As Hawai‘i’s entrepreneurial ecosystem expands, local business owners are navigating the challenges of scaling their businesses. From financial planning to preparing for acquisition, entrepreneurs face unique hurdles that require forward-thinking and adaptable strategies. Bank of Hawai‘i offers valuable guidance for those looking to take their business to the next level, ensuring they are equipped to succeed in an evolving market.
Local entrepreneurs that have graduated from Mana Up’s accelerator program, including Mahina Tuteur of Surf Shack Puzzles, Ashley Mariko Johnson of Mohala Eyewear, and Kelleigh Stewart of Big Island Coffee Roasters, have faced these challenges firsthand, and their stories provide key insights for others looking to grow and scale their businesses.
Financial Strategies & Exit Planning: Insights from Bank of Hawai‘i
At the forefront of business growth is solid financial planning. Dave Stinson, Vice President and Senior Manager of the Business Interests and Valuation department at Bank of Hawai‘i, emphasizes the importance of strong financial records for making informed decisions. "Good financial statements are essential for tracking progress and making decisions," he says. Entrepreneurs should focus on long-term plans, preparing for potential acquisitions or exits as part of their overall strategy.
Tim Chang, Senior Vice President, Metro Commercial Banking Center, Bank of Hawai‘i, encourages entrepreneurs to consider potential buyers early in the process. "If someone says, 'I love your product or I want to buy your company,' you need to be able to transfer that knowledge," he explains. Ensuring that businesses are well-documented and legally structured with the help of a good accountant and attorney will smooth the transition when the time comes.
Key Takeaways for Entrepreneurs:
1. Know Your Financials: Solid financial records are essential for making informed decisions and improving valuation. "QuickBooks and Excel—anything is better than nothing," says Chang. "Having receipts is better than not having receipts."
2. Think About Growth Early: Start considering potential buyers or partners early in your business journey. "Most owners have a list of who they would buy or sell to," Stinson notes. "The sooner you start, the better."
3. Plan for the Long-Term: Sustainable cash flow is a cornerstone of business success and valuation. "Companies that get the greatest sale value are the ones with strong, sustainable cash flow," Chang says.
4. Find the Right Fit: When considering acquisition or partnership, "It has to be a perfect fit,” says Mahina Tuteur, of Surf Shack Puzzles. Understanding the alignment of your business with a partner’s values and goals is critical.
5. Adaptability is Key: Stay flexible and willing to pivot. Kelleigh Stewart, of Big Island Coffee Roasters, offers this advice: "Prioritize and focus, but stay nimble. Try things, and if they work, that’s awesome."
The Power of Strong Financial Planning
When scaling a business, one of the most crucial aspects to focus on is your company’s financial health. According to Stinson, “The first thing I do when I look at a private company is evaluate its financial records. I assess its performance over time and compare it to its peers to understand how it measures up.”
For any entrepreneur looking to scale, Stinson recommends focusing on sustainable cash flow and market positioning. "If you're trying to grow your valuation, focus on sustainable cash flow and a strong market position," he explains.
Having a reliable financial infrastructure is essential for making smart decisions and tracking growth. “It’s important to have really good financial statements that you can rely on to make good decisions and track your business’s history,” adds Chang.
Flexibility and Adaptability in Growth
Entrepreneurs also need to be nimble and adaptable as they scale. As she has grown Big Island Coffee Roasters over the past decade, Stewart shared her experience of balancing the rapid growth of her business with staying true to its roots. “Some people who’ve worked for large corporations with set procedures don’t realize how fast a small business can grow,” she explains. “We try things, and if they work, that’s awesome.”
Stewart’s approach emphasizes the importance of flexibility in the entrepreneurial journey. “Don’t try to fit a round peg into a square hole when it comes to people, including yourself. Be willing to adapt and cater to your employees’ talents,” she says. Building a team that can pivot and experiment is essential to sustained growth.
“Prioritize and focus, but stay really nimble as well. Build that into your team and remind them that we’re going to try this, and we don’t know if it’s going to work, but we might have to change.”
Preparing for Acquisition or Exit Strategy
As entrepreneurs look ahead, thinking about the future of the business becomes increasingly important. The possibility of an acquisition or partnership is a topic that often arises as a company scales. “At some point, you need to start thinking about your exit strategy,” Chang says. “Who is buying your business, and what are they looking for?”
Chang also points out that entrepreneurs should plan their exit strategy early. “If you’re trying to sell your company, focus on transferable wealth. You’re selling cash flow, a market position, proprietary information. Companies that get the greatest sale value are the ones with really good sustainable cash flow,” he explains.
Determining your company’s valuation is also key. Stinson typically looks at six years of financial records, which helps him “assess a company’s performance against itself over time. The second step is assessing the company against a peer group — other companies in the same industry of its size and how they compare, for better or worse.”
The Importance of Advisors and Relationships
Surrounding yourself with the right people is vital for success, especially when scaling and thinking about long-term strategies. “Having a good set of advisors—whether its your business partners, accountant, attorney, or friendly venture capitalists—will provide timely advice,” Chang says. “Every situation is different.”
Building a solid network of advisors can help entrepreneurs make informed decisions, especially when it comes to finances, legal matters, and scaling.
“Realistically, there will come a time when our infrastructure won’t be able to keep pace with our needs, and partnering with another brand—whether it’s an acquisition or partnership—that’s how it makes sense in my mind for a solution to a problem we might have,” Stewart says.
This advice mirrors the experience of Surf Shack Puzzles’ Tuteur, who also spoke about navigating these challenges. “When you start a business, there are so many things you can do wrong. Do one thing a day—whether it’s getting business insurance, an Employer Identification Number (EIN) —so that you don’t let it pile up and can actually get to the finish line of launching,” she advises. Her approach to business management emphasizes consistent, steady progress—a crucial aspect of any successful venture.
"It’s been quite a journey with its ups and downs, but it’s also super exciting. My advice would be to try to do one small thing every day.”
Embracing Growth and Innovation
For Hawai‘i’s entrepreneurs, embracing growth and innovation while staying true to their roots is a balancing act. “It’s been quite a journey with its ups and downs, but it’s also super exciting,” Tuteur says. “My advice would be to try to do one small thing every day.” Her commitment to daily progress highlights the importance of persistence and resilience in business.
Entrepreneurs also need to be open to new opportunities as they scale. Tuteur notes that one of the key areas for growth is expanding into new markets. "We’ve looked at coastal communities—from the West Coast to Florida, Japan, and Australia—for growth opportunities," she shares.
Mohala Eyewear has expanded its reach by testing new strategies like launching on Amazon and collaborating with large retailers like Nordstrom, Johnson says.
Sustainable Growth and Cash Flow
As entrepreneurs scale their businesses, maintaining sustainable cash flow is essential for long-term success. “If you want to grow your business, we call it the capital stack,” Chang says. "Bootstrapping, personal funds, credit cards—that’s always the base level. If you’re making money, you retain it in the company to fund future growth.”
For those seeking external capital, Stinson emphasizes that bank capital is often a more affordable option than investor capital.
However, it comes with a greater infrastructure requirement. “Bank financing is the more traditional slow and steady path,” he explains. “If you take on bank debt, you’re going to pay an interest rate of 6% to 7%. The cost of equity capital is more like upwards of 20%. You need to have really high expectations of growth to repay those investors.”
Plan, Adapt, and Scale
The road to scaling a successful business is filled with both challenges and opportunities. The advice shared by local entrepreneurs and financial experts underscores the importance of planning ahead, maintaining strong financial records, staying adaptable, and surrounding yourself with trusted advisors.
As Stewart from Big Island Coffee Roasters emphasizes, “Prioritize and focus, but stay really nimble as well. Build that into your team and remind them that we’re going to try this, and we don’t know if it’s going to work, but we might have to change.”
Mana Up’s Role in Entrepreneurial Growth
Mana Up’s accelerator program supports entrepreneurs in scaling their businesses globally, and has assisted 95 Hawaii-based businesses to date. Through mentorship, resources, and exposure, these entrepreneurs are positioned for growth both locally and nationally.
The company’s recent Visionary Ventures event, produced with Bank of Hawai‘i, was a powerful reminder of the importance of collaboration and community in Hawai‘i’s entrepreneurial landscape, and the critical role partnerships play in ensuring future success.
The support from Mana Up continues to be an invaluable resource in Hawai‘i’s business ecosystem, helping entrepreneurs navigate the complexities of growth while remaining grounded in their community roots. "We just decided we’re going to raise our capital in Hawaii,” Stewart says after considering funds from Mainland investors. “I’m grateful we were able to do that.”
Building a Sustainable Future
Looking ahead, both Mana Up and Bank of Hawai‘i remain committed to supporting Hawai‘i’s entrepreneurs. Whether you're scaling your business, preparing for an exit, or simply starting out, the advice shared by these seasoned business leaders is invaluable.
Remember to stay adaptable, plan for the future, and rely on strong financial records to guide your decisions.
“If you’re serious about wanting to sell your business and have a time frame in mind, you have to start gathering potential buyers,” Chang says. “It’s like an estate plan; the sooner you start the process, the better.”
