I thought I’d write a 'positive' article about starting a business in the Philippines. Some of you may be skeptical because that’s what I do for a living and I may be self-promoting, but I promise to be as honest and truthful as I can. My “rose tinted” glasses disappeared a long time ago.
I read many negative posts on the internet about setting up a business here; comments such as “How do you earn a million pesos from a business in the Philippines? Answer: Start with 5 million!” or “You can’t compete with the locals; they will undercut your prices and drive you out of business”. I do know of people who have set up a business here and failed; but isn’t that true in the West also. The Bureau of Labor Statistics in the USA say that only 20% of US businesses survive beyond the first year. Why should the Philippines be any different?
On a positive note, our company, Cebu Relocation Solutions Inc., has set up close to 200 businesses over the past 7-8 years, and in that time we have only had to close 3 of them; and all of those were closed because of personal reasons, not business failure. Of the other 190+ companies, some are just surviving, some doing okay, but the majority are thriving. Many of my clients, with existing businesses overseas, say that their Cebu based operation “saved” their foreign company from going under. The level of foreign investment in the Philippines continues to grow each year.
My background is in law, not Business Studies, and it wasn’t until I came to Cebu that I ran my own business. I made many mistakes along the way, and don’t suggest that I’m in any way an expert at running a business here. I can set you up legally but after that, you are the one that has to learn fast!
I will however give you my opinions about starting a successful business here and what I see as the best way to go about it.
- Don’t even think about starting a business until you’ve been here a while. You may hold a Master’s Degree in Business, but you need to understand a little about the people of the Philippines and their culture if you want your business to succeed. One of my favourite quotes is from Mark Twain, who said “All generalizations are false, including this one”. However I see Filipinos as intelligent and extremely hard working. They may not subscribe to the “Puritan Work Ethic” that we are used to in the West, but the “Asian Work Ethic” is rapidly becoming the benchmark for high achievers. To summarize, don’t expect to “manage” a Filipino the same way as you would an employee in the West, but make sure you don’t underestimate them as employees!
Before deciding to open a business here, make sure you have the time, money, experience and enthusiasm to run the business:
- Time – many of you may have worked for an employer all your life and like the idea of being the “boss”. Running your own business isn’t a 9-5 job! You may find yourself working 12-14 hour days, 7 days a week. And no annual holidays with the family!
- Money – if you don’t have enough to get through the times of bad debts, poor sales, theft, etc., you shouldn’t start. I just about broke even for the first 2 years and still have my bad times now. Cash Flow is a lesson I learned very quickly!
- Experience – how can you successfully run something you have no knowledge of? You’ll learn from your mistakes as you go, but that may be too late. I still dream of owning my own bar: playing the “Jovial Mine Host” with my customers. The reality is I would fail for many reasons. Lack of knowledge of running a bar would be #1, but I know I would be “legless” by mid-afternoon, having drunk away most of the day’s profit.
- Enthusiasm – even if I knew how to run a bar successfully and didn’t drink the profits, do I really want to work until 2am in the morning and get up at 7am the next day to make sure I’m ready to open? I enjoy my “job” and I think that is why I have been successful.
- Unless you are an export business, don’t focus your marketing offer just to foreigners. Your foreign client’s average spend might be 2-3 times higher than that of your Filipino clients; but there are 100+ times more Filipinos here than there are foreigners. Better to have 200 customers spending 50 pesos each than having 25 customers spending 200 pesos each. Although foreign minorities are hard to break into, again there are more Chinese or Koreans here than there are Europeans.
- Whether your business targets the domestic or the overseas market, for me the most important thing is to find a good local Manager. Someone that knows how to motivate, organize and discipline your Filipino workers. In my opinion, if you impose a Western management style here, you will have problems. You can set Western standards but you need to motivate your staff to achieve those goals in a different way. Another generalization, sorry.
- My business competes within the local domestic market, so I can’t charge Western prices. I’m not the cheapest, nor am I the most expensive. I justify my price on the quality of the service that I offer. However, if my business was a Sari-Sari store, (a local store selling every day food, drinks, groceries, etc.), and I was charging ₱95 for a bottle of beer and my close competitor was selling it for ₱90, I wouldn’t sell much beer. The most successful business model is one that trades overseas. Charging slightly below the rate for the service provided by local overseas companies, but benefitting from the lower operating costs offered in the Philippines.
- For those of you that have come to the Philippines aged 60+. If you want to start a business, do so: I recommend it for your health. As long as it breaks even or doesn’t bleed you to death financially, the benefits of staying active are overwhelming. As we get older, our bodies decline in both shape and strength and there’s not a lot you can do about it. However, your brain can stay young, like that of a 25 year old, as long as you use it daily. Switch it off and it will quickly die.
As I said earlier, all of the above comments are my personal opinions. To those of you who disagree, I say – “I respect your opinions and comments and don’t ever profess to be right”.
To explore business opportunities, link with me by clicking on the 'Invite' button on my eBiz Card.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.