The Inland Empire Business Leadership Survey was designed to elicit the opinions of a diverse group of executives on critical issues facing businesses in the region. Topics included an assessment of the business climate at the local and state levels, plus an in-depth look at specific issues related to money and growth, the regulatory and legal environments and quality of life factors. Additional questions were asked to help categorize respondents as to their industry, location and size. 

Data was collected in two waves between August 22 and September 10, 2005. Participants were sampled from an opt-in e-mail list of executives in Riverside and San Bernardino counties and the Eastern Los Angeles county communities of Pomona, Claremont and La Verne. Over 145 business leaders responded. 

THE BUSINESS CLIMATE
Respondents were asked to gauge the climate for business expansion at the city, county and state levels. Statements such as "The current business climate at the city level favors business expansion" were presented on a five-point scale ranging from a value of one (Strongly Disagree) to five (Strongly Agree). The top two box scores (four and five) in this study are a measure of strength of agreement or level of concern and will be used throughout this summary. Percentages provided represent the combination of respondents indicating these two scores. 

Respondents were more favorable of the business climate at the city and county levels with scores of 66% and 60%, respectively, for the city and county statements. In contrast, less than one-third of respondents either agreed or strongly agreed that the state's current business climate was favorable for expansion. 

Table: Business Climate by Level of Government (below) details the top two scores by sub-market and county. Respondents from Lower Desert communities hold a more favorable perception of the business climate than their counterparts from other sub-markets. Respondents from Central Riverside county were the least favorable with an average score of 47% across all three levels of government. 
 

Firms generating $5 million or more in revenue viewed the business climate more favorably at the city level (72% vs. 61%) and the county level (70% vs. 49%) than their counterparts with less than $5 million. There was no difference at the state level. 

Manufacturing and industrial firms were less favorable in their opinions of business climate at the city level. Their score for the city business climate was 50% compared to 66% for all firms. For the county, their score of 55% was slightly less than the 60% average. Their views of the state's business climate were on par with the average score of 33%. Respondents from the real estate and professional services sectors were more apt than other participants to agree that their respective cities favored business expansion. Those in professional services held the highest level of agreement that their respective counties were suited for expansion. 

BUSINESS CHALLENGES
Respondents were asked to indicate their level of concern for issues in three primary areas: money and growth, regulatory and legal, and quality of life. The issues presented were scaled using a five-point scale ranging from a value of one (Not Concerned) to five (Very Concerned). Overall, issues identified in the quality of life section were of highest concern with an average score of 69%, followed closely by money and growth with an average score of 67%. Issues in the regulatory and legal section had an average score of 53%. 

MONEY AND GROWTH
This section focuses on issues surrounding cost and profitability, available money for growth, taxes and fees, the movement of goods and services, the presence of needed infrastructure and costs to insure the business and the health of its employees. Health care costs followed by general insurance costs, as well as overall cost control and profitability, were the topics of highest concern amongst respondents. 

Graph: Top Two Scores for Money and Growth Issues (below) 
 

Nearly all respondents were concerned with cost control and its impact upon profit margins. Respondents from industrial and manufacturing firms showed the highest level of concern for this factor at 91% compared to the overall average of 80%. Respondents from the real estate sector had a score of 58% indicating lower levels of concern. 

Affordability of business insurance is a major concern in the mindset of respondents. This varies by industry, however. Over 94% of respondents whose firms are in sales, both retail and wholesale, gave this a high priority compared to the average (84%) for all respondents. This was less of a concern for respondents from the professional services sector (64% vs. 84% overall). 

Rising costs for health care is the top money and growth concern among Inland Empire executives who responded scoring over 92%. Businesses with revenue of $5 million and greater skew higher at 97%. Those with revenue of less than $5 million skew lower at 86%. 

Of least concern to respondents are money and growth issues relating to accounts receivable and collections. Respondents from manufacturing and retail sales sectors tended to skew higher with scores of 50% and 53%, respectively. Infrastructure and logistical issues were of greater concern to respondents from the industrial and manufacturing sector than to the overall pool of respondents. 

REGULATORY AND LEGAL
This section sheds light upon issues surrounding lawsuits, the regulatory environment, legislation and workplace issues. Even though this section was of less concern overall to respondents, they were concerned with two main issues: workers' compensation and frivolous lawsuits. Scores for these two issues were 79% and 69%, respectively. 

Graph: Top Two Scores for Regulatory and Legal Issues (below) 
 

Industrial and manufacturing respondents skewed toward having a greater level of concern for regulatory and legal issues than their counterparts from other sectors. This was the case for frivolous lawsuits by employees and consumers, environmental and regulatory issues, workers' compensation, workplace safety and new legislation. 

The retail and wholesale sales sector skewed high for workers' compensation (88% vs. 79%) and workplace safety (53% vs. 43%). Respondents from the professional services sector had lower levels of concern for all issues except the area of employees violating rules and regulations, thereby placing the company in potential jeopardy. The issue of employees violating legal standards was also a pressing concern for respondents in the real estate sector. 

Sarbanes-Oxley scored at 36%, placing it last on the respondents' list of concerns. Sarbanes-Oxley is a greater concern for publicly-held firms. It is possible that a significant number of respondents are not subject to this regulation. 

QUALITY OF LIFE
This section scored the most important to business leaders. Quality of life revolves around issues that face us in our lives outside the workplace and directly affect the region's ability to attract and retain qualified employees. Scores ranged from 45% for cultural amenities such as restaurants, entertainment and shopping to 81% for educational issues. 

Graph: Top Two Scores for Quality of Life Issues (below) 
 

Overall, six out of ten respondents ranked commuting an issue of concern. Industrial and manufacturing respondents skew toward greater concern over commuting (68%) compared to respondents in the professional services arena (21%). Commuting was also more of a concern for firms with over $5 million in revenue (66% vs. 54% for those with less than $5 million in revenue). Respondents from the Lower Desert were less concerned with commuting issues than their counterparts in the Western Inland Empire. 

Cost of housing was a significant concern for eight out of ten espondents. Over 84% of San Bernardino county residents scored this a four or five, compared to 74% for respondents from Eastern Los Angeles county and Riverside county combined. No other profile variables provided measurable distinction. 

Over two-thirds of respondents stated pollution was a concern. Level of concern varied by respondent location. Lower Desert respondents viewed pollution as less of a concern (56%) whereas respondents from Eastern San Bernardino (71%) and Southern Riverside (89%) counties exhibited more apprehension about pollution. 

Education and crime weighed heavily on the minds of 80% of respondents. Education was somewhat less concerning to respondents from the industrial and manufacturing sector (68% compared to 81% overall). Education was also a more pressing topic for Lower Desert respondents (90%) particularly when compared to respondents from Western Riverside county (70%). Crime was a greater concern for respondents from the real estate sector (92% compared to the average of 80%). 

Although cultural amenities has a low ranking overall at 45%,respondents from the sales and real estate sectors found it to be more of a concern (59% and 55%, respectively). 

PROFIT VARIABLES
Several variables were used to classify respondents. These include professional organizations that respondents belong to, industry, location of company headquarters, annual revenue and the number of employees based in the Inland Empire. 

Local chambers were the most often mentioned organization for respondent membership. Over one-third mentioned they participate in chamber activities. The Building Industry Association and the Inland Empire Economic Partnership also received mention as did trade association groups specific to respondents' industries. 

There was diversity in the industry sectors represented. The top four sectors [industrial and manufacturing, sales (both retail and wholesale), professional services and real estate] accounted for 45% of respondents. 

Just less than one-half of respondents reported annual revenue of up to $4.9 million. Respondents in the $5 to $50 million range accounted for 31% of responses. Organizations generating over $50 million provided the remaining 20% of responses. At the top of the scale, six percent of respondents generated annual revenue over $500 million. 

Furthermore, respondents were asked to estimate what percentage of their revenue was tied to Inland Empire operations. 45% indicated their local operations accounted for up to one-fourth of their company's annual revenue. Over 20% indicated their entire revenue stream was generated from local operations. 

Two-thirds of respondents had less than 50 employees based in the Inland Empire. Eight percent have more than 500 employees in the local market. Two-thirds of respondents estimated that at least three-quarters of their employee pool was based locally. 

Seven out of ten respondents indicated their headquarters were in the local area. The remaining respondents were split evenly between another California location and another state. 

CONCLUSIONS
Inland Empire business leaders are most concerned about quality of life issues affecting the region including education, commuting, cost of housing and crime. These issues directly affect their ability to attract and retain their desired workforce. Issues affecting the bottom line are also of high concern. These include rising health care costs, insurance availability/costs and the measures needed to control costs and ensure profitability. In the workplace, issues surrounding workers' compensation and frivolous lawsuits by employees and consumers generate high levels of concern. 

These concerns are not new. Seven out of ten respondents said their key concerns had not changed over the last five years. 

There are differing perceptions regarding the business climate at the state, county and city levels. Across the board, respondents gave lower marks to the job that California is doing to promote a healthy level of economic expansion. Respondents were more favorable of the business climate fostered by their respective cities and counties. 

Research compilation and analysis for The Inland Empire Business Leadership Survey 2005 was conducted by Wilkin Guge Marketing, Inc., an independent research firm located in Claremont, California. The survey was sponsored by Best Best & Krieger LLP, the largest law firm headquartered in the Inland Empire and a top 35 firm in the State of California. The study was conducted during the months of August and September 2005 and results were previewed at the State of the Inland Empire, one of the top business events held annually in the Inland Empire. The identities of those who participated will be kept confidential.