneurial spirit in the small-business community. Like everybody, they’re reaching for some sort of help and looking perhaps for state and federal assistance to survive.”

When the survey asked Orange County business owners what help they want from the Obama administration:

58% said cut taxes for the vast majority of small businesses
44% said temporary tax incentives to encourage small businesses to invest in jobs
38% said increase small firms’ access to capital

Statewide, owners want the federal government to cut small-business taxes, lower health-care costs and create tax incentives for job creation.

Other business stories….

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Anand says:

March 10, 2009 at 12:22 pm

Hos is 49% for healthcare coverage, down from 46%? thats higher. get your math straight.

Jan Norman, small-business columnist says:

March 10, 2009 at 12:41 pm

Thanks Anand, it should be 56%. I’ve changed it in the post.

Jan Norman, blogger

Merrill Holbrook says:

March 10, 2009 at 1:17 pm

Business owners are finding more and more reasons why the weather, lots of people, and family is not adequate to continue to try to run a business in California. New taxes, over regulation, and an exorbinate cost of living are making a business’s ability to be profitable unrealistic. We are seeing more large discount stores, and stores that market to minority and low income groups. The small business’s that provide the tax base for the state are leaving. Soon Califonia will be left with few tax payer’s and lots of low wage earners. Who will pay the bills then?

Brian says:

March 10, 2009 at 2:09 pm

I moved from OC to Phoenix. Terrible business environment as well. California seems more desirable to me though.

Rober says:

April 24, 2009 at 4:23 pm

That heat is something over there. If I had to move, I would probably move to the cold country vs the desert. Outside of So Cal, those are your options. That is the ONLY reason I stay. If I could find this weather anywhere in the USA, I’d be outta here. And don’t mention Florida - that is a sweat box.

Nazar says:

March 11, 2009 at 9:08 am

With the many types of people and a diverse business climate the OC offers opportunities in any financial climate. Resourcefulness is the key to any enteprenuers success as well as a diverse enviorment to hunt and work in. I choose to stay and adapt. Fleeing can’t be the answer, you will be out of position for any type of recovery to come. The recovery will come to the OC first, much sooner than to many out of state alternatives. Good luck Phoenix, your recovery is going to be 18 months behind that of the OC. Persevere, Adapt and Overcome, a simple formula for success in the OC.

mike says:

March 11, 2009 at 7:40 pm

1. Location… where else can you visit the beach one day, the desert another day, and the mountains on another day!

2. Weather… when I see what the rest of the country has to put up with during winter, there is no way I’d leave So. Calif. Besides, I’m a native!

3. Opportunity… So. California has so much opportunity because of the quantity and diversity of the population.

Yes… the tax environment sucks… but as California goes, the rest of the country goes. It’s just a matter of time until other states impose the same regulations as California. Some already have.

So… might as well stay put!

Glen Naughty says:

March 12, 2009 at 12:53 pm

It’s the sun, wind & the breeze on the beach.

OneMoreThing says:

March 25, 2009 at 10:54 am

Since the question is “Why do O.C. business owners stay here?” it appears you left out another possible reason — there are business owners who cannot afford to move (yet) and therefore stay. The cost of relocating and re-establishing one’s business elsewhere is cost-prohibitive for many; especially those who are struggling just to stay afloat, so they have no other choice but to stay and try to survive. That being said, I believe that if Sacramento and local governments continue in the direction they are going, it will only be a matter of time before even the high costs of moving aren’t enough to keep businesses in this state.

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March 31, 2009 at 8:01 am

dog agility training…

I love what I am reading here. Shall drop by again….

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