Should You Start a Business in the Philippines?

Business in the PhilippinesBack to more ordinary matters. My target reader is someone considering a visit here to the Philippines. The first thing that needs to be pointed out to someone considering staying here more permanently is that Metro Manila is Metro Manila and everywhere else is a completely different kettle of fish. It is quite possible to have a good life here and succeed in business. This post is not just related to Metro Manila but most of my experiences here have been there. If you have the opportunity to consider a life away from the capital, then I imagine it would be easier. Things are cheaper away from the capital and depending where you are, there are many local opportunities. The way of life in the provinces is considerably better, less stressful and more idyllic but people are often poorer. The advice I am going to give though is largely general and completely unqualified so take it for what it is, just an Englishman’s impression.

When I look at other blogs, I find dozens also written by foreigners and very often on the same subjects. My version is only how I see it. It would pay to read as many blogs as possible and seek opinion from all over before you make any final decisions. Some will say don’t do it, others will encourage you. Neither is wrong as you do need to be careful and even wary, but not so much as to let anything put you off. Just be aware.

I’m really not going to bother listing down all the requirements you need to start a business. The obvious concern is the 40/60 ownership clause which means you are going to need to put your trust into people. I’m not saying don’t, but I am saying that that could leave you vulnerable. This being all the more reason to be cautious.

It’s all very complex and understanding the laws and requirements can be incredibly confusing. Not only that but everyone’s circumstances are different, so it would be pointless listing everything down. If you want to know something, send me an e-mail and I will do my best to point you towards the right places to find out. Be warned though. Starting a business here can be an expense and not easy with quite a lot of bureaucracy. However, it’s a case of getting the relevant information related to your need. Too much information isn’t helpful as each person has a different circumstance so only focus on your own needs and don’t let the tidal wave of advice from other expats mislead you.

It is possible to do it yourself, but not being overly familiar with the bureaucracy of the Philippines can make it seem very difficult. It may be wise to have a lawyer assist you but of course this is additional expense but one worth considering. I won’t say any more other than get it done properly and find out where you stand in every worst case scenario imaginable. Starting a business in the Philippines is not something you should rush into.

So even though everything has been said before, I will just give you my take on some things you may not have considered. I really suggest you read every piece of information available and keep an open mind when you read other people’s accounts. Many have bad experiences in business here, but a good many do okay so again, just take in as much as you can relating to others experiences. What’s noticeable is that for far too many expats investing in a business in the Philippines the reports are negative. Yes, it could be overstated by some, but the sheer volume of stories from people who have lost fortunes suggests that negatives need to be taken very seriously. If your careful and take time to learn about the business culture and the staff culture, you stand a much better chance of succeeding.

Learn The Culture

Only owning 40% of a business can be a major put off factor for many not surprisingly. Naturally many get round all this by putting their trust into a partner. Well that’s something I would not say don’t do, but be aware that should things not go as well as expected with your relationship, you will be at a disadvantage. However, I’m not a marriage guidance counsellor but as always, don’t rush into setting up a business.

Wait until you have been living here for at least one year. I would really suggest even more than that if at all possible. Okay, many don’t have the resources to survive that long without income, but I will say that until you are fully aware of the culture of not just business here, but of life, then you are highly likely to make some bad decisions.

Simple Made Complex

By taking your time and spending a long time learning about the culture here, you will come across some things that will make you realize that the way you are used to how things should be done do not always apply here. I can guarantee in many of these things that you will think its nuts. I will cite you some examples.

Something as simple like hiring a car and driver, I’m sure you would expect to be able to enquire how much for how long etc. and think you will get an answer that you can understand. Well, you would think it shouldn’t matter where you want to go, as long as you cover the driver’s time agree an hourly rate which has a minimum amount of hours for a fee you agree. Then of course all you need to do is pay the amount of hours you have used him for nice and simple huh. You have no chance as everything is… “um, it depends.”

First off, they price it by area and not time which makes a simple understanding of what you are getting for your money impossible. Then meals are expected by the driver. Fine, everyone has to eat, but as a customer you must be thinking what kind of meal? How much? All they need to do is work out a simple hourly rate plus fuel and then naturally you have to pay for his time to drive back and include fuel with that, too. It’s very difficult to know in advance what you are actually paying. His meals you would think are simply taken into consideration when he sets an hourly rate but it could never be that simple here.

Add-Ons

The other thing to watch for generally is the untold add-ons. Such as a builder will set you a price for a job, but halfway through the project he is likely to come back at you requiring extras for things he should have pencilled in from the start. In other words, 20,000 PHP ends up being 30,000 PHP but they have you at a disadvantage as without the extra funding, the project will not go ahead even though you have already laid out your cash. They are far from direct here and it’s often part of the business culture. You have to keep hold of your cash and pay out only when needed and ignore any requests for advance money. In fact its best you purchase materials yourself as and when required as it’s the only way to control the add-on culture. If the builder is insane then you can get in another one to continue. You really have to be hands on here as leaving things to others can be a nightmare and always get a second opinion. Substandard materials are usual even though you paid for quality. Some here find many ways of getting extra for themselves.

Don’t Expect Adventurous Customers

Good ideas from home may not transport well. Now, it’s tempting to think that people will love something different. I personally love Indian food. It seems much of the UK now loves Indian food too. It was imported to the UK via Indian restaurants and over the years the British people’s taste for something different meant it was a huge success and it’s very popular in Britain.

So the temptation is to think that as your own people are prepared to try different things and like it that that tendency would be international. In the Philippines, no.

Filipinos are quite negative when it comes to new things and are simply reluctant to try it. So as an outsider, you may be thinking, yum Indian food, everyone loves it; lets open an Indian restaurant as once they taste it they will love it. Wrong; they won’t try it and you will be out of business in a year. These are the reasons you need to know more about the Filipino before you start investing cash into anything. It won’t take you long to realize they are not an adventurous people.

Staff Headaches

There are plenty of decent people here and many of them are crying out for a job. What I am about to say does not mean it is anything like impossible to find good staff. It is quite possible especially if you pay the legal minimum wage as they will value the job all the more. However though, you do need to be aware of some attitudes here, and it’s just possible you will be as frustrated as hell with some of the people you give an opportunity too.

Customer relations are an area the Philippines really needs to work on. Big companies seem to regard their customers as nothing more than cash cows and once they have your cash and your signed up to a contract, example internet providers, then they won’t give you even half of what you signed up to. Well, this attitude seems to have rubbed off on some of the people, too and your staff could destroy your business if you let them.

I notice many businesses here leave the running of it to a young manager who is not aware of the need to satisfy customers. They have young staff and they seem to think the place they work is for them and customers are secondary.

Example, I’ve been in restaurants and the staff all seem to be having a very nice time. They play their own awful music which is not something the average eater wants to hear at high volume. It isn’t because that they believe what they are doing is adding to the ambience; it’s simply because the staff like it and they go to work to have a good time regardless of the customer. I’ve even been in McDonald’s (yes McDonald’s, the family fast food chain) and listened to god awful American rap of the worst kind, listened to lyrics about “my bitch, fuck you fuck you” as part of the lyrics and even worse. The staff takes control and they don’t give a damn about the customer. If you are not present all the time, this can all too easily happen. Having the wrong staff and not monitoring them can mean half your stock will disappear, they will ignore customers and sit there texting and some have the right manner when they speak to you, others make you feel you are inconveniencing them. You need to choose your staff very carefully and monitor them daily, failure to do so will result in you having no business left. This includes your wife’s relatives.

Text Text Will Kill Your Business

I have been in so many places, whether it be a store, bar, eatery or customer service department, where you are dealing with someone so pre-occupied with texting that they will leave you waiting while they text important things like “have you had your lunch”. Simple word of advice. Make it a rule that cellphones are not allowed at work time. Tell staff to give family your number in case they need contacting in an emergency. If certain staff members have their cellphone with them at work, they will think they are at work to text and your customers will be secondary to texting. Filipinos are not good at following rules. They will make you feel that you are a dictator but if you let them decide for you, you will no longer have a business. You really have to be hands on, strict and immune to bullshit.

Best Businesses and Competition

Well, I don’t feel fully qualified to act as a business consultant, but I do know food is a good bet as Filipinos cannot stop feeding their face. Some eat 5 times a day, and it’s frightening how much of it they put down there cakehole. Competition is a real liability as very few will have any business ethics and if you sell socks, someone next door will sell socks too.

First thing that is likely to happen, within a year, someone will set up over the road doing exactly the same as what you’re doing. It seems sometimes that a Filipino business plan sometimes consists of opening the door of your business, looking inside and saying to themselves “hmmmmm busy”… business plan done; let’s set up. They don’t seem to consider that if you set up where a competitor is active, then it’s going to be hard. This, of course, impacts massively on your business.

I once had a local friend that owned an internet café. She bought an existing café and the only competitor at that time was one other café in a very busy area. Within 4 years, it went from two cafes to 5 all on the same road. Then they try to outdo you with promos and if you do something, they will match you. The impact is everyone struggles and it seems like one of those local insanities.

Of course, you cannot stop a competitor setting up over the road, but you need to be very mindful of the possibility of it happening and consider whether you could weather the storm or not. It’s a constant problem here and can put many off.

Also, thanks to police corruption which is rampant, you will have to compete with people who set up right outside your store. If you sell fruit and veg, some arse will set up a stall right outside your shop selling fruit and veg also. He will not be paying any of the fees you pay, such as business permits or taxes, so he can undercut you, and if you complain, you will discover he is protected by the local police who he pays around 20 peso a day which empowers him to trade illegally with full police protection. This is very common and it is known locally as Tong.

So in short, business can be done here, but you really need to be firm and be prepared to be beaten by corruption and a total lack of business ethics of Filipinos. Never give credit as you will not get paid and I think I have given you more than enough to think about.

These problems are totally unaddressed by the authorities and you really need to think long and hard before you entrust your business to anyone. In fact, if you are not prepared to be totally hands on, then don’t bother.

You can make a success of a business but it will never be easy. Trusting your money and business to others could well be your downfall. I hate to sound so despondent, and it’s not meant to put you off. If you are aware, you can succeed; if you are not, expect to lose everything. Your wife or girlfriend and her relatives will try to convince you that it is all good business. In my experience, Filipinos are not good at all in business and I would not listen too much to any advice from anyone that stands to gain.
I will be happy to advise and help anyone who is thinking of setting up, but don’t expect everything to be easy and expect some negative advice from me. However, if you’re hard, you can succeed.
Learn for yourself and don’t take others’ word for anything. A partner or perhaps family of the partner will be very eager to start a business. They will bombard you with bad advice. You really cannot take anyone’s word for anything. Many locals, possibly your partner, will be very keen on the idea of having a business. That’s natural, and Filipinos are experts at making money from little enterprises, so don’t disregard everything you hear, but in general there is as much bad advice as there is good. Again, taking your time is extremely necessary.

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Filed under Culture, Impressions, Manila, Philippines

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