Philippines Business Guide Part 3

If you want to make a small fortune in the Philippines start with a large one.

I have heard that expression many times in the Philippines from Ex-pats But my question is why? A lot of the problem with Western mindset is we overspend on ideas. We go out to set-up with the latest technology the best advertising etc. etc. but have people actually looked at projected figures of income? Is it more a case of “I over spent but its easier to blame the Philippines than admit I was wrong”. Than it is to actually look at the mistakes that led to failure. I will give an example :-

We recently opened ZoeiTECH our internet café :-

We built the building it is housed in at Aprils parents so that there is no rent to cut our overheads. We bought 11 PCs for the job and then opened. The business has been slow. What went wrong?

  1. Location is in a “local” sub area off the main road.

  2. The sign (above) only went up today after 2 weeks.

  3. We didn’t promote the business well.

  4. The PCs didn’t have the right set-up for the customers.

Is it a viable business still though? Location wise “Yes” as the neighbourhood is full of kids and now we have the sign up we are getting busy. But we now have to adapt to the market. The PCs were originally set-up for “Chat” not gaming so installing the games has been time consuming but an important factor. The “word of mouth” is now spreading because of the kids starting to use the café after the sign-age. Adding food and drinks for sale are likely to match the netcafe machine sales.

The important factor is looking at what is wrong and putting it right

So what if the netcafe did all go wrong completely ? This is also part of the planning ahead. We have built a 2 studio apartment set-up if the café failed it would then become an apartment renting for around P4,000 per month with the one above it. Total investment including the PCs and construction is P500,000 the PCs have a value of around P130,000 so selling them on would leave the debt value of P370,000 which is a repayment period of nearly 4yrs if just rented. But the point being its not a complete right off even if it did fail. The other important factor is things always have a value in the Philippines. In the UK the PCs I bought here would have been unsellable. But I could hang onto them for 12 months here and still be able to sell them on. Why? Because credit is expensive here and imports are heavily taxed and restricted. So if you do have a business that doesn’t work out it doesn’t mean you lose your entire investment. On top of that it doesn’t mean for example “ZoeiTECH” cant move into Minglanilla town centre where it would be able to make more money. But at the same time working from the first location we have ironed out any problems we had initially with software or permits for example. Giving you an advantage over others due to already have learned the ropes.

Getting back to the If you want to make a small fortune in the Philippines start with a large one argument there is some slight truth as in reality your investment is likely to be longer term and its changing the mentality of a business owing you say P350,000 you invested initially to the reality of a regular income of P10,000+ a month profit. Which in repayment terms would be just shy of 3 years. But in my terms would be a continuous income that pays my rent and bills for the month allowing me to concentrate on the next venture. The Philippines has a population that generally works on “daily” incomes and that is how you need to approach it. I have invested around P3 million in just over two years and generating an income of around P70,000 a month which is slowly increasing. Repayment period 3.7 years right? Wrong.. because we have an income that is supporting me, April, Zoei our daughter, Aprils sister and my parents in-law. The income isn’t based on repayment but expansion as our mindset is improving the P70,000 not getting back the P3 million. In the next 3.7yrs I expect the P3 million will have been repaid several times over. As we have already survived our first year fully without money being sent from abroad. In reality if the netcafe pays off or the apartments are rented we will be around P80,000 a month which in reality is P40,000 a month spare capital into the next venture. Which is buying a taxi or jeepney in 3 months time “cash” or something else. But this is why its important to move from a Western mindset as often the business venture returns seem small in comparison to what you expect. Which is why people say most things aren’t worth bothering with. But lets face it the Chinese, Koreans, Japanese and Filipinos are all operating successful businesses in the Philippines as well as some Western Ex-pats Its not impossible its research, patience and local knowledge that generally makes things pay off. The fact that its hard to operate/start a business in the Philippines is one of the reasons its a viable opportunity. Couple that with the fact you will no doubt have no debt on the start up then your ahead of most of your local competition already.