---

CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM Wedding consultant Christina Hassing works out of her home in Aiea, saving thousands of dollars on office-space rent.

---

Perseverance helps
entrepreneurs succeed

Small businesses here face
high costs, labor shortages
and government indifference

Of the 100,000 small companies trying to make it in Hawaii's tough business climate, perhaps none is as aptly named as IT firm Akimeka LLC.

"It means 'perseverance.' It's kind of appropriate," says founder and President Vaughan Vasconcellos.

In a word, it sums up what's needed to be a successful small business in a state with high business costs, labor shortages and a tradition of governmental indifference toward business.

Despite keen competition from big mainland firms, the perseverance is paying off for the 7-year-old firm, which has bulked up to 61 employees and annual sales of around $10 million on a steady diet of Web and network solutions contracts, primarily with the Defense Department.

Small businesses like Akimeka prove that in Hawaii, size still doesn't matter.

Despite the double whammy of 9/11 and SARS, and the parade of national chains muscling into the local market, small businesses remain the flexible spine of the state's economy.

According to the U.S. Small Business Administration, last year Hawaii had an estimated 28,300 small businesses with at least one employee. That's an increase of nearly 1,700 businesses in five years despite the economy's difficulties over that span.

Another 75,000 isle businesses are sole proprietorships.

"It's been slow in coming, but by nearly every indicator, they're doing better these days and the optimism level is higher," said state Sen. Sam Slom (R, Diamond Head-Hawaii Kai), president of the advocacy group Small Business Hawaii.

Among those indicators, income taxes paid by larger corporations have declined 15.4 percent since 2000, while revenues from the general excise and use taxes paid by all businesses grew 23.7 percent over the same period.

"It's an interesting dichotomy," said Paul Brewbaker, chief economist with Bank of Hawaii. "Either big companies are figuring out ways to work the tax code, or one can probably infer that small businesses are really cranking out the revenue."

If so, they're doing it by evolving to meet the new challenges.

The typical SBA loan in Hawaii has shrunk to around $90,000 last year from around $150,000 five years ago, said Andrew Poepoe, SBA Hawaii district director. Moreover, new programs introduced last year that offer loans of $5,000 to $15,000 have seen "brisk" demand, he said, as small and lean microbusinesses get off and running with little overhead other than a new computer and a handful of staff.

"The small-business sector is definitely growing, but it's changing constantly, too," said Poepoe, whose office was recently recognized by the SBA as the nation's No. 2 performer for this year with $63 million in financing extended to small local businesses.

Christina Hassing is among those finding that smaller may be better. In 2002, she and business partner Maggie Campolong set up wedding consultancy Pacific Aisles -- operated out of Hassing's Aiea home -- to capitalize on the growing market of visitors tying the knot here.

"There's a huge market for it. It's seen as the cool thing to do," Hassing said.

Today, they do at least two large high-end weddings a month, serving mostly clients from the mainland and Europe who need help on everything from flowers and photos to settling on a venue.

Hassing saves thousands of dollars a year on rent by working from home.

"I love it. It gives you so much freedom," said Hassing, who makes up for the lack of traditional office space by meeting her clients at their hotels.

Another factor likely to keep many businesses lean is the 13-year-low jobless rate, said Bankoh's Brewbaker.

"Unless they can offer attractive pay and benefit packages, it'll be tough and expensive to hire good people," he said. "The labor force just doesn't support sustained rapid job growth here. We used 'em all up, brah."

For some, the solution increasingly lies in outsourcing key aspects of their business, which in turn benefits the companies receiving that work.

"It took me away from doing what I do best," graphic designer Wainwright Piena said of the financial, personnel and other administrative tasks that mounted as his Nakuluai Studios gained success.

About two years ago, Piena took on a pair of partners to help reassess the bloated business, which makes T-shirts and other apparel under the Kapala Ahu brand.

They stripped it down, eliminating costly warehouse space, declining to replace departing staff and outsourcing production, leaving only Piena, who now focuses on design work and customers.

His monthly revenue has been halved from $40,000 two years ago, but overhead has dropped even more dramatically.

"I'd still like to grow, but I think I've got a better foundation now," he said. "I'm down to the heart and soul of the business."

Slom of Small Business Hawaii said huge challenges remain for local enterprises, particularly in high workers' compensation and other premiums. But the climate is improving.

A wealth of resources exist today for small entrepreneurs, including various incubation programs run by the SBA, other organizations and the state. Local banks are also increasingly coaching small-business loan recipients on everything from drafting a business plan to bookkeeping.

The Lingle administration, meanwhile, has taken a number of steps to ease the licensing and other paperwork burden on small businesses, putting many processes online.

"There are more resources out there than ever before," Slom said.

Ultimately, these factors are likely to leave a stronger small-business community.

Darryl Mleynek, director of the Hawaii Small Business Development Center Network, said that during tough times, many would-be entrepreneurs jump into business out of desperation. But today's strong employment market is enticing many to play it safe by taking steady jobs, leaving the most committed and promising businesses in place.

SBA data shows that in the past couple of years, business terminations have indeed slightly outpaced new business launchings.

"Before, people started businesses out of economic necessity, because they needed a paycheck," Mleynek said. "But today, people are responding more to real opportunities."

BACK TO TOP
|

Size doesn't matter

Ninety-seven percent of businesses in Hawaii are classified as small, a sector of the business community that keeps growing despite myriad challenges.

Small businesses with employees 26,675 1998 28,300 2003

Small business proprietors' income $2.7 billion 1998 $2.9 billion 2003

Persons employed by small business 237,000 1996 254,330 2001