The Hawaiian Islands are a terrific place to live and work thanks to the allure of the ocean, the tropical beauty, and the great year-round weather. The state is typically associated with vacation, relaxation, magnificent beaches, and stunning scenery, attracting a large number of visitors annually.
However, tourism isn’t the Aloha State’s only economic mainstay. Indeed, many people call it “home” and establish a small business in the various industries that dot the island state. Hawaii has certain pro-business incentives, as well as an excellent, relatively laid-back quality of life, which explains why thousands of individuals relocate to the state every year.
Small businesses are critical to Hawaii’s economy. They provide opportunities for entrepreneurs and meaningful jobs with higher work satisfaction than positions at bigger, conventional corporations. They help the islands’ neighborhoods and communities by fostering local economies and keeping money close to home.
Take a look at the following statistics that highlight Hawaii’s business landscape.
Quick Hawaii Small Business Statistics for Entrepreneurs
- Small businesses represent 99.3% of all businesses in Hawaii.
- Small business employees account for 49.9% of Hawaii employees.
- 85.7% of all exporters in Hawaii are small businesses.
- Small businesses in the accommodation, food services, and retail trade sectors in Hawaii are the most impacted by the economic fallout brought on by the COVID-19 pandemic.
- Between March 2019 and March 2020, 3,480 new businesses opened in Hawaii, while 4,664 closed, resulting in a net loss of 1,184 jobs.
- In the 2021 CNBC Top States for Business Survey, Hawaii scored an F in the cost of doing business and access to capital.
- Veterans account for 7.2% of workers and 7.8% of business owners.
- Racial minorities represent 58.2% of workers and 50.9% of small business owners.
- In 2019, Hawaii firms with revenues of $1 million or less received $346.4 million in loans from local banks.
- Between March 2019 and March 2020, 3,480 new businesses opened in Hawaii, while 4,664 closed, resulting in a net loss of 1,184 jobs.
Hawaii Small Business Statistics
1. What is considered a small business in Hawaii?
Depending on the sector, the federal Small Business Administration defines a small business differently, but if we take one of the SBA’s definitions—500 or fewer employees—Hawaii has approximately 137,328 small businesses. That’s 99.3% of all businesses in the state.
2. How many Hawaiians are employed by small businesses?
According to Statistics of US Business, a survey by the US Census Bureau, a total of 275,076 Hawaiians are employed by small businesses across the state. They represent 49.9% of all employees in Hawaii.
The state minimum wage in Hawaii is $10.10 per hour. This is higher than the federal minimum wage of $7.25 per hour. Every employee in the state is entitled to the higher state minimum wage. This wage limit is applicable to the majority of employees in Hawaii with an exception to student workers and tipped employees whose wage is maxed out at $9.35 per hour.
Employees who receive a fixed monthly salary of $2,000 or more are exempt from the state’s minimum wage and overtime laws.
3. Hawaii small business statistics by industry
The professional, scientific, and technical services sectors cumulatively account for the largest share of small businesses in Hawaii. According to data provided by the Census Bureau’s Nonemployer Statistics and Statistics of US Businesses, there are 18,991 small businesses currently operating within these sectors.
They are followed by the real estate, rental, and leasing sector, which comprises 14,766 small businesses, and retail trade with 12,909. The mining, quarrying, and oil and gas extraction sectors have the lowest number of small businesses with only 22 firms currently invested in these sectors.
4. Hawaii small business ownership by ethnicity
Hawaii’s total population stands at 1,401,709 residents. This represents a 5.3% increase from the 1.36 million recorded during the 2010 Census. Approximately 37.6% of all Hawaiians are of Asian descent. Whites/Caucasian Americans are the second largest ethnic group at 25.5%, followed by mixed race individuals 24.2%, Hispanic/Latino (10.7%), Native Hawaiian and Other Pacific Islander (10.1%), Black or African American (2.2%), and American Indian Alaska Natives (0.4%).
Small businesses ownership is distributed among these ethnic groups as follows:
- White/Caucasian — 63,554
- Asian — 56,883
- Native Hawaiian and Other Pacific Islander — 8,305
- Hispanic — 6,800
- Black/African American — 1,500
- American Indian and Alaska Native — 549
5. Hawaii small business ownership by gender
There are 54,361 small businesses owned by women entrepreneurs in the state of Hawaii. Of this number, 48,500 are nonemployer businesses while 5,861 have fewer than 500 employees.
Men own 69,953 small businesses in the island state, 57,500 of which are nonemployer businesses and a further 12,453 with employees. There are, however, 1,107 small businesses owned by both men and women.
6. Business taxes in Hawaii
The Tax Foundation publishes a study document called the State Business Tax Climate Index every year. For years, Hawaii was in the 20s and 30s for state tax policy, but this year, Hawaii dropped into the bottom ten, ranking 41st.
Corporations in Hawaii are subject to Hawaii’s corporate income tax at marginal rates ranging from 4.4% to 6.4%. A home business grossing $55,000 a year pays $2,720 in corporate income tax. A small business earning $500,000 a year pays $2,450.
The COVID-19 pandemic has not made things easier. Since the pandemic hit, the state witnessed a loss of high-net-worth individuals and business owners, as well as their money, which affects the tax revenues.
7. Small business financing in Hawaii
According to the Community Reinvestment Act (CRA), large banks are required to report new small business loans made to companies with annual revenues of less than $1 million. In 2019, banks in Hawaii paid out $346.4 million in loans to Hawaii small businesses with less than $1 million in sales revenue.
You should consider a local lender if you are looking for a business loan. The top four banks in the state are all local and they control 90% of the market share. They are First Hawaiian Bank, Central Pacific Bank, Bank of Hawaii, and American Savings Bank
8. Small business challenges in Hawaii
According to the 2018 Business Outlook and Sentiment Study (BOSS), an annual survey conducted by Hawaii Business Magazine, 402 business owners were given five nonregulatory topics and asked if each offered a unique challenge to their businesses. Following that, individuals who chose at least one of the five items were asked to name the one they thought offered the greatest obstacle.
The results of the survey showed that 54% of respondents cited finding good employees was the biggest challenge of operating a small business in Hawaii:
- 54% — finding good employees
- 20% — high cost of doing business overall
- 12% — competition from other businesses
- 10% — cost of leasing or buying land and facilities
- 4% — access to capital
However, taxes and regulations remain the main challenges to Hawaii’s small businesses. In order to stay in compliance with Hawaii state regulations, it is critical for business owners to find a good registered agent office that will take care of their tax compliance issues and even help them with their employee recruitment issues.
Read my review of the best registered agents in Hawaii and find out which company is the best for your business.
9. Hawaii small business export statistics
In 2019, the US Census Bureau released the profile of US importing and exporting companies. The document indicated that 749 businesses exported items valued at $334 million from Hawaii. Of this number, 642 (or 85.7%) were small businesses that shipped items totaling $178 million, accounting for 53.3% of all exports by acknowledged businesses.
The Final Word
In the United States, no state compares to Hawaii. It remains distinct because of its tropical environment, rich culture, island topography, and political and regulatory framework. The costs of doing business may be high, and the regulatory atmosphere is dense, but most Hawaiians still swear by their motherland and believe that its beauty and culture make it the best state for business.
Sources
- CNBC – Top States for Business
- University of Hawaii – Economic Research Organization
- Hawaii Data Collaborative
- State of Hawaii – Department of Business, Economic Development and Business
- Venture Beat
- Kauffman
- Tax-rates.org
- Hawaii Free Press
- Tax Foundation
- US Census Bureau