Posted tagged ‘Business Location’

Businesses Joined by Non-Profits in Leaving California for Friendlier States

September 21, 2017

Friends in economic development agencies and in the site selection consulting world have asked why I haven’t posted anything in quite awhile. My answer is simple: I’ve been exceptionally busy. It certainly isn’t because there aren’t things to write about.

Another question I’m usually asked is whether businesses are still leaving California.

They are, especially with the state legislature again failing to provide tax or regulatory relief to its home-state companies. Overall, taxes, fees and regulations have gotten worse. Such a difficult business environment, combined with grim treatment by local governments, have caused operating costs to grow faster in the San Francisco Bay Area and Los Angeles than in virtually every other metropolitan area in the nation.

So large corporations and small business entities – joined by non-profit organizations – continue to look for ways to partially or fully exit the state. Today alone brought two examples, which by coincidence both involve Nevada.

The first is a loss for Los Angeles with Virtual Guard, Inc. leaving the city’s Sherman Oaks section. The company plans to relocate its headquarters and interactive command and control center to Clark County (Las Vegas area), citing an “unfriendly economic environment” in California. The move is likely to occur later this year.

There, Virtual Guard  is expected to hire 80 new employees within its first two years of operations. The video monitoring company is also a developer and integrator of technology in the perimeter security sector and its solutions are being used throughout the United States and Canada.

California, which a long time ago was a haven for aerospace companies, will lose another one next year.

ERG Aerospace Corp. plans to relocate its Oakland operations to McCarran, Nevada and make the Silver State its headquarters. The company manufactures materials and components for the aerospace, national defense, semiconductor manufacturing, biotech and other high technology industries. The target date for the move is the second quarter 2018, with operations to commence in the same quarter.

Several months ago, a non-profit organization said it would relocate out of state, too. Horizon University, a private, Christian school that started classes in 1993 in San Diego is heading to Indianapolis.

Horizon’s President Bill Goodrich calls the decision “a no-brainer.” He said Indiana offers a “climate” that was slipping away in California, and by that he wasn’t referring to San Diego’s sunny days. Goodrich said that the university helps people “grow academically” while integrating the “strong biblical teachings and we find in Indiana, there’s an openness to that.”

The move will allow the, accredited university to grow on a 97-acre spread – in a state with less “red tape” – and attract more students.

Thanks to high costs, a sizeable non-profit move is upcoming: Toastmasters International will shift its headquarters from its birthplace in Orange County to Colorado.

With about 180 employees, Toastmasters CEO Daniel Rex said costs in California were a concern. “When you look at the availability of workers, when you look at the cost of commerce and real estate, this is something that makes sense.” The organization is spending $19.5 million to buy a building in Englewood, south of Denver. Toastmasters is a legendary California institution, founded in 1924 in Santa Ana. Since 1990 it’s been based in Rancho Santa Margarita.

Business people who endure the decline in California’s business climate and pervasive cost increases can take some comfort knowing that some non-profit brethren are members of the same club.

I’ll write moe about how California treats its commercial enterprises. But first let’s see how many business-helpful bills and business-damaging bills Gov. Jerry Brown will sign into law.

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

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Another Los Angeles-Area Tech Company Creates Jobs . . . 800 Miles Away & Out of State

June 20, 2016

PCM, an El Segundo-based IT services provider, will open a sales center in Rio Rancho, New Mexico this summer, with the first of more than 200 employees coming on board in August.

El Segundo to Rio RanchoGov. Susana Martinez and other state officials, on a recent trade mission to California, asked the company’s CEO to consider New Mexico.

PCM provides technology support to clients that include the NFL’s Cincinnati Bengals and Green Bay Packers, Sea World, Wendy’s, GE, and others. Salaries of the sales positions will range between $45,000 and $65,000.

Frank Khulusi, CEO and founder of PCM, said, “Meeting with Gov. Martinez and her team in California was a game changer. Learning about New Mexico’s improved business environment and talented workforce was a deciding factor in expanding our operations to this state.”

The publicly traded company will generate $2.2 billion in sales this year.

See the complete story at the Albuquerque Journal, “Calif. tech company brings more than 200 jobs to Rio Rancho.”

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One focus of this blog has been to address California’s difficult business environment.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

 

We Must Create Accountability or California Will Keep Bashing Businesses

March 24, 2016

Recently, when my firm completed a study that found about ten thousand companies left California in the last eight years, it hardly surprised leaders in the business community.

Some say there is one thing in California worse than taxes – and that is the complex set of directives enforced by unforgiving state inspectors. In fact, many business owners consider the state’s regulatory environment to be worse than its notorious tax burden.

Kathye & Jim Rietkerk, Kallisto Greenhouses

Kathye & Jim Rietkerk,
Kallisto Greenhouses

California’s political elite and their regulatory enforcers don’t understand that business owners enjoy running their enterprises and virtually all of them try to do the right thing. One example can be found in Kallisto Greenhouses, which closed in Fontana in response to Sacramento stinging them from many directions like a group of killer bees.

Suffocating a Nursery

Even a non-polluting, greenhouse-gas reducing, job-creating, tax-paying, greenhouse run by good employers can’t escape the punishing regulatory noose.

Kallisto Greenhouses operated with a peak of 36 employees shipping tropical indoor plants to ten western states and Calgary Canada since 1977. But the owners padlocked the doors because of actions by the California Air Resources Board (CARB) and California’s Occupational Safety and Health office (Cal-OSHA).

CARB Calif Air Resources BoardCARB required heaters that underperformed despite costing tens of thousands of dollars and also insisted that their truck – which almost certainly would be legal in most states – be replaced by a new vehicle with an unaffordable price tag.

“Contributing factors included the ripple effect of an increase in the minimum wage and addition of paid sick leave,” said Kathye Rietkerk, co-owner. “But the nail in the coffin was Cal-OSHA. We got a letter saying we had the choice to invite in a visit by a Cal-OSHA consultant to review employee manuals or take the chance of being visited by an inspector.”

Outrageous Fine for Simple Mistake

Naturally, the company opted for help from the state’s consultant. Upon his arrival he noted that a numerical calculation on a certain OSHA form was in the wrong column, which resulted in a $5,000 fine. Not that the number was incorrect. Only that it was in the wrong place on the form.

By the time he was done, the fines he felt he could assess had he visited not as a consultant but as an “inspector” would have been in the hundreds of thousands of dollars for similar mistakes.

Cal OSHA“Also, the corrections to procedures and existing manuals were deemed not exact enough to suit the Cal-OSHA consultant, so it took six months of staff time to satisfy him.” she said. “They wanted us to be rigorous on things that aren’t that important.” (Note: Cal-OSHA rules are more stringent than required by federal OSHA regulations.)

For example, the agency wanted a requirement that mandatory disciplinary proceedings be initiated for certain employee mistakes even if the employer doesn’t want to treat long-term employees that way.

“To be forced to be inflexible makes you an adversary to your employees, and we should be allowed to determine when discipline makes sense and when it does not,” Rietkerk said. I contacted workplace expert Tom Martin of People Management Professionals in Riverside, Calif., who confirmed her viewpoint that Cal-OSHA indeed makes inflexible “one size fits all” demands.

Company Hit Hard

Meanwhile, the company’s operating costs kept increasing as water bills rose despite having installed $300,000 in sophisticated water-saving technology, health insurance prices went up, electricity became more expensive, and taxes continued to climb.

“The day after the OSHA consultant left we called the developers who had been seeking to buy our property for yet another distribution warehouse to serve ‘products imported from abroad,'” Rietkerk said. The company owned ten acres, six of which were covered by 257,000 square feet of greenhouses.

Kallisto Greenhouses had loyal employees (76 percent with more than 20 years of service) and offered health insurance since the early 1980’s, three weeks vacation to long-term employees, seven paid holidays and flexible working conditions.

Kallisto Greenhouse

Kallisto Greenhouse

“We were forced to make decisions we never dreamed of because of the incredibly hostile small business environment in California,” she said. “It is sad that government programs that are ideally intended to protect employees can result in complete job loss instead.”

“We got into business because it was enjoyable and we loved producing a product that enhanced people’s lives. People who create jobs are not ‘the enemy’ and we were grateful to have choices when the onslaught of regulations made the choice of closing more attractive,” Rietkerk said.

It appears that the majority of California legislators, Gov. Jerry Brown’s “jobs czar” Michael Rossi, and state bureaucrats are just fine with ignoring the hardships the state imposed on Kallisto Greenhouses and continues to inflict on other businesses.

Hold the State Accountable

It’s time we make life uncomfortable for state inspectors who have been allowed to remain anonymous while inflicting unreasonable demands on entrepreneurs.

I have such a way – it’s called accountability.

Let’s begin requiring that California regulatory agencies publish online the names of inspectors every time a business shuts down or leaves the state because they decided there was a regulatory “failure.” The inspector would be free to list the details of infractions, but, in the same posting, an option should be available for the company’s leadership to tell their side of the story.

Doing so would help journalists and the public better understand how harsh treatment by public agencies motivates companies to transfer jobs and capital to other states or close their doors.

California needs such disclosures because the majority of voters are ill-informed about what it takes to run a successful enterprise. Such voters elect majorities of business-bashing politicians to the state legislature and to city councils in liberal strongholds like Los Angeles and San Francisco.

Consider the popularity of Presidential Candidate Bernie Sanders, a fierce socialist who attracted a huge crowd in San Diego on Tuesday. It seems that the ranks of voters antagonistic toward business are expanding.

If we fail to expose how California politicians and their regulatory armies treat companies, the proverbial man in the street will continue to be unaware of the pain that leaders of commercial enterprises have to endure.

An Astonishing Contrast

Many California Democrats represent a Jekyll-and-Hyde disorder by being contemptuous toward business interests while coddling state agencies that are guilty of far worse behavior.

Calif HSRAFor example, legislators recently blocked the State Auditor from examining financial mismanagement at the California High Speed Rail Authority (CHSRA); they did that after eliminating the rail agency’s obligation to report twice yearly on a project likely to cost in excess of $100 billion. Now, the CHSRA must report only once every two years despite evidence of serious cost overruns, dubious changes in plans and multiple statements that lack credibility.

Members of the Authority’s board ignore the stipulations contained in Proposition 1A, which voters passed into law in the 2008 election. California propositions that pass at the ballot box become law, and that high-speed rail law is being violated in so many ways that the list is too long to publish here.

Members of the Authority’s board continue to ignore the stipulations contained in Proposition 1A, which voters passed into law in the 2008 election. California propositions that pass at the ballot box become law, and that high-speed rail law is being violated in so many ways that the list is too long to publish here.

Can you imagine the outcry if Kallisto Greenhouses had copycatted the High Speed Rail Authority by demanding elimination of audits by the California Franchise Tax Board or the Internal Revenue Service? Or obfuscated details in documents required by state law?

The double standard in the way California treats businesses and public agencies is enough to turn the stomach of any business owner. Without more voters becoming concerned, we will continue to see company relocations to friendlier states, or – as in the case of Kallisto Greenhouses – simply go out of business.

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

‘California’s Split Personality’ – Coastal Economy Brisk While Large Swath of the State Suffers

February 3, 2016

California FlagPleased to note that the City Journal published a column which relies in part on our firm’s research about companies shifting their investments out of California to more business-friendly states and nations. The column’s subtitle is quite apt: “The Golden State’s tech sector is booming, even as its industrial base flees.” It’s written by Steven Malanga, the senior editor of the magazine and a senior fellow at the Manhattan Institute.

See California’s Split PersonalityCity Journal, a quarterly magazine of urban affairs, published by the Manhattan Institute, is “the most beautifully produced political magazine in the country,” according to PowerLine.

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

 

How Family-Owned Companies Can Decide ‘Should We Stay or Should We Go?’

January 20, 2016

Stay or Go (2)Warren Buffett is reported to have said, “Never test the depth of the water with both feet.”

Such caution is respected by families that own businesses, especially when they consider a new location for expansion, relocation or consolidation purposes. The further away a new location is – say, in another state – it’s more likely the project causes company owners to contemplate the difficult-to-answer-question, “Should we stay or should we go?”

Also, complexity varies by project since it’s usually a more elaborate job to relocate a factory than, for example, an office or warehouse.

There are two basic ways for a family-owned business to launch a site selection project: Conduct studies and consider what the numbers say about various communities; or deal with emotional issues within the family unit before launching a serious location effort. Both approaches work and if desired both can be done simultaneously.

Gathering Data

Site selection consultants will say, rightfully so, that great clarity will result after hard information is gathered regarding labor costs, taxes, facility expenses and other factors in prospective locations. Then, those findings can be compared to the company’s current situation. If you, the business owner, could reduce costs by 30 percent without hurting sales, would you be motivated to relocate? With savings of 10 percent, would you stay?

Acquiring Insight

It’s usually more than about numbers. Sometimes coaching occurs prior to data gathering to address family sensibilities about the project.

I’ve been in meetings where disagreements are aired by the company’s founder (usually the parent or grandparent), their now-adult children and spouses, and sometimes by non-family members who are essential to smooth operations. To say that differing views are expressed would be an understatement.

Change: An Explosive Topic

People generally fall into two camps when it comes to the issue of change regardless of who originated the proposal – those who oppose and those who support.

Some will resist any business transformation or relocation simply because people dislike change and change agents. For an excellent list of the reasons employees resist change, which also applies to family members, see the book by Robert Kreitner and Angelo Kinicki, Organizational Behavior.

Those who prefer the status quo will often say, “We’re trying to fix something that isn’t broken – let’s tweak a few things and move on.” The resistance is understandable because revising a business process or establishing a facility in a new location presents disruption and uncertainty.

Supporters of change will often repeat a quote that “Insanity is doing the same thing over and over again and expecting different results” (often attributed to Albert Einstein, even though evidence that he ever said it is elusive). Support for change may grow if people feel confident that discussions are being conducted in an open, honest and participative manner.

Many will applaud when hearing about a new location that offers a nice quality of life and lower living costs. This is especially true for people who cannot afford to buy a house in some of our costliest cities; they will relocate to become a home owner, particularly when the new location offers better schools, lighter traffic and decent amenities.

The Focus of Coaching

Where there is disagreement or lack of clarity, this is where I come in as a coach. It may be too early for me to serve as a consultant offering data, but at the time it’s more important to explore personal priorities and look for opportunities to resolve conflicts.

At the outset, I encourage participants to acknowledge that we don’t know what we don’t know. I ask everyone to examine their own experiences; notably, how have they handled earlier turning points in their lives? If aspirations within the family aren’t complementary, how can they be reconciled? What are the fears about the future of the company regardless of location? It’s remarkable how fruitful conversations can become when the subject of fear is discussed openly.

Coaching success depends upon an honest airing of the issues with the intent to bring about extraordinary results for themselves and their organization. Every case is different, and the agenda is set by the client, not by me, although I focus on accelerating positive personal and business results.

The Pros, The Cons

Sometimes, we find the answer whether to stay or go before launching any study that pinpoints the optimum candidate locations. A stronger desire to relocate may result from a never-ending onslaught of taxes and regulations from states like California and New York that are hostile to business. In such cases, the owner “can’t take it anymore.” However, an assessment of family circumstances may outweigh other factors and result in a decision to stay in the current location.

Remaining in place or heading off to a new community is a strategic decision that affects the company’s future. Gathering information can be considered more of a tactical effort, although a critical one, that shows where and how any repositioning will take place.

So, when heeding Warren Buffett’s advice about how to test the depth of the water, it’s best to start by relying on a coach or consultant who will carefully use a “tape measure” on your behalf. That way, no one will “drown” trying to find a good answer to the stay or go question.

The resulting location decision, whatever it may be, can be positive for any family-owned enterprise. It does, after all, clear the deck for the next business-building steps to be taken.

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

Another California Company to Expand Big Time – in Texas

December 23, 2015

Breaking news from the Austin American Statesman:

Oracle Corp. will build a huge, new corporate campus on 27 acres in Austin. With the new campus, Oracle plans to grow its Austin workforce by 50 percent over the next few years. The move expands the presence of another rapidly growing California-based technology giant in Central Texas, as companies including Apple Inc., Google and Facebook are aggressively ramping up their workforces there.

Seal_of_Austin,_TXIn addition to its new 560,000-sq. ft. campus, the deal also includes a adjacent 295-unit luxury apartment complex that will be a housing option for Oracle employees. Scott Armour, senior vice president of Oracle Direct, the firm’s cloud sales organization, said, “Our state-of-the-art campus will be designed to inspire, support and attract top talent – with a special focus on the needs of millennials.”

Jobs at the new campus will be primarily sales-oriented, lead qualification, prospecting and technical support. Founded in 1977, Oracle, one of the world’s leading software companies, is based in Redwood City in San Mateo County.

See the full story at: Shonda Novak and Lori Hawkins, Software giant Oracle to build major Austin campus, add employeesAustin American Statesman, Dec. 22, 2015.

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

 

Top Destination for California Company Relocations: Texas

December 9, 2015

Today, the Dallas Morning News published a big spread online about businesses migrating from California to Texas. The story is based on our new study of 9,000 companies leaving California in the last seven years “with about 15 percent finding a home in the more business-friendly Lone Star state.” (The print version will appear sometime next week.)

California FlagExcerpts:

“This report echoes what businesses that relocate to Texas continue to say – they are sick and tired of being over-taxed and over-regulated and are making the economically sensible choice to move to Texas,” said John Wittman, deputy press secretary for Texas Gov. Greg Abbott’s Office.

Texas Flag“Texas is an easier place in which to conduct a business,” said Joseph Vranich, president of Spectrum Location Solutions in Irvine, Calif. “Why is that so? A lot of people think it’s taxes, but in my view the No. 1 benefit is an easier regulatory environment. California’s regulatory regime is so harsh that it causes companies to look at all kinds of states to go to.”

California … is one of the costliest states in which to do business, with expenses 20 percent to 35 percent higher than other states, Vranich says.

Of all U.S. cities, Austin was No. 1, gaining 86 California corporate sites or expansions. Dallas ranked sixth (20 companies), San Antonio was No. 8 (16), Houston was No. 11 (11), Plano and Irving tied with Hillsboro, Ore., for No. 13 (9) and Fort Worth tied with Tempe, Ariz., for No. 14 (8).

The online version has a drop-down menu that permits searches by year, company, city, industry and product/service.

See the full Dallas Morning News story here.

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.