 Think Tech Hawai'i, civil engagement lives here. Welcome to this week's edition of Business in Hawai'i, I'm Deila and Yanagita. We're broadcasting live from the Think Tech studios in Pioneer Plaza in downtown Honolulu. If you want to tune in live, we're at www.thinktechhawaii.com and you may also subscribe to our programs and get on our mailing list at that site as well. The theme of Business in Hawai'i is to share with you stories of local businesses in Hawai'i by local Hawai'i people. Our guests share with us how they were able to build successes in our challenging business environment. We are pleased today to have Valerie Wang to the Think Tech studios. Valerie is the president of Makai HR, a startup business that recently launched in Hawai'i. Valerie, thanks for joining us and welcome to the show. Thanks for having me. Absolutely. So congratulations on the new business. Thank you very much. Let's hear about what Makai HR is. Yeah, so Makai HR is a professional employer organization, acronym PEO. And what we basically do is we do HR outsourcing for small to medium-sized businesses. When you look at a small to medium-sized business, there's a lot of tough business decisions that the business owner has to make. And HR shouldn't be one of them, although HR usually is the most complex piece because it's you're dealing with state and federal law. So companies like Makai HR are able to offer payroll, work comp, and benefit services to help support the day-to-day jobs and work that the business owners are doing so that they can focus on their actual business and what they want to build. Very nice. So tell me how you got involved with Makai. I understand that's a big story. Yeah, so I'm a transplant. I moved to Hawai'i at the beginning of this year to join the Makai HR team. Let's take a couple steps back and actually talk about the Makai story. So we were founded by Dustin Sellers. Some of you may know him from his time at Pro Service. So he was at another PEO on the island for a number of years and really helped build that company to where they are today. He took some time off to focus on some personal matters and then ended up back in the Hawai'i business world with Koa Capital. One of the true core values of Dustin and his story is to support small businesses in Hawai'i and to create managerial opportunities and management opportunities for local residents in Hawai'i to keep talent here on the island and to also attract talent from the mainland to Hawai'i. So Koa Capital was founded and their purpose was to really find and identify strong businesses in the community that had the potential for a lot of growth and that's what they did. So Dustin and his partner Chris Eldridge really focused on looking at different industries and identifying key sectors where they could make a difference. And when you look at their portfolio companies, you can see some of the impact that they've had on the community here. And so Dustin's focus for a while after he had left Pro Service was to get back to his roots and focus on the small business community in Hawai'i and create job opportunities and management, particularly management and equity management positions for local residents. Fast forward a couple of years, you know, he was really looking at the HR industry and was looking at what happened on the mainland and the changes that happened. And a lot of the things that he dreamt of building for the communities in Hawai'i but couldn't do because technology just wasn't there yet, he saw that happening on the mainland with some of the new tech companies that had launched. So he spoke with a bunch of his friends and advisors and realized that this was a great opportunity and time to, you know, get back in the world of HR and PEO and have this great chance and opportunity to kick off new technology in the HR space here in Hawai'i. The way I got involved, so I've been in small businesses my whole life, my whole family is a family of entrepreneurship. So, you know, my dad ran his own business since 1990 and we've been through the ups and downs of being the family supporting that lifestyle and career. And so, you know, after I worked at a couple of jobs out of college, I also took a stab at small businesses, started my own company in 2013, went to another startup business a couple years later. At that startup business, I met a really good friend of mine, Sean Montgomery, who soon became one of my mentors and he's really guided me and made me the business person that I am today. Sean, turns out, used to work with Dustin many moons ago when Dustin was at the marketing agency and, you know, so Sean and I got to know each other for a very long time and quite well and spent years working together in the startup world. I left that company to go to a PEO and honestly had no idea what PEO meant or what it stood for but that PEO had actually pitched me when I was working for the startup, their services. So, I understood a little bit about the value of PEO because everything that they were pitching me that they would do, I had no idea and didn't understand and they introduced me to this whole new world of compliance which I should have known being a part of that executive team of that startup business but really had no idea. My favorite part was I did not know what Worker's Comp Insurance was and I had no idea whether or not we had it so that was a fun eye opening conversation. So, I ended up, you know, it went from a sales pitch to a job interview and I ended up at another PEO on the mainland for a couple years and when Dustin decided to get back in this world he was, you know, talking story with his friends and Sean told him he had, you know, he had someone on the mainland to talk to and, you know, Dustin, his Dustin and convinced me and really didn't actually have to do much convincing but showed me what he was working on in his vision and it lined up with a lot of the things I wish I could have done in my last role and so it was the perfect storm, everything lined up and I ended up moving out here, you know, really quickly about a month after we first connected to join the team at Mackay and to help build what we hope will be a really special tool for the small business community here. Fantastic. So, you said you're a transplant so you moved here from California and we know in Hawaii that the small business market is very challenging for businesses, local people. What has your experience been like being that transplant, being from California and working on a startup? Absolutely. So I think when you look at the Hawaii business community something you learn very quickly is how close this community is and when they say it's a small island they really mean it's a small island and everyone knows everyone and relationships are not just business deep, right? Kids play on the same team together, business owners went to high school together and by high school I also mean middle school and elementary school so it's a very close-knit community and I think you can either view that as a huge obstacle and challenge being a transplant obviously not having gone to high school here, not having kids that play soccer with the other kids on the island here you can view that as a huge challenge or I think as a blessing and an opportunity because once you can actually get into that community it's really easy to be a part of that family rather than another community where it's more fragmented and not as close you know it's little relationships that you have to make one at a time and it takes a lot longer to be a part of that ecosystem. With that said I've actually found the community here to be extremely warm. I feel like Hawaii's made me genuinely a nicer person and a calmer person when it comes to stress level and deadlines and the timings of things and so even though starting a new business can be quite stressful and a lot of work and a lot of hours it's with really incredible people and everyone I've met in my time here not just our team but and not just clients and friends of clients but our business partners and businesses that may not even be partners but genuinely have a vested interest in our success I mean it's been the most warm I guess landscape to really launch a business in because people genuinely care and you can trust that they have your best interests at heart and that's how I've I've always tried doing my business in the past and so it's you know when I when I'm asked my greatest flaw what my greatest flaw is I normally answer I think I trust too much and I think I'm too honest and on the mainland that has bit me in the butt because people have taken advantage of my honesty and my candor but I don't think that's the case here at least I haven't found that to be the case here so all good things um and I definitely think for anyone that's looking to start a business starting a business in a community where the community genuinely cares is a great place having been born and raised in Hawaii I I know how fortunate we are that we we are people of Hawaii and that we have the warmth and the heart for one another before all the all the business stuff but with the experience that you have in startups share with our viewers what does it take what's the first steps in starting up a business yeah so I think there's there's a a lot of people with a lot of great ideas the challenge is actually taking that leap of faith you know leaving a very steady nine to five job and putting all of your time and effort into this idea that you believe in so I think there's a couple things you know before you start a business is your idea something that you're so passionate about that you're willing to give up everything for it because starting a business is not easy there's a lot of sacrifices that have to be made and a lot of risk that you're taking and you you don't want to do that for an idea that you don't wholeheartedly believe in and you're willing to put your heart and soul into that concept so that would be the first first step obviously you know not everyone's cut out to be not everyone wants to take that risk and not everyone's comfortable with taking that risk so just having that open dialogue with yourself and and if risk isn't necessarily part of your profile you know maybe it's partnering with someone else that is a little bit riskier to kind of hedge that risk with you so step one obviously what is your idea step two vet your idea I'm I've had plenty of ideas that I thought were the best idea in the world and it turns out the rest of America doesn't agree and if people don't agree you know it don't necessarily change your idea but listen to why and the feedback and there's a lot of gems and nuggets in there that can actually make your idea better once you've vetted out your idea I think the next step is to really evaluate what you need to execute so you know most people will start with the business plan and I think that's really smart for first-time business owners or startup entrepreneurs because it really lays out the foundation of what you need to do whether you know from putting together a budget which will help you determine not just how much money you need to raise but also how you want to raise the money wants to profitability and and everyone you talk to is going to say you know this is a shot in the dark right you can't really guess what your business is going to look like but it gives you a good framework of what you should work towards and what you can expect doing a market analysis so who's your target market and then what's your stp strategy and how who are you talking to how are you talking to and then doing and collecting data research to make sure that there's a fit between your product or your service and the market you're targeting because if there is no fit you're setting yourself up for failure before you even begin so coming up with your plan and your strategy vetting your idea and then once those two pieces are done now it's time to actually launch your business and before you get to all the fun stuff it's all the boring legal stuff right what type of corporate structure do you want and a lot of that is determined by how are you fundraising and funding your company then it's filing all that paperwork getting your url domain getting all of your you know your get license and things like that so there's a lot of little things where i think as a first-time entrepreneur you know 15 20 years ago a lot of people had to do it on their own or spend thousands of dollars hiring the right people to do it fortunately now you know i believe that that today we support small businesses more than we've ever supported them before and by we i mean i just mean the world um and so there's a lot of tools and resources out there online outsource bookkeeping services hr services legal services where for a very small amount of money you can get the right support to properly set up your business from the get-go which kind of lowers the barriers of entry for new players entering the market with all of your experience it's obvious that you've learned a lot from all of that when we come back i want to um talk to you about what are the steps after you've done the planning and you've done the research and you you've set it up so we're going to take a quick break and we'll be right back um we're going to take that short break this is business in hawaii we'll see you back here shortly hi i'm ethan alan your host on think tech's likable science show every friday at 2 p.m we delve in the magical magical fascinating world of science how science applies to your life why you should care about science what impact science has on you and on those around you why you need to know some science it's a fun interesting painless way to learn some good science that you can use see you there hey hello everybody thanks for joining us on think tech hawaii i'm your host andrew landing the security guy i host a program called security matters hawaii and i hope you'll join us on fridays we are at 10 a.m and we're going to be talking about those security things that really should be important to you and you know maybe get behind the scenes on some some things that you may not know about the industry or about products or even about your habits um security is all about people processes and products and we hope to bring that to you in an informative and um hopefully a useful way so again 10 10 a.m on fridays security matters hawaii on think tech hawaii join me thank you back this is business in hawaii and today we're talking with valerie wang of makai hr so valerie was sharing with us uh her vast experience in starting up a business so once you've done the planning you've done the research you've done the research then you've done the planning what next you've launched your business what are all the things that we need to think about yeah so in the planning part of that stage is to determine what you need to launch your business right and so there's a lot of pieces that come with that what is your launch strategy what's what's your marketing plan who's your how are you reaching your target customer what's your infrastructure for servicing your customer um if you're a product-based business before you launch you probably want product in hand service-based you want to have your SOPs and procedures in place so really what goes hand in hand with that is is growing your team and i think that's probably the most important part of starting your business is surrounding yourself with the right people um and i think that's where where the the difference between teams that make it and companies that don't is is the team um and not just the experience right of the team and and the knowledge that they bring to the table but also how does the team work together so that's why i think recruiting is so important and why there's so many businesses in that field because not just for startups but any companies you know who you work with is really important and so when you launch your company the first step is to start building your team and with that are you two two decisions to make the first is are they partners are you giving them equity in your company or are you hiring them as an employee if you hire them as an employee you know that goes back to why maca'i hr exists right so now there is all of these things you have to worry about you have to have work comp insurance you have to have a department of labor number filed you have to have your payroll set up and figure out payroll taxes and compensation plans and now in in hawaii you have to you have the hawai prepaid health care act and have to provide you know not just aca compliant but also prepaid compliant health care plans to your employees and track that so once you decide that you want to go down the w2 route and to hire employees to join your team there's a number of things you have to start focusing on and you can either do that all in house and and maybe hire a friend or or a consultant to help you with that or you can look at a company like maca'i hr which is a professional employer organization whose purpose really is to handle and manage all of these pieces and components for you in that peo complement model so that you again you're starting a business you can focus on your business and not have to worry about the hr compliance piece so there's peo there's something called aso and you could also hire a private consultant so talk to me about what the difference is absolutely so peo is professional player organization aso is administrative services only and then consultants consultant i think it really comes down to how you want to manage your business and what resources you have internally the peo model is a co-employment model where you actually pay your employees through the peos fein what that does is it really allows two things one it allows a lot of the compliance and risk to be shared with the peo provider because they're paying your employees through their fein things like quarterly tax filings end of year tax filings w2 preparation and delivery a lot of those responsibilities fall onto the peo and if if it's done incorrectly because it's being done through the peos fein it is their responsibility similarly for small businesses especially because you're paying your employees through their fein even if you're a company of five people you're viewed on paper as a large company so when you look at some of the changes that happened with the affordable care act all of a sudden small businesses went from really nice composite banding band ratings which means from a benefit standpoint everyone has the same rate to now they're being age banded so everyone has a different rate based off of their age and gender now when you join a peo you are technically over 50 employees and so you go back to that composite band benefit rating model so those are some of the things that make the peo co-employment relationship unique i would say a couple years ago it was actually a little bit of a gray area because you were paying your employees through the peos fein so there was a lot of question on what does this mean for me as an employer what does this mean for my employees i'm trying to take advantage of the r&d tax credit can i still keep that if i'm paying my folks through your fein and i will say it was fairly gray but in 2014 the small business efficiency act was signed and then it was actually fully launched in 2016 and what that act did was it clarified a lot of these questions around peo and co-employment and what that act specifically addressed was the peo now can and is now recognized by the irs file all of these taxes on behalf of their clients but all of those tax credits and tax benefits and payroll related benefits still live with the client not with the peo so i'd say now in 2018 the advantages of joining a peo are greater than ever because the law has kind of clarified some of these gray areas um aso administrative services only does monitor a lot of the same things that a peo does such as payroll they can also assist with benefits administration and workers comp administration but there's no co-employment relationship so that fein number isn't shared and the times it makes sense is you know when there's a certain reason why your employees have to get payroll through their own fein number whether you're a non-profit and you have non-profit status or there's um a specific contract that requires that that's when the aso model makes a little bit more sense the hr consultant model which was the third third option that you mentioned i believe the consultant depending on your size could either come in more as a project based solution rather than a long-term ongoing solution and they help your company get everything set up properly and launched properly they identify an issue or a problem and they fix it but it's not necessarily a long-term month-to-month solution um if you are looking for a consultant to be more month-to-month i think in that sense you are looking for very hands-on support where you don't have anyone internal to help manage and make some of these hr decisions and in that case you might want to hire a consultant to actually sit down and tell you what to do versus a peo or an aso which is more there for guidance so macae hr peo aso hr consultancy where are you macae hr is a peo um so you know our bread and butter is to really live in that co-employment model and a lot of the technology that we've put into place and a lot of the procedures and efficiencies that we've leveraged support that peo model and our peo clients um so you've started a few businesses you've been a small business owner i am sure that you've had your share of failures as well as successes so share with us some of the the challenges that you've been through yeah i i think i could probably how long do we have because i could talk about my failures and lessons learned for hours um i would say probably the biggest lesson i learned in all of my experiences and and i was told this as a as a new business entrepreneur and i didn't i i heard the advice and i internalized it but i didn't really understand it now that i've experienced it i understand it but you know when you're raising money and as as a small business owner you're just launching cash is king if you you're looking at payroll you're looking at that invoice you have to pay and if you don't have cash you can't pay it um and when you're fundraising obviously the investors are doing their due diligence and spending a lot of time on the different opportunities and figuring out where they want to put their money what i did not realize the importance of is as a small business owner it is your responsibility to it interview and assess the investors just as much as they're analyzing you um because all money is not the same you want to get fundraising and funds from the right partner from a partner that truly understands your business and can add more to you and your business and your the growth of your business than just capital and just money um you want to look for someone that understands your industry and can help provide other advice and other assets that you may not necessarily have relationships partnerships where they can truly contribute to your growth outside of just writing you a check on top of that you want to look for investors that understand your vision and their vision is aligned with your vision so that you're working in harmony towards a common goal versus you having to change your vision or the investor wanting x and y and you want a and b and and that creates a lot of friction which takes away from the end goal which is building and growing your business so i think the the biggest piece of advice i learned is to spend a lot of time on on that piece and to really look at the who your partners are and and not just on the fundraising and investment standpoint but also who are your board of directors who are your advisors do you have a personal mentor to help guide you through this experience maybe you do but you don't have one in the industry you're trying to get into you should probably look for one in that industry because experience is priceless so it sounds like you started your venture into being a business owner very early on in your career i you're obviously very very young so for our young people out there who are looking to perhaps have a business of their own and start up what's your advice for them i'll never forget um this conversation i had with one of my mentors and a pretty incredible venture capitalist in los angeles um he told me when he looks at different companies to invest in the first the only question that matters to him yes a business plan is nice yes understanding your marketing strategy is nice but the only question that mattered to him is whether or not the founder could answer the why you why now test and that that stayed with me for a really long time um and what that question means is you know when you look at your startup business now you know just go to silicon valley silicon beach there's hundreds of thousands of businesses starting up every single day um why you what makes you and your team so unique that no one else on this planet can replicate what you're doing that's the first question because if someone else can come in take your idea and build it better you've already failed that test second question is why now why if your idea is so great why wasn't it built five years ago or 10 years ago or is it too early now or maybe technology hasn't caught up yet and really your idea should be introduced five years from now when you have the technology to support it so answering the question of why you why now i think was is the advice that i was given that i'd like to pass on other people um then when i looked at you know mackay hr we are also a startup i could answer that question for this company and that's why you know one of the the reasons why i was so excited to to join the team because the team was really special and i could truly answer why us um and then why now you know we are a technology driven company there are certain technologies that we're leveraging and efficiencies that we get from that technology that wasn't available two years ago i just talked about the small business efficiency act and how that launched in 2016 so definitely i would say focus on those two questions i think that's great it's very catchy so that young people will remember it anybody who wants to start a business um thinking about those i want to thank you for sharing with us your experiences and the new um the new startup um and we wish you well thank you good luck um we are out of time but thank you to valerie for joining us today and a big thank you to the projection staff um here in the studio business in hawaii airs every thursday at two and we look forward to seeing you here next week