At an event recently, I was struck by something a fellow business owner said. “If you’re in business, you have to involve yourself in the business of government. If not, you won’t be in business for long.” 

As a California business owner, I have seen firsthand how legislative and compliance challenges have put up roadblocks for business in the state. The Los Angeles Area Chamber of Commerce’s report, “California’s Competitiveness: A Regional Approach,” details how regulatory, insurance and employment issues combined with an increasing cost of living, have driven businesses to states that are perceived as more business friendly: Texas, Florida and others.

At the same time there are a lot of reasons for optimism for the state’s business owners, especially in Los Angeles.  The Los Angeles region will host international sporting and entertainment events — including the 2026 World Cup and 2028 Olympics and Paralympic Games — resulting in significant investments in our infrastructure and a great opportunity for suppliers.

Los Angeles Mayor Karen Bass signed Executive Directive 4 to support economic growth by empowering small businesses. The Executive Directive will focus on opportunities to reduce costs through a review of business taxes and fees, assessing processes to start a business and defining approaches to foster business growth and attraction.

These opportunities are not just important for small businesses. According to the mayor’s data, small businesses represent 99% of businesses that have opened in the city since 2022 and are responsible for 63% of net new jobs. Nearly half of all California employees are employees of a small business.

In addition, other stakeholders need to support small businesses in their efforts since small businesses often serve as a proxy for greater economic development. By looking at conditions for small business owners, one can see what the broader economy holds. So, using small business as a crystal ball, we can see some troubling trends as well as reason for hope.

Labor

The SAG-AFTRA strike showed how small business owners that are not a party to a strike can be critically affected by it. Estimates show the strikes cost the state up to $5 billion in losses. Small businesses that serve the film industry – caterers, launderers, florists, equipment manufacturers and more – saw the same impacts and outcomes to their businesses as they did during Covid. 

In addition, the State Assembly has put forth several bills that would raise the burden of unemployment on businesses and which makes it more difficult to hire contractors. In order to continue to employ nearly half the state, business owners need to balance the costs with the benefits.

Climate

Climate related disasters, combined with infrastructure failure, has resulted in billions of dollars in losses in the state.

In terms of climate, the state legislature has already passed two bills aimed at California businesses requiring them to report their annual greenhouse gas emissions, climate-related financial risk exposures and climate risk management plans. These bills are not aimed at small businesses or medium-sized businesses but rather seek to mitigate future losses that result from climate-related disasters.

Infrastructure

With historic levels of federal funding, Los Angeles is poised to transform its infrastructure over the next decade. This will create new jobs and opportunities for the business owners that are advocating for their inclusion and participation in the projects. 

Reasons for optimism

Transforming California’s business environment and economy will bring benefits to the small business owners, as long as they can continuously promote their inclusion. Small businesses are well positioned to provide solutions that mitigate climate change, that provide positive working environments and benefits for employees while balancing costs, and for being key suppliers in delivering infrastructure solutions.

The element that links the risks affecting small businesses is that they are largely outside of the businesses’ control, or even the organizations that support them.  The way businesses and business owners can influence the laws and regulations such that they have a positive impact on the economy is to continuously advocate.

Of course, business owners cannot do it alone. Keeping tabs on bills in Sacramento or Washington, D.C. is a full-time job that impedes the leadership of a thriving enterprise. Chambers, advocacy organizations and trade associations are the key to elevating and amplifying small business voices throughout the region. 

In order to for these factors to trend positive for small businesses, those businesses need to advocate for increased resources to support them. Business owners need:

• To strategically assess and mitigate risks that result from the regulatory and compliance environment that exists in California

• A seat at the table to encourage their inclusion and substantial participation in upcoming infrastructure, sports and entertainment opportunities

• Capacity development to expand beyond current business niches to leverage business opportunities

By joining an organization, participating and making your voice heard, small businesses will be key to transforming the infrastructure, environment and economy in Los Angeles.

Kevin A. Keane is chief operating officer of Directed Action Inc., a boutique management consulting firm in Los Angeles. He is on the board of governors of the Los Angeles Area Chamber of Commerce and is co-chair of its Small Business Council.