Pitfalls

Many owners of
new businesses quickly
receive a reality check

By Peter Wagner
Star-Bulletin

You thought owning a business would free your time? Dream on.

"One of the dreams of going into business for yourself is wanting to be in control of your own time," said Brock Lawes, a professor of Marketing at Chaminade University and counselor at the Service Corps of Retired Executives. "The reality is very few businesses allow you the luxury of control over your time."

Take Hank Taufaasau, who puts at least 60 hours a week into Hank's Cafe Honolulu on Nuuanu Avenue. "In my wildest dreams I never thought this little neighborhood bar would entail the time we put into it," said Taufaasau, who opened Hank's five months ago. "Be prepared to put in the hours."

Underestimating the effort that goes into a small business is a common mistake, consultants say. Over-estimating profits is another.

Ben Krause, trying to market his first haul of tank-grown moi at Pacific Harvest Inc. Seafarms on the Big Island, is finding sales slower than expected. "It's been disappointing," he said. "I thought I would be farther along at this point. The market is not as big as I was told it would be."

There have been other miscalculations, Krause said, including the cost of building a fish farm on a lava field.

"In Idaho, if you want to dig a ditch, you bring in a backhoe and it's done. Here, there's nothing but lava and if you want a hole in the ground you've got to ram one. That was completely overlooked."

Such miscues, sometimes costly, are common among new businesses, consultants say. "You need to be really on top of every aspect of your business," said Laura Noda, who heads the Oahu office of the Hawaii Small Business Development Center. "People tend to over-estimate their revenues and underestimate their operating costs."

Among the other pitfalls Noda has noticed:

Undercapitalized: Lagging sales leave you struggling to meet expenses.

Open too soon: "If you're not ready to deal with customers or your product is not ready to be sold in the quantity the market requires, you could alienate your customers," Noda said.

Bad location: "Location is the key to success for many businesses," she said.

Too successful: "You could overextend yourself by adding markets when your staff or resources can't accommodate the expansion," Noda said.

Poor fit: "Your chances of succeeding are greater if you know your product or service really well. Some people will go into a business with very little product knowledge."