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.
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!