Author Archives: brian

Coffee Marketing 101

We live and work in the heart of the world-famous Kona coffee region.  Needless to say, a big part of our economy is connected to the coffee industry. Kona Impact has several coffee clients. It is the only coffee we drink.
A lot of farmers are great at farming, and less effective at marketing. This is not a problem if they sell their coffee to processors. If they want to realize more profits, however, they often try to market at least a portion of their coffee.
Here’s a list of some things we have learned about coffee marketing.

  1. Coffee is a flavorful product. Having consumers taste and smell the coffee is essential. Without a taste, it’s just coffee in the consumers’ mind. Do not expect a huge number of people to buy your coffee without tasting it. Get out to the farmer’s markets. Do in store taste testing. Have farm tours. Get your coffee in the mouths of consumers.
  2. Some people buy Kona coffee because it is made in America. Hawaii is the only place in the U.S. with commercial coffee growing. Try to tap into the “made in America” consumers.
  3. Some people buy Kona coffee because it comes from family farms. Connect with consumers by sending a personalized note or a picture of your family with orders. Use newsletters to let people know what is happening on your farm.
  4. Some people buy Kona coffee because it is organic. These people value organic certifications and the farmer’s commitment to avoiding herbicides and pesticides. Words like “compost”, “mulch” and “sustainability” are buzzwords.
  5. Your bag counts! Go with the standard bags and labels and you will look like every other farm. Spend twenty or thirty cents more for some nice looking bags and labels and you’ll sell a lot more.
  6. Repeat orders and coffee clubs are essential. You might only win four or five new customers a month, but over a year, that’s sixty new monthly orders—sixty pounds a month! These are orders for which you do not need to spend money on marketing. They are golden. When you get a customer, do everything possible—awesome coffee and customer service—to keep them.
  7. Never ever sell a bad bag of coffee! If the roast if off, give it to family and friends. Never sell a bad product!
  8. Coffee marketing is not about price. See all of the above. If you have these things right, you can demand a premium for you product. Racing to the bottom for pricing will make you busy….and broke!

Signs of Trouble for Entrepreneurs Starting New Businesses

Kona Impact has worked with thousands of entrepreneurs over the years. We often see these entrepreneurs at different stages of their businesses, from day 1 when they get an idea and are ready to run with it, to the waning days of business as they begin the steps to liquidate their assets and close up shop. These, of course, are extremes: most businesses we work with are well-established and doing well.
That said, we get to see many businesses start and close. While they all have a myriad of reasons for failing—often a handful—here are some to the common ones we see:
1.  Inability to get beyond a logo or business card. We see this several times a year: a person who obsesses over a logo, or worse yet, a business card, so much so that they lack perspective on what really matters at that point in the business: big picture planning. Yes, branding is very important—it’s what we do at Kona Impact—but those who believe that creating a logo is creating a brand or a business are just not focusing on the right thing.
2.   Not doing the math. We see this all the time with emerging businesses. If you want to see widgets, you need to understand your total costs of production, your facilities costs, labor costs, marketing costs, taxes and figure out a reasonable salary for yourself. Whether its t-shirts, cosmetics, coffee or tubas, you need to have a very solid grasp on costs and projected sales levels to figure out if you have a chance of making any money from your business.
3.  Believing 100% in social media or 0% in social media to grow your business. You do need a website and online presence that you own and control. Using Facebook, Instagram or other social media platforms are important, but not sufficient for most businesses.  Plan on your marketing efforts using what you own—a website—and what you use to reach targeted markets—Facebook, Instagram, Pinterest, etc.
4.  Not having sufficient funds for a year. Many recommend six months’ worth of reserves to get a business going: based on the experience of many of Kona Impact’s clients, this is too little, as many businesses take longer to grow than most people realize. The worst thing I see is businesses that have a good idea and a solid chance of prospering running out of funds too early.
5. Not going “all in”. If you are looking for a hobby, go surfing, take up gardening or join a club. If you want to run a business successfully, be prepared to spend every day—including weekends—focusing on developing and running your business. If you don’t, I guarantee you that your competitors will. If you aren’t going to play to win, don’t waste your time. Keep your money and time.
Businesses fail for many reasons. Some are just bad ideas, and others are viable ideas with poor execution. Some just start at the wrong time in the economic cycle and are doomed from the beginning. Others fail because the owner finds a better opportunity and moves on. We often find that it is a combination of factors. As such, a burgeoning entrepreneur needs to focus on what she can control and reduce the risks to success as much as possible.

“Hopelessly confusing and opaque” The Value of Testing Your Systems

Last month Kona Impact ordered some expensive equipment from a large, very well known copier company. We received an invoice and were happy to see that we could pay online. We would not have to write a check, prepare an envelope and hope that it got from here to there. Having just received a payment made from a customer that took two months to go across town via USPS, we’re happy to pay online whenever we could.
First, I had to make an account. Then I had to confirm my email address. So far so good. Then I had to find where to pay the invoice. I looked and looked. Maybe it was under “Account” Nope. Maybe it was under “Order”. Nope. I spent over 20 minutes looking under every menu to see where I could pay a several thousand dollar invoice. I gave up. I wrote a check and put it in an envelope, knowing that it could take a week or more to arrive.
My question to the company is this: Has anyone in management, customer support or accounts payable tested or used your website?
confused concept
This should be fundamental for anyone who has a website. Go on the website and try to do everything your customer would conceivably try to do.
If you have an e-commerce website, place an order, beginning to end, at least twice a year. Is the process smooth? Are there places where you could make the process clearer and simpler for your customers?
Review all the text on your website at least twice a year. Is it comprehensive? Is it still applicable? Are you missing anything new? Does it read well?
If there is a contact form on your website, try it at least twice a year. Do it work as intended?
You should also have someone who has not used the website place test orders, search for key information and make contact through the website.
I did reply to the copier company reply to the invoice email and simply said that I had to mail the check because, despite great effort, their online payment system did not work for me. I couldn’t come up with anything better than, “I tried to pay online but your system was hopelessly confusing and opaque.”  I would strongly encourage the Accounts Payable department to spend some time trying to use their own system because if they did, they could work on making it clear and transparent.
Testing a website should be a regularly scheduled task. You don’t know what you don’t know, and only through testing will you figure it out.

Lessons Learned from the Grumpy Barber

I found out yesterday that my local barber is leaving the island soon. I’ll miss him as much for his excellent haircuts as his grumpy, opinionated personality. Even though I could have easily labeled him as rude, out-of-place, and genuinely disagreeable (at times), I challenged myself to look at each haircut as a time to step outside of my routine and enjoy the banter.
I’ve seen him kick people out of his shop for using cell phones, asking (what he thought were) stupid questions and women: they would not do women’s hair. He has many 1-star reviews on Yelp detailing his unique personality. He also has a lot of five-star reviews.
You would think that this would have hurt his business; it didn’t. In fact, I believe it helped his business: a no-nonsense haircut with a side of strong opinions was what made him special, unique. I’ve never been there when there were not at least a few people waiting. He was busy, always busy.
In this time of political correctness and exaggerated outrage over the most trivial matters, I think his barbershop offered a chance to enjoy, at least for 20 minutes, banter and conversation that wasn’t overly filtered. I think that’s part of what drew the mostly older patrons to his shop: guys would get a chance to complain about the world and not be made to feel self-conscious or wrong.
This is a good lesson in branding. If the market is full of homogeneous, cookie-cutter providers, a person or business with a bit of personality can carve out a good niche. There is room for a place that breaks the mold and dares to be different, authentic. I think we are lacking a lot of authenticity in corporate run businesses that teach their employees to “follow the manual” and to avoid any sort of non-prescribed behavior or words in the workplace.
Would I like to work side-by-side with my barber? Heck no! Twenty minutes once a month is enough. Do I enjoy stepping into a world of authentic conversation for a brief time when I get my hair cut? Absolutely.
grumpy barber

How to Develop a Win-Win Relationships with Kona Impact

Here is something most business owners understand to some extent: a solid relationship with a supplier is invaluable, especially in times when many businesses are working near or at capacity. You need your supplier just as much as your suppliers need you.
A little non-secret in the business world is that suppliers turn down business all the time. It might be evident in not receiving return phone calls or emails. Some businesses have better tactics and try to refer the clients they don’t want to deal with other suppliers. Others just claim “too busy” when new projects come in from dispreferred customers. I know one local business that has stopped answering the business phone line altogether.
At Kona Impact we usually do not turn down business from new clients, even if we believe we will make very little from their account. We know businesses grow, and we find helping people at that stage of their company very gratifying.
We have over the years done our best to transition some of our customers to other suppliers, or, to be frank, anywhere but us.
win-win business relationship

How can you develop a win-win relationship with a supplier like Kona Impact?

A big part of the answer is in the question: “develop a win-win relationship.” Start with the belief that a supplier must benefit from the relationship, which includes making a reasonable profit, working with clients with a reasonably agreeable personality, getting paid on time and all the other markers of a good client.
Here are some the things you should never do as a customer:

  • Order something for which you don’t have the money to pay
  • Order anything you do not plan to pick up when completed
  • Bad-mouth a previous supplier. If you do it to them, you’ll do it to us. Red flag.
  • Start a project you don’t need to be finished for a long time. If that’s your intent, be sure to pay a hefty deposit.
  • Use the old, “give me a good price on this, and we’ll give you more business in the future” ploy. Doesn’t work for us; if you won’t let us make money now, you never will.
  • Change the scope of the project without expecting a new, often higher, cost

Here are some things you should do as a customer:

  • Communicate clearly what you have in mind. If you don’t know, or can’t explain, there is no way we can figure out what you want
  • Ask us for a price quote right away. We’ll have some questions, for sure, but don’t use our time to fish for ideas if we’re unlikely to do business. We’ve been doing this for over 12 years, so we have a good idea what projects will cost and will gladly share that with you.
  • Provide comprehensive feedback for each draft. Take some time and give us all your feedback at once. Trickle-in feedback is very detrimental to achieving a good result. If you have five sisters, six aunties, four uncles and business partner who are giving you feedback, good luck, but when it comes to communicating with us, speak with one voice and only after you gathered all the information you think you need.
  • If you’re going to “disappear” for any extended period of time, let us know and offer to call the project done and settle any remaining amounts for the project. We get it that life and business goals change; just have the courtesy to communicate

Every business transaction can help to build a productive relationship or create reasons for the supplier or buyer to start looking for a new partner. It’s a two-way street, and in the best of all possible worlds, results in a lasting, productive win-win relationship for all.

The Lifetime Value of a Customer as a Marketing Cost Guide

Marketing expenses are often looked at very narrowly: how much did I spend on a promotion, and how much did I make on the promotion? Minus out expenses and you’ll have a very crude measure of how much return you received on your marketing investment.
That narrow focus, however, is not going to give you a complete picture of your marketing costs.
I’ll give a few examples of how to use the lifetime value of a customer analysis to figure out the true value of marketing costs.
Let’s look at a new restaurant opening in town. They spent $5,000 on a combination of print and radio ads to promote their Grand Opening on a Saturday. Their revenue on Saturday is $6,000, of which 10% is profit, so they spent $5,000 to make $600. Ouch.
Now, let’s look at the same data and expand our analysis. Let’s stipulate that the average guest of a new restaurant spends $50 ($10 profit) and will return to the restaurant 5 times in the next year. Some will never return and some will visit more frequently, but let’s assume 5 as an average. That means the value of a new customer is now $250 ($50 profit). If the restaurant adds 100 new customers due to the $5,000 ad spend, the gross sales add to a year’s revenue is $25,000 ($5,000 in profit). If we add a second year of 3 average visits, you’ll add another $15,000 to the top line (revenue) and $3,000 (profit) to the bottom.
Now, add the people that came before and after the grand opening because of the advertising, as well as the word-of-mouth recommendations from the people who ate at your restaurant, and you can see that the $5,000 ad spend might have been a great investment—if you look at the long-term value of customers
lifetime value
One of our favorite analyses is to use pay-per-click data for advertising. Let’s look at tea subscription business. We’ll assume 50% margins on the tea.
We’ll go with $.50 per click for keywords related to your product. In my experience, you can expect about 1 in 25 or even 1 in 50 of the people who visit a good website to make a purchase. So, you’re looking at between $12.50 to $25.00 for a sale. If your average sale is $40, you’d be looking at marketing costs between 31.25% and 62.5%, which means you would make almost nothing or lose money on each sale. Ouch!
But, let’s expand our analysis to look at the lifetime value of customers. For our sake, we’ll limit it to one year. If you have a Tea Society Club and 25% of your new customers purchase a subscription for a package a month at $40, you now have a value of each customer somewhere between $40 and $480 ($40/month for a year). Realistically, you’ll have many people stop their subscription, so go with half the total potential and assume $240, which would translate into $125 profit. Would you trade $25 for $125? Of course.
The 75% of the purchases that did not join the Tea Society are also worth something. Let’s say, on average, they order twice more a year—an additional $80 each, in addition to their first $40: $120, $60 profit. Again, $25 for $60 profit? Yes, in my book.
Unfortunately, my entrepreneurs look at advertising costs very narrowly; what did I spend, and what did I make at that time? That would be the right way to look at things if you are promoting a concert or a limited-availability product. That said if you are trying to win new customers, especially if you have a product that is consumable, taking a broad approach to examining your marketing costs will help you make better decisions.
As a side note, any college student will tell you they are inundated with offers for credit cards. They might receive 5-10 solicitations a week. Why would a bank spend so much to win a customer that has little credit history, few assets, and a limited income? The answer is simple: people seldom change credit cards, so the lifetime value of a credit card customer is huge. It’s very worthwhile to spend a lot on these young, future high earning students.

What to do when your web designer leaves town

We get this call three or four times a year:

  • Caller: Can you get my website back online?
  • Kona Impact: Maybe, do you have website hosting?
  • Caller: I don’t know. My web designer left town and she took care of it. It’s not online now.
  • Kona Impact: Can you contact her?
  • Caller: No, she moved to Colorado, I think. Her website is off, too.

Unfortunately, there is not much we can do to help at that stage. If you don’t have a backup of the website, the original designer is gone, and the server on which the website resided is no longer hosting your website, there is little we can do to help.
There are a few things you can do to ensure that you don’t find your website offline when your web designer leaves town.

  1. Ask for a backup of your website when it is completed. The files probably won’t mean much to you, but a competent techie guy or gal could easily re-establish website hosting from a proper backup.
  2. If your web designer made your logo, ask for the following file types: Adobe Illustrator, Encapsulated PostScript, Adobe PDF, Jpeg, and Png. The Illustrator and EPS files (and perhaps the PDF) are editable files if you have the proper software. This will allow you to change your logo, resize it and manipulate it for various uses.
  3. Ask your web designer where your website is hosted and who controls the billing and administration of that account. If your web designer has your website hosting under her hosting plan, you will not be able to maintain the billing and hosting for the website. Seriously consider asking your web designer to move your website to a hosting account you control.
  4. If #3 is not possible, ask for full access to the website, including all logins and passwords.
  5. Make sure you have a way to continue paying for the hosting charges.

If your website is old and not optimal for your needs, consider making a new one. This is a perfect time to start anew and get the online presence you have always wanted.
At Kona Impact, we have been designing and hosting our clients’ websites for over 12 years. We do realize that our clients’ websites are very important to their businesses. As such, we have a firm commitment to ensuring that our clients’ websites are online 24/7. We keep cloud, onsite and offsite backups of websites, and have a plan to ensure that any business disruption will not result in issues for our clients.

We Serve Everyone….Except…

There have been a few stories in the media recently about businesses refusing services to people they don’t like. One news story was about a  cake baker in Colorado who won a favorable ruling in the Supreme Court, giving him the right not to make a cake for a wedding for two gay men. Another story in the news was about the spokesperson for President Trump being asked to leave an upscale restaurant because the staff/owner did not like some things about Trump.
My reaction as a business owner is, fine, ok, we have a right to serve who we want, though not serving someone because of race or other protected statuses will get you into a boatload of trouble (as it should).
Every business has customers or clients who are not welcome in the store or on the premises. But, this is almost always due to the behavior of the customer and usually (I would hope) not about one’s race, gender, sexuality or political affiliation.
Kona Impact has made things for the Tea Party (a far-right group) and Occupy Kona (a far left group). We have had atheist, Muslim, Jewish, Jehovah Witness, Mormon, Evangelical, Conservative Christian and Liberal Christian customers. We have several gay customers. We have done projects for an “adult” retailer in Kona, as well as projects for bars and CBD businesses.
We have turned down two businesses–an “escort” and pitbull breeder that breeds fighting dogs–in the past 12 years for the same reason: these businesses are illegal and, truth-be-told they, not the kind of business I could honestly put my full effort and energy into.
My thinking is simple: if a person comes to us for services, I do not care about the circumstances of that person’s life or business. I don’t care if he or she has beliefs or a lifestyle different from mine; I just want to give them the best possible product or service and get paid. If I refused a customer based on who he or she is, I am 100% certain I will not change that person and he or she will find another provider. I will have gained nothing.
I know that the baker in Colorado felt his moral, religious, opposition to gay marriage was a good reason to deny service to the gay couple. This is fine; he can serve who he likes (though he should not expect to be welcomed in his community with such bigoted views). I would not patronize an establishment I knew to have such policies. Likewise, I would avoid the restaurant that rejected the Trump staffer. That is my choice.
I do tend to look at business as business. I am not trying to change the world by selectively serving customers based on who they are. I will, and have, refused clients based on their behavior. Rude or disrespectful to my staff or me? Adios! Pay invoices late and only after great effort on my part? Find a new provider! Gay, Jewish, Occupy Kona member who sells CBDs? My door is open!

Non-Profit Does Not Mean No Money

I was talking to a graphic designer the other day about a project she had recently completed. She said, “I won’t charge them much. They are a non-profit.” Curious, I asked her what she thought the budget of the non-profit is. She had no idea that the budget of the agency was, from what I have heard, about 6 million dollars a year.

After talking with her a little more, I realized that she is a very kind-hearted person and felt that by charging the agency less, she’d be helping them with their mission. I could understand that, and, indeed, Kona Impact has often given services and products to local non-profits as a way to support their mission. I feel it’s part of our responsibility to support the community in which we live.

It’s important to look at non-profits through the lens of a business person, though. Some, like a small community outreach programs for homeless youth, might have a budget in the thousands, so any contributions of time or services would be much appreciated. Any money not spent would likely go to supporting community projects. These are great organizations to do pro bono work for, especially if you are new to the design business and you want to build your portfolio.

At the other end of the spectrum is non-profits supported by government grants or large foundations. This typically includes medical services non-profits, which are funded by insurance payments and Medicare, animal services, which receive state and county support in many communities, and many social service non-profits, which often receive federal and state funds. These have many full-time staff members and directors who are all reasonably compensated. They are professionally run and have a budget for outside services.

I wryly told the graphic designer that she is probably the only person who is not making sufficient money when she does work for the agency. All the staff and other suppliers are making a reasonable salary or profit, and she should consider doing the same. She could then be compensated fairly for her work and then, if she chooses, donate time or money to other nonprofits with lesser funding or resources.

Many years ago, Kona Impact decided to support a few non-profits that we knew had little funding. They also had to be organizations with a mission in which we believe. Currently, we donate a lot of products and services to the Aloha Theater, a youth sports organization, Rotary International, and our local Rotary club. We give generously to these organizations. We also try to give heavily discounted rates for other organizations that do good in our community, but we do run a business, so if our buyer is a large, well-funded organization, we do like to make some money on the jobs we do.

Just say “No” to increasing the General Excise Tax on Hawaii Island

The General Excise Tax (GE Tax) is a tax on the gross sales of a business. Currently, it is 4.166% for Hawaii Island businesses and an additional half a percent higher on Oahu. There are very few exceptions: it is collected on basically all goods and services including clothes, food, rent, automobiles sales and just about everything else. It is a very broad tax.

Recently Mayor Kim has floated the idea of adding a half percent to the tax, which would be restricted to in use road projects. He would then reallocate the funds that he had budgeted for roads for other County of Hawaii services. This is will grow the county budget 6-9%.

It is a bad idea…a very bad idea.

It’s bad for businesses

Let’s assume a business is a perfect monopoly; that is, they have 100% complete control over their sector of the economy. There is no competition. Adding a half percent to the GE tax would result in a direct pass through to the buyer/consumer of .5%. The consumer pays more, but the business would, in theory, suffer little, as buyers have no choice. They could, though, consume less if the prices become prohibitive. The power company, HELCO, is the only company I know that has no competition—a perfect monopoly.

I think this is the model Mayor Kim has in mind: businesses on the island are perfect monopolies.  Increasing taxes won’t hurt businesses that much because we don’t have much choice. Tourists will come regardless of prices and local businesses will not suffer because they will just pass on the tax to consumers and other businesses.

This is where our mayor’s incomplete understanding of business shows.

Every business, with few exceptions, competes globally. The small shop that sells souvenirs likely buys the products from a distributor in Oahu that collects and pays the GE tax when it is sold to her store. The owner then collects and pays the GE tax when she sells the items. At some point, the cost of item becomes prohibitive and Hawaii becomes prohibitively expensive to visit. Restaurants, hotels, vacation rentals, taxis, tour providers and so on will all suffer when increased taxes make them too expensive for travelers. That’s the tourism sector.

Now let’s look at any business that retails items to individuals or businesses that live here. Add a half percent increase in the price of nearly ALL goods and services and life here becomes more expensive.

What has been the biggest trend in consumer behavior the past ten years? Buying online. When goods and services become too expensive in Hawaii, people will buy off-island. This has already had a huge impact on the ability of many businesses to survive and will only become more pronounced with an increase in the GE tax. Businesses will go out of business and consumers will have less ability to keep their money on the island by buying local. Almost every business competes globally–from a small fabric store to our vacation activities providers. Become too expensive, and people will look elsewhere.

It’s bad, really bad, for low-income residents.

Let’s also take a look at consumers. Poor and lower-middle class families have no choice to spend the majority of their income on basic consumer products like bread, milk, clothes, and rent. Many of these people are living paycheck to paycheck, so it’s going to have the biggest impact on them. They might spend 95% of their income on necessities; whereas, a wealthy person might only spend 30% on necessities. Another .5% is a lot when you’re living with no disposable income. This is what they mean when they say the GE tax is high regressive: it places a bigger burden on the poor than the wealthy.   

So, what’s the solution?

To me, it seems to be abundantly clear: cut or reallocate spending. That is, live within our means.

If the public is clamoring for new and better roads, we should find ways to cut other parts of the budget. Our economy and all the associated taxes – real estate, gasoline, vehicle registration – are adding millions a year to our County’s coffers, and this trend will continue. Hold expenses where they are, and there will be many millions of dollars added to the County’s budget every year. This is inevitable if the other taxes are unchanged. We can simply grow our revenue keeping rates as they are, as the increase in property values and the growth in our island population and tourism will, over time, provide millions of dollars of extra revenue.

We can do what every family does–set aside money over time and save up the money for big projects. We can make priorities. As a consumer and business owner, I appeal to our leaders to exercise fiscal restraint.