MAKING MONEY IN THE PHILIPPINES
Common mistakes to avoid!
I write this article from experience, and though it is maybe a little embarrassing to admit, more specifically from some one who has made most of these mistakes myself. Initially my plan was to open a business in The Philippines and spent half the year here and half back in Canada. I would continue my business back home and while here have some of my long term key employees managing my Canadian business. The belief was that the money I earned there would help me build my business here. Within 6 months though, not only had I lost every cent I had invested in the Philippines, my business in Canada which I had nurtured for over a decade, had imploded due to my lack of personal guidance and oversight. I was left penniless in a foreign country with not even enough money to hop on a air flight and so rather than borrow funds to tuck my tail between my legs and run away, I decided to find a way to start a new business here from scratch, and use the valuable knowledge I had gained from my mistakes to try again. The results were truly amazing
Don’t believe the cynical Naysayers! Making money in the Philippines is not rocket science and actually can be a interesting and rewarding challenge. There is plenty of money to be made in the Philippines but before heading here with dollar signs in your eyes, there are some things that you should keep in mind. A few are so logical that it seems foolish to even mention them, but let me warn you , even the smartest and least naive of us have fallen victim to at least one of these foolish mistakes . Some, like myself, have got bruised but picked ourselves up, learnt from the errors that we thought we were too smart, experienced and worldly to make and are now taking advantage of a some of the amazing financial opportunities this country has to offer.
We hope you join us in riding the financial wave this emerging Asian Tiger will surely generate, but hope too you will learn from our mistakes without having to feel some of the pain we put ourselves through.
Number 1- Don’t make decisions based on emotions
I spent several years visiting the Philippines every winter and fell in love with the country as a tourist, Spending half the day in on or under the water, having dinner at seaside restobars and watching majestic sunsets each evening. After a month or two I would pack my bathing suit and fins away and head back to make enough money in Canada to do it all again the next winter. Then several years ago, I met a beautiful Filipina woman who I fell in love and now call my wife. After realizing I wanted to spend the rest of my life with her I also knew I had some major life altering decisions to make. Do I take her back to Canada and we continue to visit the Philippines every winter, or do I move to this country and live here full time, calling Canada my second home?
That’s when I made my first BIG mistake based on emotions. As much as I loved and trusted my wife, I was concerned that she would change if I brought her to the West and I definitely did not want her to become westernized. After all that was why I was attracted to Filipinas in the first place, because they weren’t like western women. So my first foolish decision was made clearly based on the emotions of fear and insecurity. I had just found the woman I had been looking for all my life and I was afraid to lose this newfound love, whether by extended separation from her or by her being tainted by a culture I had lost faith in. I just had to find a way to stay in the Philippines.
My second came by means of a decision as to what type of business to get into. I made a deal to purchase a resort because I it seemed a cool idea to enjoy the lifestyle I had come to know as a tourist at that resort, while making enough money to stay in the Philippines with the love of my life. Once I got that pretty picture in my head I just did not look at the plans I was making from the viewpoint of a seasoned businessman objectively studying the real chances of success , but rather as a dreamer who fell in love with the vision. In short, I again looked at it as, “I just had to find a way to stay in the Philippines”. I will go into more detail about such dream ventures as a resort in a later chapter, but suffice it to say for now, you will probably not get filthy rich from owning a small resort and it will be anything but the laid back lifestyle you enjoyed as a tourist.
A very common third emotion based scenario that I have seen that usually ends in disaster here in the Philippines is a common one indeed. Though it is not a trap I fell into personally, I have seen plenty of very smart and seasoned veterans of industry kick themselves after the fact by trying to prove something to their new lady. Whether it be setting her up in a business absolutely doomed to failure, or lending money/partnering with her family members in a half thought out scheme, usually the motivation has more to do with impressing her than it does taking part in a well thought out and financially feasible investment that will make you money. If your intent is really to make money, my suggestion is to leave the ego behind. Find an easier, softer way to impress her that does not involve a whole lot of cash outlay.
Pretty simple and logical but something you better really think about. If you are looking at some type of investment in the Philippines, keep all emotions to a minimum and look at it from only one, objective viewpoint. What are its chances for success?
Nothing else should cloud your usually sound judgement!
Number 2 – Think very hard about getting into business if you have no experience
The majority of start-up businesses fail in any country and the Philippines is no different except maybe by even more so. This is one resource online that illustrates quite clearly that the survival rate of new businesses in the United states is consistently less than 50% .
( http://smallbiztrends.com/2012/12/start-up-failure-rates-the-definitive-numbers.html )
From my experience mistakes related to lack of experience when trying to make money in the Philippines by way of operating a small business , basically fall into two catagories
- no general business experience
- no knowledge of the specific type of business being attempted.
No General Business Experience
I personally took over the family construction business when I was 20 years old and though I knew the trade, I was inadequately prepared for the business end of running a company To put it mildly, I quickly got into trouble which took a few very painful years to work through. Now 53 years old and having owned and managed numerous businesses I have come to realize that being a small owner means that you have to know a lot about a lot, and even then you have to put the ego aside and realize there is a huge amount that you haven’t learned yet. Below is a short brief list of some important things to know and remember when you make a decision to open your own small business
- You need to have a business plan – To make an analogy, if you were to decide to go on a trip the best way to get where you want to be is to do some planning. If you set out in a car for a distant locations, would you not look at a map, fill up your car with gas, and maybe pack a few things that you will need along the way or when you reach your destination? Well a business is the exact same. If your goal should is to establish a long term stable and profitable operation which provides you with a decent quality of life , you will most likely not get to that stage without a clear plan.
- You need to get customers – Without enough customers, bluntly put, you cannot make money! Sounds so foolish to say but the true fact is that very few people pay attention to this simple requirement. Before you even begin, you have to do proper market research to ensure you have a product or service that is saleable at a price that will leave enough money after direct and overhead costs are paid to produce a profit. Once you determine that there are potential customers out there, how will you reach them? Without proper marketing, the customers will probably just not even know you have something they want. I am afraid to say that putting a sign up and opening your doors for business is just not enough.
- You need to ensure that all permits and government requirements are in order and there is proper reporting and remittances to government agencies – In most countries this is painstaking and time consuming. In the Philippines, where it is usually difficult to get straight consistent answers from any government official or agency, it will seem sometimes to be an insurmountable obstacle. But I warn you, you are asking for a disaster if you don’t address this to the fullest. Many people do operate without doing so, but all it takes is to piss one person off and the officials will be knocking at your door and you will be facing arrest, deportation and loss of your investment.
- You need to maintain proper bookkeeping and accounting records – Beyond a requirement for proper reporting to government agencies, this is for YOUR benefit. Without a proper understanding of the financials of your business you will not know when to make changes nor what changes to be made. What are you spending your money on? How much does it cost to deliver your product or service? Are there peak revenue generating periods and low revenue generating periods? Will your cash flow allow you to pay your bills on time? Again, like in the planning stages, you have to consider running a business is like a journey. Without paying attention to the landmarks along the way, you just won’t know if and what course corrections need to be made to stay on track.
- You need to deliver your product or service in a way that is, efficient, profitable and maintains customer satisfaction – More will be said about this below but suffice to say there are operational challenges in every type of business. Some of the things you will need to know about are setting up supply chains, management of human resources, customer service, and most important production of your particular product or delivery of the service you are selling.
No knowledge of the specific type of business being attempted
As explained earlier in the sections about making decisions based on emotions, this was a rookie mistake that I made personally when first coming to the Philippines. I had been in one industry all my life and been successful so figured , a business is a business and I should be able to run any business. This is probably true but what I did not think enough about was the last point in the above list, “delivery of my product or service”.
EVERY business is different in this aspect and there is ABSOLUTELY, nothing that will prepare you except experience with the specific industry you plan on getting into. A perfect example of this is opening restaurant and not having the faintest idea how to cook store and serve food, what produce to purchase or any of the hundreds of other small things that are requirements to deliver a good product to your customers.
In conclusion, I have to mention that I changed the heading of this particular mistake from “don’t get into a business without experience” to ” think very hard about getting into business if you have no experience”. I have personal experience with many Expat entrepreneurs here in the Philippines that have been successful even though they lacked experience and I have seen they have usually attained that success because , a) they did their homework, b) they worked hard and were committed to putting in the long hours a small business requires, c) they left their ego at the border and were able to accept constructive feedback from trusted sources( more on this topic in a later chapter), and most important d) had enough money to weather the storms created by their mistakes (again, more on this in a later chapter).
Now, if you read this article and figure you have enough information to get into a small business in the Philippines even though you have this lack of experience, I suggest you put your money back in your pocket, and forget about it because you have not gotten my point. This article is only a very brief overview of my personal opinion intended not to scare people away from the idea but to caution them that it will not be simple or easy!
Number 3 –Learn the culture first
If you are going to get into business in the Philippines, one of your biggest surprises will be the culture of Filipinos and how it affects not only you bottom line but also your patience and serenity. Filipinos just do not think the same way as westerners and if you are going to have employees, you better try to understand how they think and find ways to deal with adapt your business model to take that into account.
Here are some of the things you will have to deal with
- communication – Though most Filipinos speak and understand basic English, very few comprehend it as well as we count on. Invariably you will explain to an employee in clear detail what is expected of them, then find after saying “yes sir” they will walk away and immediately do the opposite. The main problem is for some reason Filipinos just find it difficult to say instead “sorry sir, I do not understand”. Whether it has to do with pride, insecurity when dealing with a foreign or simply that they honestly believe they understand is irrelevant. Get used to hands on training and explaining through action.
- poor customer service – Filipinos just do not get the idea of customer service and that happy customers return, which helps pay their salary. Maybe it is because they have difficulty seeing the “big” picture or they don’t really care if some one else is satisfied. You will be faced with a constant chore of explaining to your Filipino employees that “the customer is always right”
- sensitivity – The ability to accept anything that resembles criticism, regardless of how “softly” and tactfully it is delivered seems non-existent in the Filipino culture. Once you have to point out any shortcoming they usually harbor resentment or complete insecurity. Rule of the day has to be that if you don’t like how some one works, it is time to find a replacement
- inability to think” outside the box” – Filipino are great at following set out directions and following rules and policies but if, or when situations arise that are not in the “rule book”, they seem unable to adapt. Sometimes I believe that this may be related to the previous point in the regards that they are afraid to make a mistake and get reprimanded, or it may simply be that they as a race cannot grasp innovation.
- dispute resolution – When you get a customer that has an issue, most Filipinos will panic or disappear into their”shell”. They simply hate conflict and do not have a clue how to turn an issue into an opportunity.
- planning ahead – a typical Filipino trait is to “live for today” with hardly a concern for tomorrow. This type of thinking just does not lend itself to the business world as for any business to succeed, planning and implementing those plans is absolutely essential.
These are just a few of the things that I have learned about the Filipino culture while trying to do business in this country. At first I myself assumed that an employee here would respond in a similar fashion as those I have had back in Canada, but I was so wrong that I faced not only utter aggravation, and frustration but also alot of lost money. I will say though that just like any problem there are solutions. In this case it involves knowledge of the culture and developing ways to adapt to the realities in place. YOU WILL NOT change the culture of this country and any attempt to do so will cause you more grief than you are probably able to handle.
Number 4 – Know who you are dealing with
Beware ! The Philippines is full of people who have “re-invented” themselves. I have found these people can be broken down into two groups, those that are criminals who are out to deliberately scam unsuspecting people, and those that who do not necessarily have bad intentions but being in a new country where no one knows them have decided it is safe over inflate their past accomplishments. regardless of the intentions of these people these pretenders can be extremely damaging to your financial success, and I myself have been naively conned by both.
When I first arrived here, I was targeted by a man who was pretty slick and presented me some deals that seemed very, very attractive. Though I did not invest financially, I did invest plenty of time and energy in one of his ventures and only found out a month or two in that he was a notorious convicted swindler who had spent 2 decades in Norwegian prison. After this being brought to my attention, I examined my involvement and though I had not originally invested financially, I was bankrolling the operations of the business which were being expertly bled to support a lavish lifestyle as well to wine and dine new marks he was targeting. While trying to extricate myself from involvement with him, the real fun began and I have had to fight off an extortion attempts that still do this day almost three years later I am trying to bring him to justice for.
The other “pretenders” seem to pop up on a weekly basis and are usually in the form of foreigners looking for work who present a long and impressive resume, and claim they have vast skills that will bring success to your business. The most notable example of these types that I have run into was a spinmaster who claimed he was ex special forces, who had been treated poorly by the American military, but had then gone on to run a multinational in Kuwait, a high end resort and dive operation in Thailand, and on and on and on. Regrettably he was now stuck here in Dumaguete City, without cash or a job. I hired him and soon realized that his supposed skills were non-existent. I have since seen many of these types and really the big red flag should be that why is a middle aged man who has accomplished so much and has so many skills, broke and penniless in a foreign country. Sadly, most were losers in their own countries.
The point of this though is that it is my responsibility to do my own due diligence on the people I get involved with. It is actually very simple in this internet age and a quick google search is an easy first step that can either put your mind at ease or raise red flags and sound alarm bells. Had I done this on either of my two examples, I would have saved myself money and a pile of aggravation.
Number 5– Don’t over commit your resources or your funds
Again this is another huge mistake I made myself, even though after 30 years in the business world, I should have known better. No matter how well a businessman prepares for a start-up, it NEVER goes exactly according to plan. There is a long list of potential hiccups from the minor such as staffing problems to the major including a target market for your goods or service, that just did not exist to the degree you expected. When these roadblocks pop up, the business needs to adapt and for that it will usually require both more money as well as more hard work and time put in. If you do not have the cash to weather the storm or the time to devote to solving the issues, the business will most likely fail. Many business with loads of potential failed miserably just because they did not have adequate resources to weather the storms all young businesses will face. Another trap to avoid is mistaking cash flow for profitability. Often, due to undercapitalization, business owners will discount their product just to keep the cash flow churning and the doors open, but that is always only a short term solution. Regardless of how good the cash flow is, if the business is not making money on its day to day operations, it will catch up to them and the business will fail.
Personally, I have experienced success beyond my wildest dreams here in The Philippines but that success has come on the heels of my greatest failure in business. I made huge mistakes in my first business endeavors here and paid a high price in terms of financial loss and emotional turmoil , but with a lot of humility to admit my mistakes I was able to learn from them and get right back on horse to try again a little wiser. I truly hope that others can avoid the mistakes I, and many others have made and be able to get it right the first time.
As a parting note, I would like to leave potential businessmen with one small piece of advice. Filipinos are terrible in two areas, Customer Service and Marketing. Do these things right and you will not have any real competition, and without competition, you will have to screw up real bad for your business not to succeed.