by: Sandy Harjo Livingston

Posted: Apr 24, 2025

HONOLULU (KHON2) — Starting a business in Hawai‘i can feel like swimming against the current. There’s all this beautiful surroundings, rich culture and community pride that masks deeper struggles.

While small business ownership is a dream for many in the islands, the reality is very complex. From sky-high costs to shaky support systems, many local entrepreneurs are asking: Is Hawai‘i failing its entrepreneurs?

Let’s look at seven key things to understand from the study, especially if you’re thinking about starting or supporting a business in Hawai‘i.

1. Hawai‘i isn’t the worst, but it’s far from the best

According to data from the U.S. Bureau of Labor Statistics and analyzed by the study, Hawai‘i doesn’t top the list for the highest business failure rates. But it also doesn’t make it into the best-performing states.

The top states for business survival — like Washington (13.6% first-year failure rate) and California (14.0%) — tend to offer stronger ecosystems for startups. That means access to capital, networks and infrastructure.

Hawai‘i’s isolation and high cost of living make it more difficult for entrepreneurs to tap into those same advantages offered in states actively supporting it entrepreneurs.

2. The cost of doing business in Hawai‘i is crushing

Let’s be real: Hawai‘i is expensive. Commercial rent, shipping fees, electricity, and basic supplies all cost more here than on the continent. Even hiring workers is tough because the labor pool is small.

These costs squeeze profit margins. During periods of inflation, like the 8.5% spike from 2021 to 2022, customers buy less. That puts even more pressure on local businesses, especially new ones.

“Inflation doesn’t just affect your grocery bill,” said Matt Schulz, chief analyst of the study. “It also changes how people spend money in their communities — or don’t.”

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3. Access to capital is limited, and that’s a big deal

Banks in Hawai‘i tend to be conservative. Venture capital? Sparse. Many local entrepreneurs rely on personal savings or support from ʻohana, which isn’t sustainable for everyone.

For Native Hawaiian business owners and those in rural or neighbor island communities, the challenge is even steeper. Without strong credit or a track record, getting loans is hard. And without funding, businesses can’t survive the slow seasons or invest in growth.

The result? Promising ideas die before they ever get the chance to thrive.

4. Cultural and community values can help or hurt

In Hawai‘i, values like kuleana (responsibility), lōkahi (unity) and aloha are central to everyday life. These principles can help small businesses build strong relationships and loyal customers.

But community expectations can also add pressure, especially when a business is seen as “too successful” or “not local enough”. It’s a balancing act: stay true to your roots but grow enough to survive.

Some entrepreneurs find success by deeply embedding cultural values into their business models. Others struggle to do so while keeping the lights on.

5. Hawai‘i’s isolation limits opportunities for scale

It’s tough to scale a business when your customer base is capped by geography. Hawai‘i’s remote location means higher costs for shipping goods in or out. Even digital businesses like those in the information industry face challenges due to tech infrastructure and limited access to high-speed broadband, especially outside urban areas.

Nationally, information businesses have the highest one-year failure rate (25.8%). That includes media, tech and data services. These are sectors with potential in Hawai‘i but where competition is global and resources are local.

6. Entrepreneurs need more than passion; they need a plan

A solid business plan is a game-changer. Yet, many first-time business owners in Hawai‘i launch with a dream, not a roadmap.

Experts say knowing your audience, understanding competitors and calculating realistic profit margins are key steps too often skipped. As Schulz put it: “Failing to plan is planning to fail.”

With nearly half of U.S. businesses closing by year five (48.4%), getting the basics right matters, regardless of how passionate you are.

7. There are resources but not everyone knows about them

Support exists, from the Small Business Administration to local programs like the Patsy T. Mink Center for Business & Leadership and Hawai‘i Small Business Development Centers. But many entrepreneurs don’t know where to look, or they feel like the help doesn’t meet their cultural or practical needs.

For Native Hawaiians, women and other underserved communities, culturally responsive support is key. One-size-fits-all doesn’t work, especially in a place as unique as Hawai‘i.

Mentorship, community workshops and peer networks can bridge those gaps. But they need more investment and visibility.

Bottom Line: Is Hawai‘i Failing Its Entrepreneurs?

Not entirely. But it’s also not setting them up to thrive. While many small businesses in the islands survive on grit, creativity and community support, too many others struggle alone and fold before their time.

You can click here to read the full report.