Doll Maker Must Shape Her Goals Along With Figurines

Sculpting the faces of her collectible Hawaiian dolls or designing their intricate costumes of grass skirts, flower-print dresses and tiny leis, Patty Kanaar is happy to be able to combine her love for the cultures of the South Pacific with her fine arts training.

She’s less pleased about the state of her company, Hei Mana Creations, which seemed to be on a growth curve before sales slowed, hitting only $80,000 last year.

“It’s fun to a point, but it gets to be a drag when you’re not making any money,” said Kanaar, who owns the company in partnership with her mother, Peggy Hinshaw.

The UCLA art major who spent her childhood summers in Tahiti and later performed in a professional Polynesian dance group has tried to close the gap between Hei Mana’s sales and its costs, which have stretched to several thousand dollars each month. She has attended entrepreneur classes, bought marketing tapes and business books and consulted with collectibles experts. She has explored expanding distribution beyond her mail-order clients and the Hawaiian gift shops on Oahu that sell her dolls. Test orders have been placed with a company in the Philippines that can cast the resin dolls more cheaply than can Kanaar’s small operation in Canoga Park.

She knows she has to make changes, but Kanaar is unsure what to do next, and she’s beginning to doubt if her vision for the business is even feasible.

“I think maybe I am too emotionally tied up in this, and I don’t know if I’m making good decisions,” Kanaar said. She’s afraid she may have to close her doors if sales and profit don’t improve.

The picture didn’t look quite so bleak to consultant Paul Ratoff, who said Kanaar has taken some important steps to get her company back on track.

“She has great opportunities,” said Ratoff, a financial and certified management consultant at Moss Adams Advisory in Los Angeles.

But too much of Kanaar’s time and energy and the company’s resources are being depleted by the relentless demands of the operations side of the business--production, inventory and shipping--while critical areas such as product development and sales go begging, he said. That’s not an uncommon business problem, according to the consultant. It’s easy for a business owner to get so bogged down in the details of manufacturing that the business loses momentum.

To achieve a better balance, Ratoff recommended that Kanaar reconsider her goals.

“Few people take time to figure out what they really want from their business,” Ratoff said. “Once you have that clear vision, it’s a lot easier to come up with a game plan.”

After some reflection and a meeting with Ratoff, Kanaar decided she would consider the business a success if she could meet three goals within five years. First, she’d like to earn a minimum salary of $6,000 a month and live in Hawaii on land her family has long owned but never built on. Second, she’d like to spend most of her time sculpting new designs and creating new collector’s items. Third, she’d like to earn a worldwide reputation as an artist who creates collectible dolls and figurines.

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With that vision of success in place, Ratoff worked with Kanaar to help her decide what vehicle she will use to achieve her goals, what her mission will be. That included defining the company’s strategic or competitive advantage. They agreed that Hei Mana will focus on creating collectible dolls and figurines of indigenous peoples from exotic lands. The limited editions Kanaar will design will set the company’s products apart from its competitors. And distribution will continue to be targeted at the tourism market and the private collection market.

“So now she’s got a product and she’s got a market and she’s got what’s going to make it unique,” Ratoff said. “Once you get your vision and your vehicle or mission in place, you are really ready to rock and roll. It becomes very clear what you have to do.” Clear to an experienced consultant, at least.

Ratoff had a number of recommendations for Hei Mana in the areas of operations, product development, sales and marketing and budgeting.

Essentially, he’d like to see Kanaar deconstruct the company by turning to outside vendors for production (making molds and casting, painting and dressing the dolls), warehousing, shipping and billing. Kanaar could design and oversee operations from a home office. One or both of her current employees could work from home handling customer service, some sales and marketing support. Her mother, a former miniatures shop owner who currently casts the dolls, could meet her own goal to retire.

Kanaar “needs to get out of the manufacturing process because--looking back at her mission--that’s not her competitive advantage,” Ratoff said.

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Buyers will want Hei Mana dolls because they are designed by Kanaar, not because her company manufactures them, he said.

By July, Kanaar should plan to have 100% of her production done overseas, he said. The company in the Philippines can match her quality at one-quarter of her cost, Ratoff said. And unlike her current, somewhat haphazard manufacturing process, Kanaar will have a clear cost structure to work with. Kanaar will have to bear the expense of traveling to the Philippines several times to set up the arrangement and ensure quality control, but she will save money on the arrangement in the long term, the consultant said. Kanaar also should consider having the dolls finished--painted and dressed--in the Philippines or by a local finisher.

Ratoff estimated that the cost of production and packaging would equal 25% of the wholesale price.

Once she finds a local fulfillment house to handle warehousing, shipping and billing, the finished dolls can be shipped directly there.

At that point, Kanaar can sell the expensive mold-making equipment the company has acquired and move out of or sublet her 1,200-square-foot space.

“That will simplify her life tremendously and free up time to devote to the critical areas of product development and sales and marketing,” Ratoff said.

He’d like to see Kanaar take an aggressive role in sales by visiting potential clients on the Hawaiian Islands untended by her outside sales rep, who is based on Oahu and who focuses her efforts there.

“People always like to meet the designer, so she’s not selling in the conventional sense,” Ratoff said.

Ratoff suggested that Kanaar’s current office manager, working from her own home, set up appointments and handle other sales support and customer service duties. As Kanaar had already recognized, it’s important for the company to increase communication with its existing customers, the consultant said. The office manager should call past clients and talk with current clients about what the company has done well and where it could improve.

Ratoff also suggested that Kanaar upgrade her Web site (https://heimana.alohaworld.com) to better serve her retail customers. These gift shop and boutique owners should have access to information on expected product delivery dates, current inventory levels for different products and retirement dates for limited editions, and should be able to order online, he said. Once the company has expanded its retail store business, it can use the Web site to woo its second market, individual collectors.

The company’s client base is in serious need of expansion. Currently eight customers account for 35% of sales and 30 others account for 55%. Ten private collectors make up the remaining 10% of business.

“What’s held her back is the fact that she has one rep who only sells on one island, and there is not a whole lot of growth,” Ratoff said.

He suggested Kanaar set a goal of increasing the retail client base by 60 new accounts over the next two years, an aggressive five new clients per month. In addition to visiting potential accounts, Kanaar should tell her rep that she’ll be calling on her major accounts to introduce herself and find out how to increase sales.

After 18 months or when cash flow can cover an extra $2,000 or so a month, Kanaar should consider hiring a publicist and marketing consultant to help build her reputation as an artist among private collectors, said Ratoff.

And each year she should ask herself, “Do I want to go to the same place I thought I wanted a year ago?” said Ratoff.

“You have to revisit your vision on an annual basis because people change and situations change,” the consultant said. “But this plan will definitely get her where she wants to go.”

Cyndia Zwahlen can be reached at cyndia.zwahlen@latimes.com.

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This Week’s Business Make-Over

* Company name: Hei Mana Creations

* Headquarters: Canoga Park

* Type of business: Designs and makes collectible Hawaiian dolls

* Status: Partnership

* Owners: Patty Kanaar and Peggy Hinshaw

* Founded: 1992

* Start-up financing: $3,000 loan from Hinshaw, $2,000 in credit card debt

* 1998 sales: $80,000

* Employees: 2

* Customers: Retail shops in Hawaii, doll collectors

Main Business Problem

Sales are stagnant and the company is unprofitable.

Goals

Outsource doll production in order to concentrate on design and marketing; earn a decent salary; move to Hawaii.

Recommendations

* Develop a vision and a mission to guide growth.

* Outsource production, finishing and shipping tasks.

* Move out of warehouse to a home office.

* Spend more time on designs.

* Start an aggressive sales and marketing campaign.

Meet the Consultant

Paul Ratoff, a business consultant for more than two decades, is a financial and certified management consultant at Moss Adams Advisory in Los Angeles.