The Definitive Guide to Business
The Definitive Guide to Business

This couple has made millions selling homemade ukuleles

This couple has made millions selling homemade ukuleles

Early in their marriage, Joe and Kristen Souza lived in Kaneoahe on the Hawaiian island of O'ahu, in a small 500-square-foot love shack. Kristen stayed home to watch their newborn son in those days, while Joe went to work as a fireman. Struggling to make ends meet, they ate simple meals like spam and rice or saimin noodles, because it's all they could afford.

Resolving to become more financially secure, in 1998 they decided to start a business crafting and selling ukuleles. Kanile`a `Ukulele was born. Today, two decades later, the multimillion-dollar company is among the top three ukulele distributors in Hawaii, says the couple on CNBC's "Blue Collar Millionaires."

Ukulele making may sound kitschy, but "make no mistake," says the show's host, "they put as much blood and sweat into their craft" as any other business.

The Souzas take pride in the sound of their instruments. Their handcrafted ukuleles are made from koa trees, a plant indigenous to Hawaii, and because of the products' meticulous construction, the brand is widely considered the "Cadillac of ukuleles," Joe tells CNBC Make It. They're even patented.

Joe and Kristen Souza
Blue Collar Millionaires | CNBC

While Joe runs the manufacturing — he learned how to make ukuleles as an apprentice under the master luthier Peter Burmudez, whom he calls "Uncle Pete" — Kristen handles the business side. Kanile`a `Ukulele is truly a husband-wife collaboration.

"If you provide a quality instrument, people will pay for it," she says.

But that was not always a sure thing. As is the case for many businesses, the early days were a struggle. They began over $10,000 in the red, set back by investing their savings into the machinery they needed to build the instruments, like sanders and saws.

But after a few years, the business began to turn a small profit. Once there was some momentum, the Souzas started producing a second model: the Islander. It's not made from koa, so they can sell it cheaper and target a larger customer base.

"The vision was to have the whole world play an ukulele," says Joe on the episode.

A third party distributor in China constructs those instruments, Joe tells CNBC Make It, which go for between $50-$100. The higher quality koa ukuleles, meanwhile, cost between $800 and $1,200, but some versions can get even pricier.

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In 2015, the Souzas sold close to 12,000 instruments, they explain on "Blue Collar Millionaires." Around 2,200 were made from koa, which offer a profit margin of around 15 percent, while 10,000 were Islanders, with a margin of 45 percent. Their sales came to $2.2 million and gross profit amounted to $700,000.

Since the episode, which aired in 2016, sales have looked even better, Joe says. Last year they topped $2.4 million. Profit margins were higher too, largely because they sold more expensive models, but also because they have begun to primarily use their own koa trees as materials for the instruments.

The Souzas bought a 118-acre ranch with 200 koa trees in 2014 for close to $600,000. Last year they bought another property with 162 acres and even more koas. Joe says each tree yields around 1000 instruments. So, in those terms, the properties are worth millions. But, because each individual tree can be used to construct so many instruments, they aren't planning to uproot all of them. In fact, their real goal is reforestation, Joe says. They want to build up the bio-diversity of each piece of land.

After all, the koas have been good to them.

The trees have been an important element in their staggering success, which allowed them to leave their modest lifestyle behind. The Souzas' revamped love shack now boasts 3,700 square feet and it's worth $2.2 million. They reside there with their three sons.

"In its purest form, true success is found by going with your passion," Joe says on the episode, "and to me, it's just incredible that we're able to provide this wonderful instrument to the world, to be able to spread aloha through ukulele. It's been an amazing journey."

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