California's Budget Crisis: Effect on Small Business (credit, debt, 2009)

[AsymptoticFaery]

News LINK: California on the Brink

Now with all of this going on with California, how might this affect either the prospect of furthering a small business startup or carrying on an existent small business in this state?

Is this the state to invest business plans in? Should small business owners look elsewhere for startups or business opportunities?

Just curious about the opinions of those in business, looking to start a business or highly knowledgeable about business.

I have my own ideas but I know there's a lot more to know on this front.

[desertsun41]

Being from Cali you should already know 2 things. The first is that all business publications rate Cali as the worst business climate in the USA. Second is that a very very large number of Cali business owners large and small already escaped the commuist like high tax business climate of California. Most went to Nevada. But with Nevada now in a deeper economic depression then most every other state, where is there left to go?

Beats the hell outta me!!

But I wish you luck. I hope you are wealthy to finance your own ventures. And the only small risk biz I can think of is an inexpensive high quality food fast food joint. Probably leaning on healthy choices.

No matter how bad the economy is, and no matter how broke people are, they will never give up going out to eat. They may cut back on costly dinners out but they will never cut back on going out. It's an American past time.

[user_id]

Originally Posted by desertsun41

Being from Cali you should already know 2 things. The first is that all business publications rate Cali as the worst business climate in the USA. Second is that a very very large number of Cali business owners large and small already escaped the commuist like high tax business climate of California. Most went to Nevada. But with Nevada now in a deeper economic depression then most every other state, where is there left to go?

This is just fabrication. Businesses have left California for Nevada? C'mon.....

California is never rated the worst business climate, its middle ground. See here:

CNBC's Worst States For Doing Business - Top States For Business 2008 - CNBC.com

California has a high cost of doing business, but there are many other factors.

Anyhow, I don't think the budget crisis is a major factor unless perhaps your business depends on government spending. I don't think they are going to touch the corporate tax rate and any increase in the income tax is likely to be for high income (half a million or so).

[harry chickpea]

FWIW, a quote from the cited article, from the same folks that bring you Cramer...

"California, where is considered a highly regulated state, ranked 48 out of 50 in Cost of Doing Business. It also ranked at the bottom in Business Friendliness (48) and Cost of Living (49)."

[user_id]

California's main issue are the costs of doing business in the state, but costs are often offset by the assets of doing business in the state. It just depends what sort of business you are doing.

The "Business Friendliness" issue is a bit deceptive too. There it really depends on what sort of business you are running. Most of the regulations are environmental in nature, which makes sense considering California's natural beauty is one of its biggest assets. But there are some areas that are fairly lax.

[AsymptoticFaery]

Well I admit I am concerned about this because I currently have a startup, so of course that means I am still in development stage of my business operations and plans.

My business is a bakery which will operate as a catering service first and a storefront later as I get funds to finance a brick and mortar. (Cakes, cupcakes, bars/brownies, cookies and the like)

[user_id]

Originally Posted by AsymptoticFaery

My business is a bakery which will operate as a catering service first and a storefront later as I get funds to finance a brick and mortar. (Cakes, cupcakes, bars/brownies, cookies and the like)

The problem here is not the state government, rather its the residents. Californians drown themselves in debt and how are having to pay the reaper.

The debt driven consumption in California artificially increased economic activity and now a lot of businesses are failing while the economy adjusts to lower spending levels. Unlike a normal recession the spending is not going to return to peak levels as the spending was debt driven and the credit is not coming back. I think one impact of this is that a lot of businesses are going to be competition while they fight to survive. I personally think the sort of business you want to create is very much over saturated (of course that does not mean there are no opportunities).

Additionally, Californians need to correct their balance sheets. This means paying down debts instead of spending money.

I personally would not create a food service in business in California right now, I'd save money and improve my product while I watched the market and create the business when things start to stabilize.

[AsymptoticFaery]

Well currently I have a "silent partner"...an investor who will help me eventually set up my storefront financially.

But I am just still considering where ultimately I might focus my efforts. Until then I'll do some catering services as there are people always willing to buy pastries at an affordable price that is still competitive for me. I won't have to worry about a storefront at this point, so I can save on expenses that would otherwise be applied to such efforts.

I've been looking at Northern California (Bay Area), parts of Canada (but I know there are so many hoops required to jump through in order to even consider setting up any kind of shop...as a U.S. citizen) and a few other states.

But good advice on stabilizing.

[AlfredB1979]

Originally Posted by AsymptoticFaery

Well currently I have a "silent partner"...an investor who will help me eventually set up my storefront financially.

But I am just still considering where ultimately I might focus my efforts. Until then I'll do some catering services as there are people always willing to buy pastries at an affordable price that is still competitive for me. I won't have to worry about a storefront at this point, so I can save on expenses that would otherwise be applied to such efforts.

I've been looking at Northern California (Bay Area), parts of Canada (but I know there are so many hoops required to jump through in order to even consider setting up any kind of shop...as a U.S. citizen) and a few other states.

But good advice on stabilizing.

I used to run a restaurant...then the war started in 2003 and business tanked and never recovered through the summer before I shut down. All I was told is that things will get better, but that was not my hunch, and I wasn't going to kill myself to keep things going, either.

People need to eat and you'd think they'd go out and have a sit down together...they cut that out and they also cry that your product is too expensive.

Pastries are even less of a necessity. Don't blind yourself here.

[AsymptoticFaery]

Originally Posted by AlfredB1979

I used to run a restaurant...then the war started in 2003 and business tanked and never recovered through the summer before I shut down. All I was told is that things will get better, but that was not my hunch, and I wasn't going to kill myself to keep things going, either.

People need to eat and you'd think they'd go out and have a sit down together...they cut that out and they also cry that your product is too expensive.

Pastries are even less of a necessity. Don't blind yourself here.

Not necessarily. I know of too many bakeries and pastry shops that are thriving as small businesses. I think their success is based on a variety of things...location for one, target audience, type of food products they offer in the category of pastries (especially regarding quality and affordability), financial management and perseverance.

I asked about California, my state, but I can definitely see some places here that are thriving. Long longs everyday and selling out to many venues and events. I'd like to get to that point but I still think it is wise to pay close attention to the financial climate overall here in my neck of the woods, so I try to do that.

Were you next to or in a military town by any chance? That might have a lot to do with why your location didn't work out or that the war took away a lot of your customers.