Small businesses
hampered by costs,
insurance, competition

Hawaii's approximately 51,000 small businesses make up 96.7 percent of the state's business community and more than 16,000 fail to support such a lifestyle for their owners, the survey said.

The "State of Small Business Survey: Hawaii 2005," was commissioned by the Hilo-based Small Business Development Center Network. The network is a joint program of the University of Hawaii at Hilo and the U.S. Small Business Administration.

"We conduct a survey in order to find out what their current perceptions are about a variety of issues," said SBDC state Director Darryl Mleynek.

Oahu-based Market Trends Pacific Inc. interviewed 507 small businesses in various industries.

The biggest negative impacts have been increased operating costs (60.6 percent); employer-paid payroll taxes and medical insurance (42.6 percent); increased competition (34.5 percent); excessive governmental rules and regulations (30.8 percent) and lack of knowledge about business operations (15.4 percent).

About 1,600 businesses lost one to two employees to Middle Eastern military deployments. That represents slightly more than 3 percent of Hawaii's small businesses, but of those, more than 62 percent said the loss of the employees created somewhat of a hardship for the business.

More than 47 percent of survey respondents said they would sign up for free business consulting from trained, experienced management consultants.

"The need for this type of consulting is very high," said Mleynek.

Many owners sought out better knowledge of business operations and 46 percent said the education improved their ability to succeed.

The Small Business Development Center Network has a bill pending before the state Legislature requesting money to meet the demand for consultants. Such services are available through the Service Corps of Retired Executives and other resources, but the funding request is not reinventing the wheel, he said. Rather, it is akin to putting more air in the tires.

The report rang true and was frustrating to Bev Harbin, president of the Employers' Chamber of Commerce and longtime small business advocate.

"The thing that really bothers me with looking at this report, is the consistency of the increased operating costs and excessive government interference. That has a bigger negative impact on business than the lack of knowledge and the ability to obtain capital loans," she said.

"That's what I see in this and it breaks my heart."

She is not confident about the network's request for legislative support.

"If you look at every single bill that came out of the Economic Development and Labor (committees of the Legislature), there was not one thing to help business," Harbin said.

The survey also contains bright spots, despite the same hue-and-cry businesses have raised for many years.

Hawaii's economic upturn boosted sales for nearly 46 percent of local small businesses in 2004. Increased customer demand was cited by nearly 49 percent; more than 20 percent cited decreased operating costs and increased Internet sales were credited for higher sales by more than 11 percent of small businesses surveyed.

Most small businesses, 60 percent, project increased sales for this year as well, with more than 36 percent planning to hire additional staff, 26 percent planning capital investment and nearly 21 percent planning new product development.

The report can be viewed online at www.hawaii-sbdc.org.