Sometimes I get the urge to write about something and I get right into cranking out words without knowing exactly where I’m going to use them. The post then sits in my “draft” folder, sometimes for a long time. Recently my friend and fellow author here on LIP wrote a great article full of advice on starting and running a business here in the Philippines by “remote control”.
Often this is a dream and a labor of love of many Filipina-Foreigner couples, “Starting a Little Business That The Family Can Earn A Living From.”
Naturally I get plenty inquiries from readers regarding starting a business here in the Philippines. Countless more search anonymously via Google and other search engines and wind up here for answers to their questions.
Some are looking for a business they can start themselves, or wife their or girl friend to finance their day-to-day living here in the Philippines.
Others are on the search for a business they can set up their wife’s family in so that they can be independent and self-supporting.
How Does This Idea Usually Work Out?
Frankly, almost invariably, it turns out very badly. It just doesn’t work. My heartfelt advice after watching this continual soap opera unfold for more than 10 years is this:
- Figure out how much net profit you think the family can possible derives for this “dream’ business.
- Go in your own bank account, take out that much every month and transfer/wire that amount to them.
Plain, simple, forthright and budgetable. Over time this is by FAR the cheapest way for you to go.
Now I know that is not the advice many of you wanted to hear, but trust me, it’s the reality of the situation. Giving family members money to start a business and expecting people with little or no business acumen or training is akin to buying an old boat site unseen and expecting someone who is not a boat-savvy person to manage a restoration project. Many have called a boat a ‘hole in the water into which you pour money”. One humorous but often true definition of “boat” is “Break Out Another Thousand”.
Believe me, a small, family owned business like a sari-sari store, Internet café, tricycle service, taxi, Jeepney or some such is exactly like a long-distance boar rebuild while wearing a blindfold. “Break Out Another Thousand”.
The reasons are many and varied and this article is too long already, so I won’t go into many of the causes right now. I’m going to cover just two very common challenges every business faces, here on in the US, and how either or both of these problems will almost certainly “sink your boat”.
Two Common Hurdles Most Of These Business Must Clear
Conserving The Seed Corn:
Some of you will understand exactly what I am talking about here. Others may be a little unsure on the concept, especially since the business of raising corn for profit is way, way different than the ‘grass roots” methods which used to be common in back yards in the USA.
In general, you get started making money with corn by buying or leasing a suitable piece of ground, and buying (or borrowing) enough seed corn to plant in the ground at the start of the growing season.
If you work hard, follow all the practices of good farming technique and have good luck with the weather you will raise a very nice crop of corn which you can then sell or trade for something of profit.
In future growing seasons, just lather, rinse and repeat and repeat , and your farming income will continue so long as there is decent enough weather and family members willing to do the work.
With one important proviso. Seed Corn.
Every year when the harvest comes in, you have to first pay your existing debts, you have to do something to insure there is enough food for the family until the next year’s harvest comes in, and you absolutely have to save enough corn to use as the seeds for next years crops. Anything left over is profit.
You can fail to pay some of your debt … trading time for interest expense. You can let the family go a little hungry if need be and perhaps borrow money against next years crop in order to give them something to eat, but if you fail to save seed corn for next year’s planting … well you might as well blow all your remaining money at the casino or in buying lottery tickets, because without seed corn to start over again in the spring, you just are not going to stay in business. There will be no income next year.
Now many of you are wondering why I have gone off on such a ramble about raising corn. You’re thinking of helping Tita Tillie open a little sari-sari (variety) store. Tillie won’t be raising corn, so what am I talking about?
Simple. Any business, be it raising crops or selling cigarettes, beer and laundry soap, or baking cup cakes or cooking roast pig requires “seed corn” to replenish stock as it is sold, so that you can use the money to buy more supplies to in turn sell more supplies and keep things going.
Time and time again I have watched this vicious cycle issue come up in ventures my own family have been involved in, and in all sorts of ventures I have watched other foreigners get involved with. (and been begged for help with, when all else fails), *sigh*.
- Money gets invested to open the business.
- Sales come and money comes in.
- Money gets spent, and/or the children come home from school, hungry, and get fed snacks from the initially huge supply of candies and chips that initially line the store’s shelves, and everything is rosy. Rosy until the shelves are empty, and there is not enough money to buy replacement stock.
- When this happens, well there is nowhere to go but down.
Or, go deeper into debt (which is also a sure route to the end of the business, just takes longer and Is more painful).
You have to think this issue through in advance and figure out a way to proven tit happening before you invest even a single Pesos in getting the business started.
If you look at the advertisement I illustrated this article with, you’ll see that in the past, this lack of seed corn has even been a major problem at times in our good old, big and powerful USA. There is no doubt at all that it will overcome Tita Tillie’s sari-sari store just as easily unless you figure out how to prevent it from the git-go.
There is no good and easy to implement solution that I know of. Even if “your” family is scrupulous about never spending money on unnecessary trinkets and junk food, “need” in the Philippines always has a way of expanding to slight more than the money available.
If a child gets critically ill, are you going to say, “No, let him suffer, we have to conserve the business’s capital”?
If someone dies are you going to say, “hell no, don’t have a wake and a funeral and a burial”?
If so you are a stronger man or woman then me.
Suddenly, with no bad actions or intentions on anyone’s part, there a huge hole in your “boat”.
There’s one more almost universal problem you are going to face as well:
Huh? How’s that again? What the heck is “Utang”, Dave?
Well I’ll tell you, very simply. Unsecured credit.
No matter what you are selling, from the day you first open your doors for sales, you are going to be plagued by “Wimpies”.
You know, the character in Popeye you is always looking for a hamburger on credit for which he will pay come Tuesday?
Or, more commonly here, on “Sweldo” (pay) Day.
Almost every business in the Philippines from large corporations to the tiniest neighborhood store faces this problem.
And there are plenty of people I have observed who make a kind of game out of finding out which neighborhood businesses are tight with their credit, and who will walk several blocks to another business who will let them buy food to cook dinner with, or let them while away the hours on the Internet “on credit”.
One reason for this is embedded deep in Philippines culture. One should never embarrass another person, to cause them to lose “hiya’ or “face”. Filipinos have a huge difficulty with saying “NO”.
The little sari-sari store behind my house where I have been a “regular” or “suki” for going on 8 years now is a good example.
They were having some “utang” problems.
One day I saw a rather large sign near the little “buying” window at the from of the store.
The sign had several dense lines of Tagalog, which started with the phrase, “Paki usap”, generally used as an expression whenever you are “making nice-nice” and asking a big favor. The sentences went on and on until finally they ended with the words “hindi utang”. Literally “No Credit”.
Below all those words was a line placed there for the benefit of English speakers like me:
There’s no shame in saying no credit to a foreigner, but to a fellow Filipino? Ah, well, that’s a much more delicate subject that will never be as direct as saying “NO”.
Saying No Credit Is Our Policy Isn’t Easy, But Enforcing It Is Even Harder
My friend Loida, the lady who runs that store took the time to explain some of the day-to-day difficulties with the “No Credit” policy.
There’s a neighborhood lady both Loida and I know who has a particularly difficult row to hoe. This lady has about 7 children, several of whom are quite unhealthy. She also has a husband (who helped make all those babies) and is frequently absent, sometimes for weeks at a time. He doesn’t work, has no intention of working, and when he does come home he takes all the money in the house to go and buy cheap booze and drinks .. enough to drink himself into a stupor if he can manage it.
If the mother tries to keep back some money for the children’s food, the husband will literally beat the crap out of her.
So let me try the test Loida (and your own business-operating family) will face every day.
If that lady showed up at the window of your store, with a fresh black eye, a crying, sick and hungry baby on her arm and said “Ate, (older sister) I am so ashamed to ask but my children haven’t eaten since yesterday. May I please a have a cup of rice and a small can of corned beef on utang so I can feed them tonight. I had the money to pay you but my husband beat me and took the money with him”.
Do you think Loida, with children of her own and shelves full of food can say “NO”?
It Ain’t Paradise Here, My Friends
This is a little of the reality of “It’s more fun in the Philippines.” Are you SURE you think putting up a little business here is tailor made solution for you and your Filipino family?
You know many times people have lashed out at me saying I am some kind of “salesman” for living in the Philippines, and that I look at my world here through rose colored glasses. Do you think that’s true?