Kaua‘i, I pleaded for help for local businesses (Forum, Feb. 25), and I hope this helps you understand why. If you aren’t a business owner and want to understand what is happening to small businesses, let me try to break it down for you.
Decrease in buyers = less people to sell to = decrease in revenue = furloughing employees. This cycle continues until the death of the business. Typically, buyers on Kaua‘i are made up of two groups: visitors and residents.
What has been lost in understanding the challenges of local businesses during this pandemic is that when a business closes or has to let go of their employees, this also decreases local buyers in our local economy. Now compound that with loss of visitors (and that) means businesses are suffering major losses.
When the decrease in revenue falls below expenses (cost of doing business), expenses are cut (i.e., getting rid of subscriptions, services and employees). If revenue continues to decrease or does not meet expenses and a business wants to keep these expenses (such as employees), then some business owners will utilize their savings (if businesses have that).
If savings are completely used, business owners have the option of taking out loans to continue to pay for expenses. If they have depleted their savings and taken out loans, the last resort is cutting expenses.
Some businesses have been cutting expenses for 11 months straight, with many businesses not able to cut anymore expenses and going out of business. Many businesses have innovated and pivoted. They are finding new buyers they haven’t served before. But in a small community like Kaua‘i, there is a finite number of buyers (local buyers and visitors who buy local).
Only few industries are able to attain buyers outside of the local economy (products and services that go beyond the local economy), but most businesses can’t, such as restaurants. This may seem that it only affects the visitor industry, but due to our small economy it seeps into all industries over time. The last to really feel these challenges is our government and their employees, because tax losses are delayed.
Therefore, our local economy is heavily reliant on those who have the means (i.e., disposable income) on Kaua‘i. In order to keep some businesses going, people have to buy from local businesses more than ever before. The solutions are very simple: Increase buyers on the island and reduce expenses.
This is what businesses are doing to try to save themselves:
• Cutting expenses;
• Diversifying their buyers (online sales, new socioeconomic buyers, new products/services).
This is how our government can help:
• Decrease expenses (taxes, fees, etc.) (although this will result in decreased revenue for government, in the future it will cause more businesses to survive to keep their tax base intact);
• Advocate for small businesses (moral support);
• Reduce restrictions to allow for more buyers (locals and visitors) to be on island.
This is how local people can help:
• Increase your spending at local businesses (increase local circular economy);
• Advocate for local businesses;
• Write positive reviews;
• Share their info on social media;
• Send them a positive letter;
• Recommend them to family and friends;
• Adopt local businesses as a family practice;
• Adopt a local business as a business practice.
All of these suggestions are for immediate solutions. The pandemic has amplified the need for diversifying our economy and strengthening our regenerative and circular systems. We can implement all of these short-term solutions while working towards medium- and long-term solutions at the same time. First step is on us. Let’s go out and help our local businesses.
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Dr. Addison Bulosan is a small-business owner and resident of Lihu‘e.
