Recently I got an inquiry from a reader regarding starting a business in the Philippines. I answered him and asked for some more information on what he planned to do, and below is part of his well-thought-out response, along with some of my thoughts on the subject. I decided to break this answer into two different responses, the long version and the short one. Anyone who doesn’t want to wade throb all I want to say is free to scroll down to the short version at the end of the article. (spoiler alert: It’s short, but not pretty)
The Long Version:
… Thank you for taking the time out of your day to respond. Well, I am not one of these morons that are unrealistic and think that I can start one business and "poof" I can make enough to live there. The plan we have is this. Myself, my fiancée, and her family wanted to set up a small retail store that mainly sells different varieties of rice. The family already has a good location in Cavite. Is the rice business worth getting into? …
Well it is worth getting into as long as you don’t mind working for hours for tiny returns. Rice is perhaps the most heavily regulated commodity in the Philippines and retail rice dealers are strictly price controlled and regulated to death by the government. There’s a lot of useful information on Philippine business on my colleague Leo’s EntrePinoys ATBP site. Also, nuts and bolts of the hurdles you have to clear on starting a small business in the Philippines here.
… After this business is set up we are mainly looking for just enough profit for her family to be ok, while she comes to America with me and marry. I am only 27 and she is 21. While here, in America, we going to start preparing for a permanent move there with in 5 to 7 years. We plan to do this by creating a few more small businesses there that her family can manage while we are in the states. We were thinking shirt printing shop, since we hear that is pretty hot right now down there. We also plan on setting up laundry service center, but we have not searched the location on that one. Another option we have, though I hear this one can be bad, is opening a water refill station. Now, we also plan to buy some wooden/shell lamps and decorations from a store in Manila and sell them on eBay for a higher price overseas, obviously. …
Now, in the meantime, I work full time, but I will also be starting my own personal training business, as the purpose to practice what it is like to run a business, since I highly doubt that personal training is profitable in the phils. . My fiancée tells me that her family is very capable of running these businesses and can even hire some Filipino workers who would otherwise be unemployed, which sounds great.
I know you always say that to make money in a business then you must sell something that is in need, which would be the rice retail store. We already did all our homework about storage, cost of carts, government permits, yada yada yada.
… So to sum it all up, the plan: My fiancée will set up the rice retail store before she comes here. I figure that rice is a need and like you say, sell what the need it, even though that rice will most likely bring in small amount of income. Hopefully, it doesn’t bomb right away, and she and her family can manage that. Then possibly even set up a water refill station and get that going (I have doubts about that one). Then she will come to America to be with me. While here, we will attempt to help her family start a shirt printing shop and they can manage it from there. Then we plan on getting items from a Manila store that seem like they would be desirable here, such as wooden lamps/shell lamps.
I don’t know about that, she is the one that knows what the hell that stuff is. Anyway, after those are purchased, resell those on eBay to a foreign audience, which hopefully will bring in some profit. In the meantime, I will start my own personal fitness business just to prepare for what it is like to run a business. I figure I can use this as practice, since I will be keeping my normal everyday job. …
OK, this last sentence is the smartest one I have heard so far. Up until this point I was getting very, very depressed, because the idea of setting the family up in a business 9olr even scarier) multiple businesses just does not seem to work. Here’s what so often happens, aside from the other normal business hazards and pitfalls. The seed corn gets eaten. Retail stores spend their profits on essentials and emergencies that come up and when the time to order replacement stock comes along … walang pera … there’s no dough.
I am not trying to insult your wife’s family (and when you’re married they will be your family too, never forget that fact). But you know the old saying, Life is what Happens Wile Your Planning Something Else? Someone gets sick. Someone’s tuition is due. Lola’s medication cost twice what they thought it would. On and on it goes.
You, yourself, can not be the owner of the business, and even if your fiancée is well educated and very strong-willed and business minded, you will put her in a horrible position if you try to make here ‘the enforcer” regarding the rules of how the business gets done.
Daughters do not order their parents and even older siblings around. It does not work that way here. She will be constantly in a position of trying to support and obey her husband and to honor her father and mother and aunts and uncles and grandparents and so forth. Trying to run a business remotely is very, very hard. trying to run it as a family affair? Recipe for disaster, IMO.
However, buying and reselling items here in the Philippines to the rest of the world? Now you’re talking. I don’t know how many times I have written about variations of this idea, yet very few ever seem to “take note”. Here’s an example I saw a few months ago on one of the local channels.
Down in the Visayas a church-sponsored group of local ladies had developed a very lovely and top-quality embroidery coop ‘factory’ of sorts. Originally developed as a “livelihood” project, these ladies were making beautiful, high quality embroidered items … things like placemats other sorts of “doilies, covers for glasses and many other items.
They ladies were all happy, they all enjoyed have some self-reliance and in general it had a great success story overtone.
The problem I saw was, their marketing. Like so very many things in the Philippines, the group was limiting themselves to the standard, medieval’ serfdom-style “middle man’ sickness.
The leader of the group shared the fact that the only place they were selling their products was, at wholesale, to a “dealer in Binondo, Manila” … read Chinatown.
Why on earth would they take such high quality items and sell them at dirt-cheap prices to some Chinese wholesale dealer? Many of these products likely go to the mega-rich in Hong Kong, Shanghai, Singapore, etc.
Dollies and other items like that can ship easy to Manila and the rest of the world.
A simple ecommerce site and free publicity, as the TV station was more than happy to give them, a daily trip to the post office to send off the envelopes and small parcels of shipping products and presto, they would not only be scratching out a bare “livelihood existence, they would have a real business … and much better profits as well.
You could replicate this sort of idea anywhere in the Philippines, and you could accommodate the needs of family members by paying them a salary to be “your hands” in the Philippines while you were in the States.
In short YOU operate the business and you help your family by paying them a decent wage, but keeping the cash, inventory etc. directly under your control.
I have often said, “Find a need and fill it”, you’re correct there. But I have also said, many times, “Live in the Philippines but EARN elsewhere”. The place where you live does not have to have any connection to where your income originates. That’s the power of what one might call, “Global Arbitrage”. And in you case, sinc3e you already have willing hands here in the Philippines, you can run a business in the Philippines and employ Filipinos and earn from any point on the globe. The best of both worlds I would think.
One last example. One of my favorite TV shows is a series on Discovery channel where a fellow name of Drew Pritchard scours the British countryside for all sorts of antique furniture, architectural salvage, and novelty items of all descriptions. Drew’s business is located way out in the countryside of North wales … kind of like locating your shop in backwoods Arkansas or provincial Philippines. yet Drew sells high-ticket items all over the world.
His main tool? His website. If you ever watch the show, note that his first order of business with any items he gathers and brings back to his shop is to put them online 9and email to his list of clients). many items are sold the same or next day.
There isn’t a reason in the world anyone reading this and interested in earning while they live in the Philippines could not replicate a business model like this.
The Short Version:
The idea of setting up all these nebulous businesses and running them remotely with family in charge (who apparently are not running businesses already)? Just take whatever money you plan to spend setting up these businesses, lump it all together in one metal container, squirt gasoline on it and light it off. It will be painful, one-time, while you watch your money burn, but, like a death in the family, you’ll get over it after a wile.
Otherwise, my opinion is, your current idea is just setting yourself up for years and years of pain, aggravation and family feuding. The end result will be even more painful than just burning your savings in a fire now. Godspeed.
As I read through the inquiry, I was gritting my teeth as I thought that this was really a recipe for disaster. In the end, I thought your answer was spot on. I have a fair amount of experience in doing business in the Philippines, and I really see no possibilities for success in the rice business.
My advice would be that if he wants to help the family either just give them money or start some kind of business like you described with the doilies and such.
Agreed Bob. esepcially with rice. It’s a politcal football. Very heavily regulated and very hevaily foreigner-negative.
Let’s just suppose someone started selling locally made “dollies” or some such. And they only cleared a few hundred dollars a month. that would be way, way more than the average small family retail store/rice shop ever makes. And it would hep people and promote the Philippines and home livelihood as well.
Another thing to consider with the rice biz idea is the fact that Philippines is hit by several natural calamities specifically typhoons in a year. This will have a very big impact.
I also don’t like the idea of managing the business remotely and entrusting the daily operations to the girl’s family. You can do this for a proven system but for a start-up the chance of success is very low.
You may considering franchising. Such model has well-established system for marketing, sales, operation, finance, etc. Of course which product/franchise is another point.
Indeed there are many small investment franchises that could do well. Whenever I visit my local mall, which is nearly every day, I am always struck by the lines of people, money in hand, buying Zagu or ‘fried ice cream” or flavored French fries and such. I have written about this a number of times before, including recommending my friend Rudolph who has been in the franchise business here in the Philippines for years.
http://www.filfranchise.com/
However, you know why most people avoid franchises? There’s is typically a franchise fee/commission to be paid every month. People can not see the difference between owning, say a Jollibee and paying a fraction of profits per month, or trying to open “Joes Burgers” and instead of a fee on profits, not HAVING any profits. *sigh*.
Dave:
As you know, we tried to run the fish ponds remotely and failed… They break even… Just. We were lucky in that the amount of investment was minimal and there are still assets for the family.
As to the rice business, here’s a little gem that people wanting to get into that business may not know, but should cause concern… I was in Thailand about three weeks ago. We were having a quick lunch in a market, and there was a rice vendor across from where we were eating. The Thai jasmine rice was selling in Thailand at a higher price than the same rice in the Philippines. (It is around P35 here, and converted to Baht, around P45 there!). The Filipinos were able to import it in and sell it cheaper than where it was produced and milled. (And I mean same rice… not just seeds grown here)
I could not agree more with your mantra, earn from abroad. This country has many resources and there are many things produced here that have markets abroad. The Internet has changed how the world conducts business. Even as recently as 20 years ago, my father and I exported cars from Florida to the Bahamas. At that time, there was still limited access to information about products, and availability was certainly not global. (We actually did some marketing by getting the local yellow pages and white pages from each island and cold calling!) Now, anyone in the Bahamas wanting to buy a used car from the US simply gets on Ebay or dozens of other sites and buys whatever they want… no worries.
People starting business today MUST take the impact of technology into account… like it or not. Markets have changed, and old thinking leads to failure.
Hi John, your point on the “price of rice” is well taken. As I have said the “business” of rice in the Philippines is not a “business” at all, as much as it is politics. Rice prices and ‘allowable” profits are controlled by the government. And the price is arbitrarily held down for political reasons. Good luck fighting the government on this.
I’ve yet to hear a success story about involving family in an enterprise.
Only headaches, heart breaks and fractured families.
The idea of buying things to sell abroad through Ebay or similar outlets makes sense.
For the others he is better off just to burn the money, it will cause less problems.
My friend here the Banana Baron (barren) is typical. The family owns 8 hectors of land that was just sitting so he decided to plant it in bananas. He went down and saw that the planting was done then returned to Tagaytay. While he was there he ran into a farmer friend if the family who had 1.8 hectors already planted but who was hurting for cash. So the Baron offered to lease the land in return for the fruit come harvest time. He made the first 1/2 payment on the lease.
You can probably see the train wreck already
When the time came he sent the money for the second 1/2 of the payment. 100k altogether.
But things were getting strange no communication so he sent his girl to see what was up (her family) now he was getting all kinds of odd stories. So he went himself with the plan to oversee everything.
He arrived and , drum roll, no bananas.
The family had blown the money and the unpaid farmer cut the fruit and sold it to recoup his lost lease money. The Baron also discovered that he had sent money to buy a truck, a 5 year old Mitsubishi 8 ton. What he got was a 15 year old Isuzu 5 ton in need of all kinds of repairs. When he asked who accepted the switch the family formed the finger pointing circle. And the price difference? Nobody knows nothing.
A month ago he set off once again to the plantation to oversee the harvest of the 8 hectors.
I haven’t herd from him since the first week. Maybe went insane and is running naked through the jungle, maybe went for a walk and never returned?
Meanwhile his rent here in Tagaytay is long past due and people are asking me where he is.
I’m hoping for the best. All he really wanted to do was help the family.
What is that old saying? “The Road To Hell Is Paved With Good Intentions? As you likely already noticed, I co-opted this comment for a full article,
http://philfaqs.com/live-there/phils-business/another-view-on-the-set-the-family-up-in-business-in-the-philippines-issue/
If you ever do hear again from the “Barren”, have him give us a shout here, please?
Hi Philly,
Great site very honest (brutally so at times) which I think a lot of people need. I have been living in Asia for almost a decade and am now considering starting a business. I do have some experience with starting a small business however this would undoubtedly be my biggest endeavour so far.
I am thinking of entering into the online english school business. I have experience in the industry. Ideally i would look for a Filipino partner I trust and take it from there. Do you happen to have any horror stories or reality checks about this industry?
Would appreciate the advice as most of it online is unrealistically optimistic or seriously jaded (pressumably written by the people who lost all their money).
Thanks a bunch!
Hi Scot,
Thanks for dropping by. Wow, brutal? Wow I never thought of myself in that way, but hey, everyone is entitled to their own feelings. And if people take my honesty as brutality, it only points up my contention that the world is being educated to become a community of wimpy, spineless ‘group thinkers’. This is the role of educators and most governments … teach them to huddle in the corner and bleat only when we tell them to bleat. They are less trouble that way.
But anyhow, I digress. If the average reader here would get passionate enough about controlling his or her own destiny as they do about Obama’s Birth Certificate, they’d be rich. Or, more appropriate, the massive “Occupy” movement. Some great, passionate people there but they accomplish just as much as the guy at the back of the traffic jam who leans on his horn hoping everyone will move o he can in the end. A colleague wrote something really insightful on that just recently . Occupy Entrepreneurship
My thought is, you can bitch about the traffic (or the system) as long as you wish, but it’s not changing. OR you can choose NOT to be that guy at the back of the line tooting his horn in frustration.
I wrote a whole series on independent online English teach, starting here .. http://philfaqs.com/live-there/working/live-in-the-philippines-online-english-business-thoughts-1/. Also use the custom search in the right hand column, I have written on the subject frequently. I think it is has a HUGE upside.
Only thing that made me wonder in your business plan is, what is the proposed Filipino partner for? Unless you are talking about some with some special talents, I highly recommend you do this on your own. That way it’s essentially totally free of any Philippines government licensing, permissions, reports and all the attendant BS that tries to keep the sheep herded over in the corner, waiting for permission to bleat. Godspeed