I’ve been doing my own businesses off and on for almost 5 years now and while I am no where near what I would consider a success (yet), I have learned a lot from my previous failures. There are many common mistakes first time entrepreneurs fall victim to. I see the same pitfalls over and over again. I’ve decided to start a new series of blog posts documenting some of my boneheadedness in hopes that it other new entrepreneurs won’t be as dumb as me.

Mistake #1 – Chasing Money

Why do most people want to become entrepreneurs or have their own business? For most people, the answer is easy; they want to make more money. Sure, they’ll come up with a long list of other reasons to make themselves sound better, I want to be my own boss, I want more free time, I want to be in control of my career, etc all that is fluff to cover the fact that they want to make more money. They want more money so they can have more free time, buy the things they want, do the things they want, basically they think that their current situation, their lack of happiness is the result of not having enough money.

There is nothing wrong with wanted more money, but starting something with the sole purpose to make more money is a broken proposition. This is the idea that drives people to multi-level marketing “opportunities”, opening franchises or buying an existing business. This is why 9 out of every 10 businesses in America fail. Money CAN NOT be the #1 priority for your business.

There is a reason why this is a very common mistake. It is counter intuitive to general thought. Start a business to make money. This was my way of thinking before as well but through experience my view of business is now this,

Start a business to create positive change.

When you do something strictly for the money, you often tend to chase the hot market. For example; Green living and eating organic is very hot and buzz worthy now. To many it may seem like a good idea to get into this market, people are interested in it, so you will probably have customers. Well, the truth is, if you only want to sell things like that because it is hot, you will most likely fail.

1. You will not know enough to sell the products effectively with confidence.
2. You will grow frustrated dealing with a customer base that you cannot relate to.
3. Your customers will not be able to connect to you because you have no passion for the product and you see them as numbers.
4. You will end up hating it because it becomes just another job.

Fortunately for me this mistake only cost me around $1000. In 2007, when the real estate market began to tank, I became very interested in real estate investing.  I was growing tired of my job as a web designer and I saw it as a great opportunity to make some big cash. I joined a local investing club in Honolulu, devoured podcasts and internet material on the subject and spent some serious money on education in the field. In the end, I had a couple deals fall through, and made $0 in real estate.

The truth is, the businesses that have the highest chance of success are the ones built on passion. Something that you would do anyway, even if you weren’t paid to do it. This solves all 4 of the problems I stated above.

1. You will know more than anyone trying to compete with you
2 & 3. You will love your customer base as they are the same as you
4. You would do this even if you weren’t paid!

See how it works. Follow passion, don’t chase money. Money is a measuring stick that gauges if you are doing the right things. What is your measuring stick reading?

It seems like ever since I returned to Kauai, I’ve watched business after business close up shop. Many of the local businesses still operating are still struggling more than ever. These businesses are family owned and operated and have been gone through multiple generations. When asked why sales are so poor, they always cite outside sources; Costco, Wal-mart, K-mart, Safeway, the economy, etc. How can they compete with these big box stores with huge national financial backing?

I hate to see businesses struggling. I feel that there is always room for everybody to enjoy success. What frustrates me though, is the inflexibility and just lack of basic business decisions that need to be made. There are ways to thrive in a competitive business environment. I understand that there is always a problem of being too close to a problem and I am 100% sure that this is the case for these local companies. Here are the four major things I see wrong with most locally owned businesses on Kauai.

1. Value Proposition - This is the most important, but often over looked concept in business. What makes your business different from all the other businesses in the market? What makes your store unique. When I look at many local businesses that are competing with mainland stores, I can’t see any clearly defined value proposition. They are all attempting to do exactly the same thing as the big guys, offering a little bit of everything, trying to capture the largest market share by offering something for everybody. What these companies should be doing is coming up with a unique value prop that compels shoppers to at least give it a try. If you can’t say clearly and succinctly in one sentence, what makes your business unique and better from your competitors, you don’t have a strong enough value proposition. If you can’t come up with why people should shop with you, why should they shop with you?

2. Define what you are competing on and stick to it - There are only three factors a business can compete on, 1. Price 2. Convenience 3. Quality. Examples of businesses who stick to these factors are Wal-Mart (price), McDonalds (convenience), Mercedes (Quality). The mistake I see many local businesses doing is trying to compete on the wrong factor.

The approach of all big box stores are to compete on price (or the illusion of price). They undercut the competition because they know that price is easily quantifiable to everyone. This is cheaper than this therefore I should shop there. The response by many local businesses is totally wrong, either a) they try to compete on price because that’s what the big guys are doing and get killed or b) they do nothing and get killed. No small local business should be trying to compete on price against a company who is better financially backed and can play with economies of scale. They should instead focus their efforts on convenience (delivery services, helping you to your car, personal shoppers, pick up service etc) or quality, (best quality products or services, do not carry anything that is not the best). Quality and Convenience can in some cases be the same thing so smaller businesses would be wise to focus on that.

3. Define your ideal customer – By attempting to be everything to everyone, you end up serving no one. Local businesses need to clearly define their target customer and do everything they can to market, and provide services and products that are relevant to them. Making changes to try to attract a larger market share is counter productive because you will lose your existing customer base which has been supporting you. Focus on that base and increase your service to them.

Defining your ideal customer is so key because not only will you know how to provide for them, you will be able to cut significant costs by eliminating products and services that they are not interested in. A great example of this Papaya’s Natural Foods. You will not see steroid and antibiotic infused beef at Papaya’s even if it is cheaper. Sure the economy may be hitting them as well, but I bet not as hard as other stores who do not have a clear picture of their customers.

4. Care – Caring about your customer is the single most underrated business principle lost on business on Kauai. Caring doesn’t just mean doing sales and specials. Caring means going above and beyond the expectations of your customers. Caring means giving your customers every reason to give you their business.

One of my favorite local businesses in Hawaii that I feel does a tremendous job with caring for their customer is KTA Superstores on the Big Island. They are the one local store on a neighbor island who has been able to deflect any outside intrusion from mainland or outer island encroachment. They are still the busiest grocery store on the island by far even though Safeway, Walmart, Costco, have all moved in to try to steal their market share. How are they succeeding when everyone else is failing? Not on price, their products are more expensive than most other places. They just care more than the other guys.

They created a brand called Mountain Apple brand which is a KTA exclusive brand which buys and sells products all grown or produced on the Big Island. When you buy a Mountain Apple Brand product, you are supporting the local island economy. Where do you think everyone and their relatives who provide goods for Mountain Apple Brand are shopping?  KTA offers a grocery delivery service that drops off groceries to senior citizens who can no longer drive (I’m not sure if they still offer this service). Derek Kurisu, VP of KTA, hosts a show on Public Access where he goes around the island showcasing individuals and businesses in the community. In fact it’s not uncommon to see Derek walking around the aisles of KTA saying hello to everyone shopping their and thanking them for their business. It would be easy for him to say he is too busy for this, he has a million things to do, but to him, showing his appreciation is just as important as anything else he has to do that day. All of this might sound like smart marketing which it is, but it boils down to one thing; CARING. They just care more and that is why they can’t be touched on the Big Island. Care about your customers and they will care about you. Simple but almost always overlooked.

I hope that many of the businesses here on Kauai will be able survive this current economic downturn. When it comes down to it, the companies who can recognize these things and implement change are the ones who will set themselves up to be successful in the long run. The marketplace is constantly changing the having the ability to adapt and grow instead of being stuck in the old ways is essential today more than ever.

Business is not easy. If it were, everybody would do it. Living your dream life is not easy, if it were, everybody would be living theirs. The only difference between those who are successful at business or life for that matter and the people who aren’t is successful people choose to be successful.

Choosing to succeed is more than just stating emphatically you will. Choosing to be successful is consciously embedding the belief of success deep into your soul. So deep that no matter what external factors may come your way, the belief remains there untouched and burning bright as ever. You continue to march towards your goals regardless of outside interference.

There will always be bad days, thing you don’t want to deal with, people you don’t want to deal with. These things in life are inevitable and unavoidable. Often you find these things might bring you down and question if it is worth it. The top of my blog says Business = Passion and this is the way I view business in general. The only businesses I believe even have a shot at making it work in this new web enabled society are the ones that are created out of passion. Being passionate about your work already gives you a much stronger desire to succeed. Choosing to follow your passion is the choice to be successful.

Unfortunately following your passion often attracts the most negativity from people who cannot understand the concept. People by nature are adverse to change. There is a certain comfort in routine and daily rituals and change, even if it is not there own scares the majority of the population. Like crabs in a bucket, they will try to pull you back down to their level. The best way to combat this is to take each dose of negativity you receive as a personal challenge. They are challenging your belief in yourself and you owe it to yourself to prove them wrong, to defend your dream. If you cannot believe in yourself enough to do this, you’ve already let them win.