Closing shop can open other doors
By Catherine E. Toth
Advertiser Staff Writer
Eight years ago David and Cindy Cheever had to make a difficult business decision.
Rebecca Breyer • The Honolulu Advertiser
Sales at their shop, Bike Way on Ward Avenue, had been slumping. Costs were rising. And the bike industry was losing profitability nationwide.
David Cheever, with his wife and kids, from left, Cindy Cheever, Nicole, Brittany and Jill Wheatman, wasn't able to cope with rising costs and had to eventually close the family shop, Bike Way on Ward Avenue. But he used that experience to move on to another job.
"We were either going to sell it or close it," said David Cheever, who ran the company with his wife and daughter. "We didn't have any other options."
At first they wanted to sell their business. But they couldn't find anyone willing to buy the $200,000 worth in inventory they had left. So they closed the 15-year-old business.
It was tough for Cheever but the experience has helped expand his marketing consulting business. He has firsthand, real-life knowledge of running a business to share with his clients. He can speak with authority on writing business plans, dealing with competition, managing inventory and, finally, retiring a business.
His daughter, Jill Wheatman, who handled operations for the bike shop, turned her experience into a job in marketing at Coffee Partners Hawaii, the operators of Starbucks.
Small-business owners are often faced with situations that could put them out of business. Sluggish sales, increasing costs, lease changes, death in the family, an economic downturn. Sometimes there is no other financially feasible solution but to close up shop.
But that doesn't mean they've failed at business. In fact, many entrepreneurs learn from the experience and apply that to new endeavors.
"There's nothing wrong with failing," said Bev Harbin, president of the Employers' Chamber of Commerce and owner of about eight small businesses starting at age 18. "You can always learn from it. And next time you won't make that mistake again. I've made mistakes my whole life, but I've learned from every one of them."
Two decades ago, Harbin started Hon/Hawaii Auto Repair, an automotive repair shop that specialized in Hondas and Acuras. Though she had no experience in that particular industry her past business experience served her well, and the business was a success.
"Sometimes you do so well and become such a success that you expand yourself into problems," she said.
Overseeing a lot of employees — and paying the high cost for them — isn't something Harbin wanted to do, so she sold the business to her employees. Her latest endeavor, the Employers' Chamber of Commerce, is a solo job.
"I don't have any employees," she said. "If I can't do it myself, it ain't going to get done."
Elton Shishido, who ran the Shishido Manju Shop in Wailuku on Maui, reluctantly closed the doors two years ago after a family dispute over the property on which the bakery stood.
"We knew it was going to happen, we anticipated it, but we just didn't know when," said Shishido, 39. "We could've pulled someone on the side and taken care of this. But our main focus (at the time) was getting rid of our debt, so we could invest in making our store better, increasing production, introducing new products."
Instead of resolving the property dispute or finding another place to make his family's popular mochi and manju, Shishido ignored the problem. Procrastination is usually a mistake. Shishido was eventually forced to close the bakery. He took out a second mortgage on his Kahului home and got a job at a nearby hotel to pay off his loans.
Family-owned businesses have particular challenges, said Marty Plotnick, president of Creative Resources Inc., a marketing research firm.
He said one of the biggest problems families face is the administrative work required to operate a business, from payroll to healthcare to workers' compensation insurance.
"All they want to do is get customers in, serve them, take the money and move onto the next customer," Plotnick said.
But not keeping up with the administrative details can sink a small business.
Another tough lesson learned in many business failures is that you must deal head-on with competition from national retail chains.
Bike Way lost sales when Sports Authority, which also sells bikes, opened across the street.
"You could buy the same goods in our store in four or five other stores in Honolulu," Cheever said. "There was nothing distinctive about our store. ... We didn't have a niche. Our only niche was that we treated people better. And that's always important."
Chock's Home Appliance & Entertainment Center shut its doors in 2003 when the retailer faced increasing competition from big-box retailers like Sears and Circuit City, which could sell similar items at cheaper prices.
That kind of competition also hurt the landmark Arakawas in Wahiawa, which closed in 1995. The 85-year-old store just couldn't compete with discount and wholesale stores such as Costco, Sam's Club and Wal-Mart, which moved into the area.
But local businesses can co-exist with national chains if they can offer something different, either personalized service or unique products consumers can't find anywhere else.
"You have to find your niche," said John Monahan, a former Liberty House chief executive and current president of the Hawai'i Visitors and Convention Bureau, the state's major tourism marketing agency. "From there you have to be able to target your customers and understand how you're going to best deliver your product to them."
If you do close an established business, you can most likely count on other business owners placing a high value on your experience.
For Shishido, running the family's bakery for six years — coupled with a degree in culinary arts from Kapi'olani Community College — helped him get a job in the purchasing department at The Fairmont Kea Lani Maui, where he works directly with the kitchen. His wife Kelly, who also helped in the Shishido Manju Shop, now works in the hotel's bakeshop.
"I pretty much grew up in the shop," Elton Shishido said. "That's what I did, that's all I did. ... My work now, it goes hand-in-hand (with my experience)."
Elton said he makes more money per hour now — working just eight hours a day compared to 14 — and enjoys not having to worry about healthcare costs, worker's comp insurance and pyramiding taxes that plague small-business owners.
"I get a free lunch break and a quarterly bonus," he added.
But he hasn't given up on running his own business again.
"I mean, I liked (running the bakery) because of the freedom. I liked being able to go to Vegas on a slow month and not have to plan ahead. Our options are still open."
Reach Catherine E. Toth at ctoth@honoluluadvertiser.com or 535-8103.
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| Lessons learned the hard way
Here are some strategies from local business experts on how to avoid the common pitfalls of running your own business so you don't have to make those difficult decisions. • Have a viable market: "The No. 1 thing you have to do is assess your product and figure out whether there is a market or customer for that product," said John Monahan, a former Liberty House chief executive. "You could have the world's greatest product and it might work wonderfully, but if you don't have a sizeable market to support your business infrastructure, you're just wasting your time." • Have enough money: "The single biggest reason businesses fail is their failure to honestly project their financials," said Marty Plotnick, president of Creative Resources Inc., a marketing research firm. "They have insufficient working capital to carry them through the first year." Among their costs owners should include the cost of remodeling or building-out their facilities, fittings on walls and counters, technology upgrades and inventory. • Don't rely on financing: Though only a small percentage of personal bankruptcies are tied into failed businesses, relying too much on financing can create problems in the long run, said Greg Dunn, bankruptcy attorney. "Planning always starts in the beginning," he said. "You have to make sure you have enough funding and assets so you don't have to rely too much on financing, especially credit cards. That can really kill you." The average amount owed to credit card companies of clients who have filed for personal bankruptcy range from $15,000 to $40,000, he said. Dunn recommends people never leave outstanding balances on their credit cards. "Things just add up and compound," he said. • Have a solid business plan: After you've identified your market and figured out your financing, Monahan recommends coming up with a solid — and realistic — business plan. "If you don't develop a strong business plan, you're absolutely going to Las Vegas," he said. "That's why the failure rate of business start-ups is so high. You have to be realistic. You can't just fall in love with the idea of having your own business." • Walk the walk: Small-business owners typically don't have the time to research their competitors — they're busy running their business —Êbut experts say it's important to know what else is out there. "Go out and look at the others, see how you're treated, see how they run their front-end, ask for unusual things," Plotnick said. "You can't let your ego say, 'I know what I'm doing, I know how to run this business.'" • Be different: Offering something unique and filling a void in the marketplace are ways to keep a leg up on your competitors. And that might be the only way you can compete with large, big-box retailers who can sell the same products at a cheaper price. "You gotta be different somehow," said David Cheever, marketing consultant and former small-business owner. "You're not Wal-Mart. Their difference is they sell things cheaper. When you're not selling it cheaper, you better find some way to be different." The difference could be in your merchandise mix, your store ambiance, or your customer service. • Focus on quality: Shishido Manju Shop in Maui sold just two products: mochi and manju. Though the bakery closed two years ago, it wasn't because the family wasn't making money. "Just find that one niche and do it well," said Elton Shishido, the last owner of the bakery. "We only did two things and we concentrated on that. If people like your product, they'll come back and they'll expect the same thing, same flavor, same quality. So be consistent." • Avoid sibling rivalry: Many squabbles over family-run businesses occur among siblings, said Dean M.K. Shimamoto, co-owner of Business Managing Agents LLC. "The siblings will go at each other," he said. "It's usually carry-over from when they were young." He recommends that owners who want to pass on the business to their children designate one sibling as the primary authority. "You can't have co- or equal authority," he said. "That leads to difficulties." • Know when to quit: Small-business owners are innately risk-takers, said business advocate Bev Harbin. But sometimes they make decisions that could jeopardize their business, such as forcing growth or changing merchandise. Other times they don't realize the high cost of doing business in Hawai'i. "When you own a business, it's like having a baby," said Harbin, who has owned about eight businesses. "You get so attached to the business that you end up putting money and energy into it. One of the hardest things to do as a business owner is to be detached." She recommends that small-business owners talk with advisers or consultants to get an outside perspective on their situation. "Sometimes you need to accept that you're business needs to be put out of its misery," Harbin said. "Just take a deep breath and do it ... There's nothing wrong with failing." — Catherine E. Toth |
