Cover Story

Brandon Reid opened The Manifest in 2009.
Image: Aaron Yoshino

The new entrepreneurs

Honolulu is home to great resources for would-be entrepreneurs. Thinking of starting your own gig? Read this first.

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Cover image for Jan 27, 2010

“Small business dominates our economy here,” says Jane Sawyer, the Hawaii district director of the Small Business Administration. Hawaii may be famous for its large number of public employees, but Sawyer says when it comes to the private sector, we go small. Really small.

“Most of our businesses would really be micro-businesses,” she says, “Many, many, many of them have under 10 employees.” Ultra-small businesses are the product of a changing local economy, one in which small private companies represent a growing share–according to U.S. Census Bureau statistics, private non-farm employment grew by more than 20 percent between 2000 and 2007.

From energy companies to lunch wagons to hip boutiques, more and more of us are looking to do it ourselves.

The Weekly sought out local small business experts, from counselors to academics to a few entrepreneurs themselves, in search of the key principles of Honolulu’s entrepreneurial class.

Whether you’re looking to launch a startup or expand a small business, consider their sage advice wisely–according to numerous studies, scarcely more than one-third of businesses ever turn a profit. Nevertheless, those who do succeed shape the future of our community. Much of what we love most about Honolulu is an amalgamation of countless entrepreneurial dreams. Besides, you can’t fail unless you try in the first place, right?

Have a vision–and a plan

Everyone starts with an idea, but that’s the easy part. The first and perhaps biggest stumbling block for most small businesses is the business plan.

“The majority [of people] come and say, ‘Well, this is what I want to do, I think.’” says Caroline Kim, director of the Small Business Development Center in Honolulu. “‘And they haven’t done their research.”

That may be because first-time business owners simply don’t know the value of a clearly–and realistically–mapped plan for profitability. On the other hand, it may be that they don’t know how to write one.

“A business plan doesn’t have to be some big academic ring of paper,” says Sawyer. “It just needs to be the most important facts [relevant to the business’ success].”

Brandon Reid, who owns the Chinatown cafe and nightspot The Manifest, says the SBDC helped him sharpen his focus.

“My business plan was really, really, really over the top,” he says, “[But] it was the key to every door.”

Is your plan strong enough?

One simple way to find out: use the online assessment tool on SBA’s Web site. It’s a checklist full of factors many would-be entrepreneurs overlook. Once you’ve got check marks next to the right boxes–sample question: “Do you have a customer service plan in mind or in place?”–the SBA will set up a one-on-one consultation with a business development specialist.

The Hawaii Women’s Business Center also conducts a free Small Business Resource Workshop twice a month, with varying times to accommodate working people.

“It’s a great overview on starting a small business,” said center director Cherylle Morrow. And it’s open to anyone, regardless of gender.

Another resource option that comes highly recommended by Sawyer, Morrow and Kim is SCORE, a national mentoring and training organization consisting of a corps of retired entrepreneurs, volunteers who field questions about formulating business plans. From general advice to the nuts and bolts, tried-and-true veteran entrepreneurs can be an invaluable resource. It’s a great opportunity for younger business people, as it combines the boundless vision and enthusiasm of youth with the hard-won wisdom of experience.

No question, a strong plan starts with a strong vision. Gelareh Khoie, who helped launch a revitalization of Hotel Street when she opened the art gallery and nightclub thirtyninehotel in 2004, says it was her vision that carried her through.

“It has to come from your heart,” she says, “and you have to believe in it with all your soul.”

How much you got?

However necessary to the greater goal, self-confidence can still only take you so far. Morrow says she finds that many would-be entrepreneurs make a surprising assumption: that there’s a supply of “free money” out there for anyone who wants to start a business.

While programs exist to help small businesses apply for grants or acquire loans, you’ll first need to find enough capital to get off the ground.

Morrow says that “usually it’s under-capitalization” that makes a business fold within the first couple of years, if not the first few months.

Owners either underestimate the amount of money it will take to get started, she says, or overestimate their early revenues–and sometimes both. Sawyer says a good rule of thumb is to carefully project cash-flow for the first two years.

“Most businesses don’t operate in the black for the first couple of years,” she says. “Or you have a flush of success and then the reality of operations settle in and things start to break.”

One word of advice: don’t get too far ahead of yourself before you have financing in place.

“If they come to us with a signed lease [before securing financing], I’m about ready to cry,” says SBDC’s Kim. “Because I can’t do anything about it. People do that frequently because they get so excited… Do not sign a lease before you have all your money. And remember that the lease is for three years, so you better know that your business plan is strong enough to carry that lease for three to five years.”

Even for existing small businesses that have been successful, a lack of capital can lead to failure if the owner tries to expand too quickly. There may not be enough money for more equipment or the opportunity to hire qualified employees to continue the same level of service.

Know what you don’t know

So you know how to fix a bicycle. That’s only part of the battle. Morrow and Kim both note that people may have skills with the hands-on side of the business–like bartenders who dream of opening bars or bicycle enthusiasts who dream of opening repair shops–but still be lacking in operational knowledge.

“A lot of times we find out that they have no idea of the management,” says Morrow. “The ordering, the planning, the staffing, all the different aspects of owning and operating a business.”

Don’t fret, she says, just know that you have a lot to learn.

“[In those cases,] we need to talk about ways that they can get some of those types of experiences,” says Morrow. “Sometimes it’s just getting people to realize that skills that they already have [can have] a different application.”

If you don’t have a certain expertise, you may also look into putting people with the needed skills on your team. The SBDC can put one in touch with those who are specialized in the entrepreneur’s field of interest. Kim says that because the SBDC “has 1,100 offices nationwide…I have reached into our national organization and said, ‘Here’s what I need, somebody refer me to who has it.’”

You can do it all–but not all by yourself

By nature, the entrepreneur is a take-charge personality. While this is an essential trait, it’s not without its pitfalls. Sometimes the enterprising owner thinks she can–or has to–do everything herself. Morrow says its essential to reach out.

“[They need to] build their own support groups, their advisory teams,” she says. “As the business owner, you still make the decisions. But you want feedback from people who aren’t involved in your business because they have a different perspective. They will see things from an angle that you can’t. And so sometimes they can see opportunities or threats.”

Hope you like working a lot!

Entrepreneurs often fantasize about creating their own hours. That’s entirely possible–sometime in the next decade. Kim stresses that running a small business, especially in the first three years, requires more time than many are willing to put in.

“Twenty-four hours a day, seven days a week…throughout the day, you’re thinking, you’re planning, you’re worrying…Your entire soul, your passion, is in this business. And it requires three years before we know whether you really made it or not.”

Keeping up

Even if a business has been successful for a number of years, Morrow notices that many businesses tend to see a drop off after 10 years.

“What seems to happen is that businesses get comfortable…and they cease to look for new opportunities to challenge themselves…[and] don’t pay attention to what’s going on.”

Morrow says entrepreneurs can’t be satisfied that they’ve “made it.”

“You need to stay engaged,” she says. “You need to be paying attention to the latest trends, to what else is going on to some of the up-and-coming businesses to make sure you stay in the game.”

No matter the economic climate, entrepreneurs considering startups and expansions will hear voices of both discouragement and encouragement. Dream big, experts say, but be prepared. There are a surprising number of other small business resources on the island, though some are quite costly, charging around $200-$300 per hour of consultation. Other free or low-cost resources recommended by the experts above include the Honolulu Minority Business Enterprise Center and the Family Business Center, both at the University of Hawaii, the Chamber of Commerce and the Business Action Center. Morrow likes to repeat the words of speaker she recently heard: “‘We can remember this as the Great Recession or the recession that made us great.’”