There are very few business owners I know who have not failed at least once in business. I certainly have. In 2000, I had a website that was similar to ideas behind the condo listing sites like Home Away and VRBO. A lot of money went into the development of the website, but, alas it lasted a year and failed. That seems like ages ago, and since then we have seen countless business failures, and, thankfully, a lot of successes.
Here are a few things we have learned helping hundreds of businesses in Hawaii over the years. Many of the ideas come from our business successes and failures, as well as the work we have done with other businesses.
- Don’t base your business on a singular technology or innovative product. People over-value what a piece of equipment or a product will do for a business. Sure, if your equipment is cost-prohibitive for all but the most highly capitalized individual, you might have a sufficient barrier to entry. This is even more true if the local market is only big enough for one of that kind of business.
If, however, your equipment or product can be purchased relatively easily by a competitor, you will lose your advantage quickly. Likewise, if a customer can substitute your innovative product with another, you will have no marketing or pricing power.
I remember several years ago when HD video was becoming the new standard. A video producer I know spent tens of thousands of dollars on a new HD camera. She was certainly an early adopter. It was very nice, but the rate of innovation with cameras made a camera with the same specs available for 1/5 of what she paid within two years. What was a technological advantage and a barrier to entry was quickly lost in a few years. Fortunately, video production requires a lot of human skills, so the business is still around.
- Avoid long-term leases. This is true for office/industrial space, office equipment, and vehicles. The average new business does not make three years, so be careful about a five-year lease on rental property or a long-term copier lease. Leases are contracts and for a new business leases almost always require a personal guarantee, which puts your personal assets at risk if you fail. Try to bootstrap everything you can at the beginning by starting lean and outsourcing everything you can until you are financially stable. I can’t tell you the number of times we have seen a business failure destroy a family’s net worth because of over-spending and lease commitments.
- Don’t rely on traditional marketing. Focus your marketing on people-to-people interactions. It’s easy to spend a lot of money on TV, radio and print advertising and get almost no return on your investment. We recommend that every new business invest in a good quality website, and then get out and start marketing face-to-face. If you have a consumer product, try to get in front of consumers at the Village Stroll, the local farmers markets and community events. In-store demos are great, too. This will give you honest and direct feedback about your products, which you can then use to refine your products and your marketing. You may love your product and think it’s the best thing since sliced bread, but the only confirmation of that is sales! If you are a business-to-business company, spend some time identifying key buyers and then go meet them.
There are, of course, hundreds of things that you need to do right to succeed in business in Kona. The three things above are things to avoid.
They may seem like common sense, but we find that entrepreneurs are some of the most optimistic, and dare we say, Pollyannaish people we know. That optimism and can-do attitude are great, but, at times, it leads us to believe that we can overcome all obstacles. The obvious is not so obvious when you are self-assured and wanting to take your business idea and make it real. Business is hard enough when you do everything right, so why not start out by avoiding some of the common mistakes?