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Honolua co-founder on surviving a recession

By Tiffany Montgomery
April 18, 2008 6:59 AM

We all know times are tough out there, so I thought it would be a good idea to talk to some industry veterans who have lived through downturns before about what they learned from the experience.


Tommy Knapp started a popular beach volleyball brand called Club Sportwear that had its heydey during the 1980s neon craze. The grunge movement of the early 1990s combined with the recession and the first Gulf War hit the brand hard.


Tommy also experienced a downturn after 2001 when airline travel fell out of favor. At the time, he and his partner owned Honolua Surf Co. stores in tourist-dependent Guam and Hawaii.


Today, Tommy is the majority owner of Initium Eyewear, an adjunct professor at USC and a consultant with Billabong.


Here are Tommy's tips for making it through a recession.


Layoffs: If you have to cut, do it in one fell swoop and only once. If not, you lose face with your employees and customers. You have to make the tough decisions early, make the deep cuts if necessary, then you'll be ready to accelerate as you come out of the downturn.


He thinks there will be cutbacks at some of the bigger companies. "The better companies will make the right moves that makes them stronger two to three years down the road. I'd be worried about the middle or small companies that don't have a good sense of self. You have to know your customer and solve their needs. It's not a good time to change direction."


Business skills: It's really the time where you find out who is just about marketing and sales and who knows how to run a business. Accounting skills and other stuff are important - you have to have more than sales skills. You also have to understand credit, and wholesalers have to be careful of retailers that are struggling.


Honolua Surf Co. example: After the terrorist attacks in 2001 when everyone was afraid to travel, Honolua's stores in Guam and Hawaii were suffering. The company had to make the tough decision to close its two Guam stores quickly. In Hawaii, employees worked fewer hours, the company moved out old goods quickly, then refreshed stores with new inventory. In early 2002 when travel came back, the stores looked great compared to competitors. Some retailers panicked and didn't order anything new and weren't in a position to take advantage of the upswing. That allowed Honolua to take over store leases when other retailers subsequently got in trouble. Billabong eventually bought Honolua and its 19 stores in 2004.


The same thing will happen here, Tommy believes. The smart retailers and smart manufacturers will be able to take advantage of opportunities that don't exist right now. "The good squirrels that put nuts away will make it through and be stronger."


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