Top Ten at Fifty

Every now and then it makes sense to step back and review things. It is hard to believe that the Small Business File has covered more than fifty articles in the past couple of years. With this in mind, perhaps it is time to look back at ten of the more important or useful articles from the Small Business File. This is not a count-down list. In other words, I have not bothered to rank any of the articles and their corresponding ideas as higher or of more importance than any of the others. I just thought it may be useful to pick out ten key topics every small business owner should keep in mind.

1. Location. As the old saying in real estate goes, location, location, location. Getting a great deal on land doesn’t always make a whole lot of sense. Many customers, both foreign and local alike, prefer to be patrons of establishments that are not too far out of the way. If your location isn’t on a jeepney route, you probably don’t have a great location for most types of small business. This is especially true for businesses in the food and beverage industry. If people have to go off the beaten path to get to your place, you probably won’t be able to develop a lot of repeat customers.

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2. Starting out small. Too many new entrepreneurs fail to realize that getting started is only half the battle. The first year or two of a small businesses existence are generally very tough going. By starting out small, an entrepreneur makes sure they have sufficient capital to keep their fledgling enterprise going and always has the cash on hand. This becomes very important if you need to make a targeted investment soon after opening but when still haven’t developed consistent sales to cover the costs of the investment. Spend too much of your nest-egg up front, and you probably won’t have enough flexibility when you need it most.

3. Cash flow. This is the lifeblood of a business. Being able to manage cash coming in and going out of your business is a critical factor often overlooked by many small business owners. Generating sales is not the same as having positive cash-flow! You can sell all the product you want, but if you don’t collect payment immediately, or have a plan for dealing with deferred payments, then you may find out rather quickly that your business does not have enough cash on hand to stay open on a daily basis.

4. Inventory. Having an inventory system that is appropriate for your small business can make a big difference between you and your competitors. We have all encountered the “Sorry, no stock” refrain as consumers in the Philippines. Having a solid inventory management system can help limit the number of times you need to resort to using this same refrain yourself! If your customers can count on you having inventory most of the time, they are likely to call on you first when they need a particular product or service from your industry or niche.

5. Learning curves. Learning and appreciating how business practices work in the Philippines is critical to your small businesses survival. Learn to adapt to your local business environment and watch your profits grow. Dig in your heels and insist on doing things like ‘back home’ and watch your sales and business fall off a cliff. The key is learning to do things better over time. It’s not always easy to break free from one’s predisposed notions and beliefs. But this is the Philippines, so why not learn to do things the Filipino way? There are many well-run local businesses. Make some friends. Learn from them how you can become successful and navigate many of the more troublesome aspects of doing business in the Philippines.

6. Skills development – both staff and self. People really are the backbone of every small business. Sure, some products sell themselves, but in most businesses, the key to prolonged success is in having the best people you can afford working at those tasks best suited to their skill sets. Investing in employee training and development often results in increased productivity. Smart business owners recognize the importance of continuous learning, for their staff and themselves. Make sure you find time to upgrade your own skills and those of your staff so you can be at the forefront when changes occur in your industry.

7. Choosing the right niche & setting the right price. Not all products are created equal. The best way to stay in business is to find ways to differentiate your own small business from all of the others. This means finding a niche that you can exploit and are better at than your competitors and some of the bigger players in the market. Once you have established a clear niche for your business you will need to set a price for your product or service. For most small businesses, this means you will be a price taker — there will already be generally accepted prices for products and services similar to what you are offering. Make sure your prices are in line with what your competitors are charging. You can afford to be at the high end of the pricing band only if you offer goods and services that the public perceive to be worth more than what other small businesses are offering.

8. Multiple currencies. Try to limit problems associated with fluctuations in the exchange rate by having savings in both Pesos and a foreign currency. Try to avoid having all of your savings tied up only in Pesos. Keep your operating funds in Pesos, but keep the bulk of your nest-egg in a harder, foreign currency. This is very important as a hedge against the potential risks associated with currency appreciation and depreciation.

9. Core business & frugal experimentation. Don’t spread yourself too thin. Stick to the main business you have developed and go about diversifying through frugal experimentation. Yes, by all means divest yourself of any businesses that are in industries that are clearly in decline and heading towards extinction. But don’t try and jump into new businesses just because opportunities present themselves. Often times you will neglect your current business to the point where you cause irreparable harm. You don’t want to kill the goose that lays the golden egg.

10. Overcoming newness & building your reputation. For many, operating a small business in the Philippines is much more difficult than doing so in other countries. One of the bigger challenges is overcoming the newness associated with your particular product or service, especially if it is new to the Philippines. People all over the world get used to doing business with those they are most comfortable with. If you are offering something new, it can take a considerable amount of time to build up your business and develop the kind of brand recognition it takes to grow your business over time. Be prepared to invest months and possibly years in preparing and educating your market and your potential customers. Be respectful and humble along the way — building a reputation takes a long time. Destroying your reputation and that of your small business can be done in seconds.

I’d like to end by thanking you all for reading the Small Business File over the past couple of years. The hundreds of comments and exchanges that have followed the articles have provided a tremendous amount of additional perspective on many different topics and issues. Thank you to all of you who have provided feedback and offered your own experiences on different topics and issues related to small business management in the Philippines.

Moving forward, I regret that I will have to scale back the amount of articles I will be writing for LiP. I still plan on offering Small Business File, F&B Insider, and They Did It articles in the future, but they will come in on a less regular schedule than in the past. Thanks again, and see you all soon in the future!

Power Plays

I don’t know about the rest of the country, but here in Caraga we’ve been dealing with an alarming increase in power outages. Sure, the Philippines is a developing country and power outages are to be expected from time to time, but lately, they have been occurring far too frequently and they are proving to be very damaging to the local economy.

The frequency of power outages has gotten so bad that we have had to buy a generator for our small business. A generator was simply not needed for the past 8 years. But now things are different. In the past, it was easy to deal with power outages that happened for perhaps 4 hours and only once in a 2-3 week period. But every other day we are experiencing power outages in Caraga that last around 5-7 hours. And this is right in the main commercial city of the region. I suspect further out from the city, the frequency of the outages is even worse and longer in duration.

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Having to buy a generator is a real thorny issue for many small businesses. For some small businesses, buying a generator isn’t a major investment, but for others it is simply not possible. And yet power outages can cripple the potential for sales opportunities in many firms, and this makes investing in a generator a very important consideration. But it is also frustrating because regular power supply is something the government should be able to provide on a consistent basis. If maintaining regular power supply was a national priority, a generator would be a luxury item. Small businesses would be free to budget for other expenses like hiring more employees, expanding their operations, etc.

There are many interesting theories as to why we are experiencing energy problems in Mindanao, but that really is beside the point. For many retailers, ‘why’ doesn’t really matter. The real issue is ‘ for how long’? For many of these small business owners, the worry is whether they can survive until the power supply stabilizes once again. Lost sales due to a lack of power can mean the difference in paying wages and rent for many firms who operate on tight budgets.

Usually I like to offer some positive points related to how a small business owner can overcome different challenges, but this is one challenge where there are very few things a person can do, if anything. If one can afford to buy a generator, perhaps this is the only feasible course of action. If you do buy one for your small business, please remember to have a qualified electrician install the unit. Make sure you do not overload your generator. And please, remember to keep your generator and any fuel for it away in an area that is safe and not a danger to passersby.

Good luck to all small business owners adversely affected by the current power outages. And if you are a consumer, please remember that most small business owners are trying the best they can, and when there are power outages, patience is much appreciated. Please feel free to share if any of you have similar problems in other parts of the Philippines, or if you have suggestions on how small business owners can grapple with the current power supply problems.

Time Out!

Every now and then we need to make time for ourselves. We all need time to take a step back from our businesses and go on a much deserved vacation. Personally, I try and take a vacation at least once every year. And by vacation I mean at least a week away from business. A one week mental-break from business can do wonders for you. A vacation can literally recharge a person, and can help you spot areas for improvement in our own business upon return. What was easily overlooked before is sometimes brought into sharper focus after getting back from a vacation or extended break away from the business.

Everyone will have their own idea of what makes a good vacation. The important thing from a small business standpoint is to get away. It doesn’t really matter if that means going away to the beach for a week, spending a week shopping in Hong Kong, or even going off to learn sky-diving. The key is doing something other than thinking about your own small business. Taking a mental break allows one to recharge and regain focus, but it can also be helpful for another reason. Being away from your business may also give you the opportunity to see or learn something new that can be incorporated into your small business operations at some point in the future.

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Now I’m sure some of you are saying, come on, Martin, that sounds great, but I don’t have the time or perhaps even the money to take a week off. In response I’d say that simply isn’t true. If you make your one week vacation a priority, it simply becomes another line-item in your annual budget for your business. If you look at it as a business expense, you find ways to make the budget work. You’re not taking a vacation every other week. Even if you really must be present at your business at most times, you’re taking one vacation per year in this scenario. Make time and a budget for it, and don’t cheat yourself from it.

What are some tips to make this more operational? First, try and book a week at or around the same time every year. If you know there is a slow period for your business, perhaps that is the best time to get away.If you commit far enough in advance, you can really make adequate preparations and go on your vacation.

Second, take advantage of cheap airfares if you work on a tight budget. Most local airlines offer discounted airfares if you book early enough. Yes, your ticket will probably be locked in and ‘unchangeable’, but that’s ok because this is the vacation that you are forcing yourself to take anyways.

Third, don’t always think that going abroad is more expensive than traveling locally. Some of you may be surprised to know that even Hong Kong can be cheap! Yes, you heard me right! As long as you stay in guesthouses instead of hotels, you can spend nights in Hong Kong for the same price as you would pay in most cities in the Philippines. And eating in food courts and buying a tourist subway card can be a bargain too.

Fourth, remember to keep your eyes open! The point of a vacation is to take a break from your day-to-day business routine, but that does not mean you shouldn’t keep your eyes open and see if you can’t spot business ideas or practices that you think may be easily incorporated into your current business on a trial basis. Sometimes even simple customer service mannerisms or techniques can be spotted and easily transported back to your own business. In many cases, these little ideas cost little or no money to implement, they just weren’t considered in your operations before.

Fifth, and lastly, make sure you sign up for at least a minimal amount of emergency medical insurance when you travel abroad. Many airlines offer such services, and some credit cards too if you purchase your tickets with their credit card. In many cases you will have to provide some money up front at a hospital if you are unfortunate and have a medical emergency, but the high costs of medical care abroad can be devastating and ruin any trip you may take. Even a little insurance can make a big difference in these cases.

So please make time for yourself. Make plans to go out and book a vacation of your own! Take a mental break from your business and come back armed with new vigor and perhaps a new business idea to try out.

Uncommon Advertising?

A few articles back a regular commenter, Dennis, suggested it may be useful to offer some suggestions on non-traditional advertising possibilities for small businesses in the Philippines. This article will offer one such suggestion. There are a number of avenues that might be considered, so hopefully this first suggestion will serve as a means of opening up the debate on how small businesses in the Philippines can think strategically about using their typically small advertising budgets most effectively.

Being a small business owner myself, I have encountered the common headache of how to go about advertising when the traditional mediums are either too expensive or not particularly well-targeted. To be completely frank, I have found it hard to come up with a coherent strategy that gets the intended message out, to the right audience, at an acceptable price. I have talked to a number of other small business owners over the years and they have come to similar conclusions.

Ads on a Jeepney
Ads on a Jeepney

I think the problem I have outlined is big, but not entirely daunting. There are a number of good tips and alternative strategies small business owners might want to explore. For example, guerrilla marketing tactics might be something to consider. The term was coined and defined by Jay Conrad Levinson in his 1984 book Guerrilla Marketing. The term has since entered the popular vocabulary and is referenced in virtually all modern marketing textbooks. The goal is to come up with unconventional tactics that result in unique, engaging concepts that grab hold of consumers.

Billboards are a standard advertising medium, but they are generally expensive for small business owners in the Philippines. But how about putting a guerrilla marketing twist on this form of advertising? How about something unconventional, but affordable and targeted? A possible solution — advertising ‘painted’ on jeepney’s. This isn’t an entirely new concept. Most jeepney’s are already plastered with slogans and graphics and stickers. But partnering with a jeepney operator might prove beneficial to both the operator and small business owner. For the same price one pays for a month or two of radio/tv advertising, one could have a jeepney custom painted with a message directly related to the small business looking for targeted mobile advertising. The jeepney owner only has to drive the route he is assigned, and for his trouble, he collects a small weekly sum directly from the small business owner.

The beauty of this concept is that the small business owner can target customers very effectively. If most of his/her customers drive, they will likely ‘see’ the jeepney at least a few times per week on the road and while stuck  in traffic. All the small business owner has to do is choose a jeepney operator that has a route that follows the main arteries of the area targetted. To make sure the advertising remains in tact, have the jeepney operator personally pick up his weekly/monthly fee with the jeep and in person. The small business owner can check to make sure no new stickers have been added to cover up the advertising. As long as the operator knows his weekly/monthly fee depends on the jeepney being clear of other stickers or designs, he’ll surely refrain from clouding the message the small business owner has painted on the body of the jeep.

Some things need to be considered with this form of uncommon advertising. First, the small business owner may want to target jeepney drivers who are more courteous in their driving than others. I can hear many of you groaning right now — some may even argue there is no such thing as a courteous jeepney driver. I think there are some drivers that are worse than others. The key in this situation may be finding the least aggressive driver. You don’t want a jeepney driver who cuts everyone off, especially one of your potential customers who then is reminded it was small business X that had something to so with being cut off. How can you find a decent jeepney driver? Ask a female office worker who rides a jeep which one she prefers if given the choice. I guarantee female commuters remember which jeep drivers are more courteous than others.

Another point to consider is how often you will pay the driver his advertising fee. Once per week is probably best — you know for sure the jeep is on the road and working if they have to collect on a weekly basis. No vehicle, no fee. You could opt to have a monthly pick-up, but for the amount of time it takes to visually inspect the jeep, I think a weekly meeting is not too difficult.

And finally, be as selective as possible when choosing a jeepney operator. Be very certain that the route of the jeepney is the one you think will reach your target market best. Furthermore, opt for a small multi-cab operator whenever possible — the amount of painting necessary is kept to a minimum, and this will make your advertising investment even smaller than a larger jeep but will still be on the road just the same.

I hope this article helps you get thinking about new and creative advertising strategies for your small business. Please feel free to offer some of your insights and suggestions on other uncommon advertising opportunities that may be particularly well-suited to small business owners in the Philippines.

They Did It: Boardwalk Cloud 9 Surf Resort

‘They Did It’ is a special column that appears on occasion in the Small Business File. Each week the Small Business File addresses some interesting topic related to entrepreneurship or small business management in the Philippines. ‘They Did It’ columns showcase businesses developed by foreigners and OFW’s. The goal is to provide insights into how different entrepreneurs have found success here in the Philippines, and provide encouragement to others by demonstrating that running a small business in the Philippines is not only possible, but can be rewarding as well!

This week ‘They Did It’ examines the efforts of an Australian entrepreneur, David Motbey, and his wife, Rose, who have a long-established resort in Cloud 9 on Siargao island. David first fell in love with the beauty of Siargao some 17 years ago. Back then, David was traveling the Philippines looking for great surfing locations around the archipelago. When he visited Siargao he knew there was something special about the place. The love he had for the waves and laid-back lifestyle of Siargao prompted him to buy some land in the area that is now called Cloud 9, and set up a surf resort called Cloud 9 Surf Resort. Over the years David has encountered the good and bad associated with running a beach resort. In the past couple of years, the entire resort has been upgraded by David and Rose, and they are the proud owners of the Boardwalk Cloud 9 Surf Resort.

Name: David and Rose Motbey Cloud Nine Surf Resort

From: Australia

Residence: Siargao Island

Business Name: Boardwalk Cloud 9 Surf Resort

Business description: Boardwalk Cloud 9 Beach Resort is a long-established and recently renovated resort with the best possible location, right in the heart of Cloud 9 Beach, Siargao Island. The resort is comprised of 16 well-appointed rooms with complete amenities, and a full-service restaurant.

Q: Can you give our readers here at LiP’s Small Business File some background history about how and why you started up your resort in the Philippines?

Cloud Nine PierA: I first came to the Philippines in 1981. At that time, I was interested in the adventure of traveling to far-off places in search of great surf and good times. The Philippines offers a bit of both, so it seemed like a great place to set up a resort. I came back in 1985 and have been coming back every year since then. When we first opened up, we had native style cottages on the beach, with nippa roofs. Everything looked great, but when rainy season came, we found that nippa wasn’t exactly the greatest material for keeping out the water. When we did our recent renovations, we went ahead and built with cement and proper roofing materials. Now the resort is much more comfortable and in-tune with what more affluent Filipino vacationers are interested in. The new amenities, combined with the best location possible on Cloud 9 makes our resort a great choice for both foreign and local tourists alike.

Q: What aspects of running this type of business do you like the best? Least?

A: What I like most about running a resort is meeting people from all over the world. Siargao is one of the best surf locations in all of SE Asia, so naturally we tend to attract surfers from all over the globe. I really enjoy the fact that people can be from very different places but still share similar interests like great surf, good company, and wonderful fresh food and cold drinks on a tropical island far from the rat-race of the cities. What I like least is dealing with seemingly endless and contradictory changes in policies and plans when it comes to tourism development on the island.

Q: What are your keys to success?Cloud Nine Sculpture

A: I believe the keys to our business success can be attributed to our outstanding location, combined with a really competitive price. There are many very expensive resorts on Siargao that really only cater to a very small number of annual tourists. At the other end of the spectrum, there are many extremely basic resorts that charge a lot more than they should based on the value they are offering to their guests. At Boardwalk Cloud 9 Surf Resort, we believe we offer the best price for exceptional value in a resort on Siargao, and if that isn’t good enough, we have the best location in all of Cloud 9.

Q: What are the biggest challenges in running this type of business?

A: Where do I begin? People need to realize that running a resort on Siargao takes an awful lot of energy and drive to make it work. In the seventeen years we have been in business, the biggest problems have actually come from local officials and from nearby residents. I have had an increasing number of headaches associated with new fees, taxes, regulations, etc. Furthermore the attitude of local officials has changed for the worse when it comes to investment promotion. When Siargao was not on the map, the local officials were very sympathetic towards the foreign investors who were trying to make Siargao a viable tourism destination. But Siargao still suffers from seasonality, and Siargao officials compute annual tax figures based on the peak periods of business, conveniently forgetting that many months are very lean. Furthermore, local residents are not really benefiting from tourism like they were promised by local officials. This causes many local residents to get angry, and naturally, they blame the foreign investors for all of their problems. Many residents feel the need to blame the investors, because they don’t have contact with officials, who only come around when it is election time. Because of their visibility, resort owners bear the brunt of the local discontent. This in turn has a knock-on effect — it is hard to get motivated, honest employees from the local community. Either they are lacking in training, or they have a poisoned attitude before they begin work.

Naked Island, SiargaoQ: What are your future plans for the business?

A: We are in the final stages of launching a website to help market our resort better and to a wider audience. We have a faithful following of repeat customers, but one of the biggest challenges seems to get better connected to potential visitors before they get to the island. Many guests have booked online at other resorts here on Siargao, only to find that they wish they had a better selection before coming. It can put a real damper on their vacation when they book online, only to find they could have stayed at a different place like Boardwalk Cloud 9 Surf Resort, for a lower price, and could have had a better room and experience as well. We’re also hoping to start marketing our resort in larger tourist centers in the Philippines, like Cebu.

I would like to thank David for providing us with some insights into what it is like to run a long-standing and successful resort here in the Philippines. Clearly there are ups and downs associated with running a resort business in the Philippines. Thos contemplating opening a resort might want to consider some of the points David has shared today. And finally, I would like to say a special thank you to Mr. Chris Yong for sharing his photos of Boardwalk Cloud 9 Surf Resort, taken this past May, 2009.