Small business owners across California are facing a compounding set of pressures that are testing the limits of what even resilient operators can absorb. Labor costs in the state rank among the highest in the nation, and without a tip credit system, hospitality businesses in particular are being forced to cut staff and shorten shifts just to stay financially viable.
At the same time, the cost of nearly everything from supplies to insurance has climbed at least 25% in recent years, while the prices businesses can charge customers have a ceiling that the market simply won’t allow them to exceed. For restaurants operating on profit margins of 5% to 10%, a 2% hit to the bottom line from rising costs alone can push an operator into the red.
The situation is especially acute in cities like Los Angeles and San Diego, where businesses also contend with staffing shortages driven by high local costs of living, a homelessness crisis affecting downtown foot traffic, and regulatory environments that many owners describe as actively hostile to doing business. Relocating is one option, but it remains out of reach for most businesses, which are locked into leases in communities they’ve spent decades building a customer base.
Many owners are simply grinding through, working full-time for little or no pay, caught in a cycle they can’t easily escape. Despite it all, the prevailing sentiment among those in the trenches is that small businesses are among the most resilient forces in the American economy, and that innovation is the path forward.
The Cardiff Connection
Cardiff has been lending to small businesses for more than two decades, and the pressures described above are reflected in its own portfolio every day. Chief Revenue and Operations Officer at Cardiff Mo Tehrani has observed firsthand how compounding costs, such as labor, regulations, and rising overhead, squeeze cash flow and slow down the financial activity that keeps small businesses moving.
What stands out in Cardiff’s perspective is a long view grounded in real data. Cardiff understands that businesses with tighter operations, smarter strategies, and reliable access to capital are the ones best positioned to endure difficult conditions. Rather than passing every cost increase on to customers, which has limits in any market, the businesses that survive are the ones that find ways to adapt from the inside.
Cardiff’s role is to make sure capital is available to support that effort, so that the small business owners who are too invested to walk away have a real fighting chance to innovate their way through.
