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.