Thursday, January 31, 2008

Finding a business location in the Philippines

My girlfriend has been talking to me about a group of collegue guys who have got together to form a business. The 5 of them have together raised $2,000 each, thats $10,000 to develop food stalls in the Philippines. Their plan is to franchise the idea.

Of course I wish them the best. Its great to see young people motivated to achieve from such a young age. Its great that they have found a support base among friends at such a young age. That is of course a good way to start a company, and a good time. It seems a sensible strategy for several reasons:
1. They can share the responsibilities between 5 people
2. They can work or manage the business to make extra money if they need it
3. They can share business skills

The only problem I see is that the tendency for them to rely on 'friends' as a basis for setting up a business with limited capital might mean they lack coverage in certain skills, particularly if they are all studying the same subjects at university. The reason I pose this concern is because they have decided to move their reataurant from one part of a shopping mall to another part. They assumed that because other businesses were making money, so they should make money as well. Being so young, they will lack experience, but I would suggest the reason they are not making sales is not the location, but their value proposition. They are selling a meat & vegetable wrap for take away. I dont think people come to a mall for take-out food, they want to sit down, and not back at the office. They want to escape the office for 30-60mins, and even if they are not coming from an office, they are not going to eat a wrap standing up. The implication is that they have not well-located their business. They really need to be in the part of the food court where there are tables to sit down. Otherwise they need a shop rather than a stall. Apparently they were paying P22,000/month in the low traffic area, but now they are paying P30,000/month. Apparently they are earning P90,000/month, so they are not doing too bad.

Very easy business to set up and its a great area. Eating out in the Philippines for singles is actually only about 30% more expensive than eating at home if you are buying food from a shopping mall. Why? The shopping mall model is very lucrative because everyone wants to go to an air conditioned place. Surprising there is no Westfield here? Maybe there is alot of corruption? But I think the Chinese managers of these businesses is terrible. They are so anti-intellectual in implementation. Which is precisely I see as the problem for these students, though being so young and raised in Asia, you would tend to expect a lack of critical thinking skills. You always want a critical thinker in your business team. Such under-appreciated people!
Andrew Sheldon

Monday, January 14, 2008

First thoughts on creating a business

The anti-conceptualists out there will start a business by finding a product and thinking I think there will be an opportunity for that. They will get a graphic artist to design a logo, set up a website, promote the site, and wonder why they have trouble selling, or wonder why they need to work so far for meagre sales. In their defence, can't they make sales by just copying everyone else.
This I have come to learn is the Asian approach to business. Business creation is about copying, building market share is about duplicating what has already been done. I see it all over Asia. That is why the western world is the creative centre of the globe and Asia is where its duplicated at low cost. This is done in a great many areas. For example:
1. Software code is copied and made the basis of a new product
2. Website stylings, products & services are copied and made the basis for a competitor. The difference - its cheaper and easier to copy than it is to develop original content.

You can't even sue the company because the company is an empty shell, the office is closed upon being served, and a new office is established elsewhere. Its so easy to avoid the legal system, to avoid being served with court documents. And at the end of the day, a great many companies just settle out of court.

Well thats one way of doing business I guess....but it makes you reflect on what is the function of business. The way you run your business will reflect your values, and if there is a disparity between the way you run your business and the values you espouse, then people will question your credibility. Of course many people are very good at managing perceptions. In Asia they have been doing it for centuries. Facts are illusive, people care more about perceptions. This was the basis of the 'village community' that has long since disappeared from western countries, and it will eventually disappear from Asian urban cities as well, as it is in Tokyo. Japanese business, before it became a create market place, used to copy western technology all the time. Note that now Japanese companies are very careful about the intellectual property they adopt overseas because they dont want 'their core values' copied by Chinese companies, as they were able to copy western technology. The west has not learned.

I guess there will come a time when consumers will be more critical thinkers and more discerning about the quality of service or product they buy. No doubt they are taking precautions today because of online fraud, but with increasingly commerce being done with foreign countries to secure cheaper services, might we expect this to occur.

You dont need to be original to create a business today. There are more resources online today than there was been anytime in the past to help you to set up a business, and a great deal of it is free, whether free advice from industry experts, online forums by enthusiasts or open source programs by online communities, there is a great many tools you can use out there for free.

A great many successful businesses just do something simple very well. In fact often its the orginator of a concept that doesnt make the money. The reason is that the originator spends their time trying to convince the market, its the developer of added value that finally gets the commercial benefits, along with copiers who expand with the market.

Creating a business

Creating a business can be one of the simplest things you can do, or one of the hardest. Determining the level of success you want will however require you to make some hard choices. Among the greatest follies I see people making when they set up a business:
1. Preparation: Diminishing the importance of developing a business plan or a business due diligence study. I find there are people whom are anti-conceptual. They look at university graduates and think they are 'too intellectual', and think life is about action. I would suggest Asian cultures such as the Chinese tend to act like this. eg. The way Chinese invest in businesses, its like throwing darts in the dark. I think its more about relationships, egos and deal making than it is about making money.
2. Disciplined: Not treating the business like a business - treating it more like an indulgence. They say that you should find your passion and turn it into a job. The problem is that most passions still require you to perform accounting, administrative and other tasks.
3. Contingency Planning: Failing to conserve their capital - living like their is no tomorrow - thinking they will make a profit in the first month. Its not even just about preparing for the worst, as if the worst depends only on you, it can also be a case of failing to plan for success. Cashflow problems can result because of success as much as failure, if only because customers decide to take a long time to pay your invoices.