Why do so many Expat businesses fail in the Philippines?

Its something that when I first came to the Philippines I wondered about and as time has gone on I have learned from my own experiences and others what really are the problems that cause businesses to fold.

  • First one would be the returns aren’t big enough over investment – Answer YOU have over invested the market has a limited cash flow and having ideas in a Western mindset don’t work e.g. I expect $2,000 per month you should be working in Pesos to start with and $2,000 for a lot of businesses is just not realistic. It doesn’t matter how much you throw at a business making it look pretty and spending a fortune on location etc. People have a limited amount of capital to spend.
  • Location,Location, Location – These are paramount to a businesses success but to be honest the best locations are way over priced. The returns on getting into a Mall are likely not to be worth the hassles unless they desperately need the business.
  • Short-term thoughts – Most people think short term these days establishing a business takes time expecting to start a business this week and able to live off it by the end of the month you better have your emergency plane ticket ready. Be realistic I know banks generally want to see projections for the next couple of years if not more but you should be looking at the viability of the business and the fact it may not be able to support you and your family for sometime. Long-term you can beat your competition and also improve your supply network, as well as gain credibility amongst the local and expat community.
  • It doesn’t make enough.. – This is something I fight against often with Expats as they are being short sighted. Running a Sari-Sari for example while your sat working on the internet or watching the TV can surprisingly be enough to pay your rent, electric bill etc. When you get your weekly groceries you can simply add stuff you know sells as well as the beer and soft drink companies will deliver. Ours currently earns upto P2,000 per day and growing. We haven’t moved into animal feeds or medication yet.
  • Filipinos let me down – To be honest more often than not many do. But the truth of the matter is its your business and you need to be hands on if your not someone will steal your business from under you either by stocks disappearing or some other means. Tight stock control and making people aware that not only are you watching everyone but you know everything that is going on will combat a lot of the problems. This problem is the biggest for many as simply they hand over the business to someone locally and expect to just pick up money every day without any work involved themselves. A business can’t function well in the West like that so why would it here when people need the money even more?
  • I don’t have enough capital to build up my business – Start with other ventures and build it up. We want at least 12 apartments on rental as well as a nice house for ourselves we are realistic living in 1 bedroom house and already developed several businesses. Keep your outgoings low and your growth high.. work towards no loans as soon as you can as often that is what will cripple a business.
  • Talk and listen – I hear it very often “its my business and I will run it the way I want”. That is fine except for the fact if its losing money don’t come whining. Expats are an odd mix but there are some good amongst the mix which could help your business. Interact with other ventures similar to yours and hopefully you can network to a point your all learning from each other. Sit there ignorant your business will fold.
  • Too many of the same businesses – E.g. people open an internet cafe or a restaurant Cebu alone has over 1000 restaurants. What you should first think of is what is different about yours and can it draw in a crowd on a regular basis. The internet cafe venture can be hit and miss depending on location but its also about scale. Most areas work on permits per machine so if your running a Sari-Sari it may pay just to have 3 on the side of it rather than a full blown internet cafe. If you find the 3 PC’s are busy then you already know there is demand you can build on.

This is just a quick guide as before people move here they should be thinking of “how” they will survive rather than “I will open an internet cafe”. Because being short sighted on ideas will end in failure, may sound a little bleak but its more to do with getting you to understand that being diverse is the key. If your living in a remote area having 5 mini businesses is better than one 1 big one.