Businesses both small and large are fleeing California in search of friendlier pastures.
From 2018 through 2021, 352 companies relocated their headquarters from California to other states. The rate of exit more than doubled from 2020 to 2021 and was highest in Los Angeles County, an analysis by the Hoover Institution at Stanford University found.
The wave of departures has continued in 2024: Last month Elon Musk announced he will move SpaceX from Hawthorne to Texas, and this month Chevron announced plans to move its headquarters to the Lone Star State as well.
It’s part of a larger pattern. Headquarters and manufacturing plants are closing down and relocating operations to cities in Texas, Nevada and Florida. The Farmer John Meatpacking plant, a fixture of the Los Angeles meat industry for nearly a century, ceased operations and left the city to continue business elsewhere last year.
While the exodus has been headlined by a few big names, I often hear that medium to small businesses are quitting the city quietly, unburdened by public disclosure requirements and individually too small to register in media reports.
The explanations are varied, but the ultimate reason is clear: Los Angeles is an increasingly difficult place to operate a business. Affordability issues including high taxes and escalating labor, utility and energy costs, in addition to burdensome liability and punitive regulations, top the daily challenges. California perpetually resides at the bottom of state rankings of business favorability.
These factors are compounded by the enticing pull of recruitment efforts by other cities, including the promise of governmental partnership — especially appealing to Golden State businesspeople who complain of treatment as diverse as apathy and outright animosity from local officials.
Tantalized by prospects of greater opportunity, profitability and incentives out of state, the rational business mind makes a compelling case to leave. It practically screams it.
So this may sound crazy: Despite the mounting challenges in Los Angeles, my family-owned business isn’t going anywhere.
We care deeply about cost savings, efficiency and growth opportunities, and we recognize profitability as imperative to survival. But like many other small businesses in Los Angeles, we measure success and derive value beyond just profit and loss.
I am the proud owner of a four-generation beef jerky company that has called Los Angeles home for nearly 100 years. It brings me immeasurable joy to work in the same brick building built by my great-grandfather, greet customers who knew my grandfather, and share an office with my father. You can’t put a price tag on legacy. This legacy of course extends to our employees, many of whom have dedicated more than 25 years to our business, or have gone on to achieve successful careers elsewhere and even start their own businesses.
Rather than chase cheaper labor, our company would rather invest in our employees through health benefits and professional development as well as cultivate a sense of family. Other states have tried to recruit our business to leave California, but among the reasons we have refused is that we don’t want to abandon these connections.
We also value our role as part of L.A.’s communities. This year we launched a program targeting causes that align with our mission — supporting youth, families and active lifestyles — through monetary and product donation, as well as volunteering our time and expertise.
That’s the difference between huge corporations and small businesses. The former each employs thousands of local residents and contributes robust tax revenue to the city at a scale we can’t match. But larger companies — whether publicly traded, backed by private equity or international holding firms, and sometimes led by celebrity billionaires — are moving targets. They will pursue shareholder value at all costs regardless of regional ties or other considerations.
Meanwhile, there are 4.1 million small businesses in California that generate 7.5 million jobs, representing 47% of private-sector jobs. More importantly, two out of three net new jobs come from a small business.
Although corporations are important to L.A.’s financial ecosystem and should continue to be recruited, small businesses should not be discounted. Just because my business and others have chosen to stay here doesn’t mean we should be taken for granted.
In good news, the U.S. Chamber of Commerce reported a 7.8% increase in new business applications in California from 2022 to 2023. Los Angeles County may lead the state in departures, but it also had the most business applications during that year — 160,925. The challenge is getting them to stay.
To that end, we are rallying our peers around a common goal of improving the business landscape. These efforts have coalesced in the Made in LA Coalition working to raise consumer awareness about products manufactured in Los Angeles.
Some of the key initiatives we’d like to see include financial incentives for local manufacturing that encourage job creation and advancement, protections against pernicious lawsuits by bad actors seeking personal gain rather than the public good, and a commitment by the local government officials to use their platform and reach to celebrate the businesses, and people behind the businesses, who are committed to the city.
That kind of investment will help make Los Angeles a place where both business and community can thrive long term.
Brian Bianchetti is the fourth-generation CEO of People’s Choice Beef Jerky.