Out Of Business

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Business critique by Sam Slom, business consultant and president of Small Business Hawaii, a Honolulu-based association of small-business owners:

"Waters' objective was laudable and ambitious. But was it realistic? Locating in downtown Honolulu has built-in traps, unlike a mall; in most cities, downtown areas are more transient and economically depressed.

"Another mistake Waters made was to rely too heavily on students, who generally are not income-stable--or product- or geographic-loyal. Also, the Asian economic downturn was being increasingly discussed, so targeting his coffeehouse to nonresident Asian college students was a big mistake.

"Hawaii also has the highest mandated benefit costs, including compulsory medical and burdensome workers' compensation, unemployment, temporary disability insurance and liability costs, which can add 50 percent to payroll costs and cut down on cost/revenue ratio.

"Waters' biggest mistake was underestimating the consequences of Hawaii's worst-in-the-nation business and tax climate which, for eight years, has gobbled up big and small businesses while breaking many able entrepreneurs."

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This article was originally published in the August 1998 print edition of Entrepreneur with the headline: Out Of Business.

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