A worker inspect filled bags of pet food before they're sealed at the Perfection Pet Foods plant in Visalia. The business is a division of Western Milling in neighboring Goshen. Photo by David Castellon
Written by David Castellon
This is part of a series of stories called “How to survive in California as a business owner,” offering tips on how to be successful in the face of the Golden State’s challenging business climate.
When Ron Heskett came to the Valley in 2012, it was for one job — to turn around a failing business. He had been contracted to do the same for other businesses in Indianapolis, Denver and other cities.
But when he was done getting Borga Steel Buildings and Components in Fowler back on track, he decided not to move on. Instead, he bought Borga and became its CEO in 2014.
As someone who has run businesses around the country, Heskett said being a manufacturer in the Valley or anywhere else in California comes with unique challenges. Other local manufacturers agree, noting the generally higher costs for labor, land and rent compared to most other states, along with a regulatory environment that often is burdensome and costly.
In addition to high taxes and regulation, Heskett noted, the legal environment is also difficult, not only due to the regulations but because people tend to be more litigious here compared to most other states.
“You go across state lines and it’s not practical to go to court for some of the stuff you get taken to court for in California,” he said.
There is opportunity, though.
“California’s blessing is it has a huge market, a huge population, and if one understands the market, the changes in the market, and if one understands his own business model — your financials and your people and the requirements and the burdens the state of California puts on you — you can be successful. It just takes a lot more work than in other states,” Heskett said.
HR, help is a must
A big part of that is having human resources staff that trains regularly to keep up with the new rules and regulations California puts out every year, Heskett said.
“Just because you don’t like a regulatory policy or a law, you can’t ignore it. You have to comply.”
As for legislation and rules that seem punitive to business, help is available, including from the Governor’s Office of Business and Economic Development (GO-Biz), the San Joaquin Valley Manufacturers Alliance, various chambers of commerce and economic development organizations and The California Manufacturing Technology Association, said Mike Betts, CEO of Betts Co., a Fresno maker of vehicle springs and other car parts.
“It’s important that businesses realize they have a voice and not to lose faith
[believing] they won’t be heard,” Betts said.
Then there are labor costs in California, as the state has imposed a series of yearly increases in the state’s minimum wage until it reaches $15 an hour in 2023, more than double the current minimum wage in Louisiana.
At least on the manufacturing side, “while that is a fairly significant hit on businesses, I’m fairly hopeful companies will be able to stay here and survive,” Betts said.
It’s important to note that business trends in California aren’t always isolated to here, as “What happens in California does trend across the nation,” said Kevin Kruse, CEO of Western Milling in Goshen, a maker of livestock feeds, pet food and fertilizers.
Leading the way
He said it helps to have a mindset that we are leading the way and will do things more efficiently.
For example, it costs more to make pet food here than it costs his competitors in other states, said Kruse, noting that Western Milling has invested heavily in automation to tamp down production costs and remain competitive, and other manufacturers across the state are doing much the same thing.
Despite the burdens and challenges, some businesses thrive here, Betts said.
“I think having the right employees is key, having a culture — a winning culture — where people are appreciated and motivated and passionate about the business,” he said.
He said it’s important to have a pipeline of new, quality employees.
“If you don’t have a good talent pool in this day when unemployment rates are low, are you able to draw great talent?”
Heskett said that as far as he’s concerned, one of the biggest challenges specific to the Central Valley has been finding labor with the skills needed in modern factories, as they seem to be harder to find here than in more urban areas where factories are more prevalent.
“The Valley doesn’t have a really strong history of manufacturing,” he explained, “so finding employees who are used to manufacturing is very difficult, and it takes some time to hire people with experience.”
It’s not just a challenge to fill low-skill jobs, Heskett said, noting he has been unsuccessful finding a “detailer” — a very experienced draftsman, and “The last engineer I hired, I brought in from Utah. The last project manager I brought in from Tulsa.”
It’s getting easier
Betts disagreed at least partly with Heskett’s assessment, noting that the Valley has an extensive manufacturing history in both food and non-food products.
But both men did agree that finding people with the skills needed in factories has gotten easier in recent years, as schools and colleges have rolled out career tech programs geared to training people to fill factory jobs. The local manufacturing industry is also working to tailor the training toward technology, which includes industrial computer programing, mechatronic engineering, modern heavy truck mechanics and robotics, Heskett noted.
Reaping the benefits
“I believe in the Central Valley we are seeing better and better talent coming out of our education programs at our universities, community colleges and high schools,” said Betts, adding that he saw manufacturing education undergo strong improvements locally starting about five years ago.
Significant numbers of people who took those courses are beginning to emerge in large numbers on the local job market, he added.
“With the advancement of the career technology, career technical [education] programs, and how state-of-the art they are today, the quality of the candidates that are available for our manufacturing business is outstanding.”