“Best of all, our economy is growing, thereby opening doors for the 10 of the best business investment ideas for 2016.”
By Roel Manarang
The conditions in the Philippines are ideal for business investments. For one, we have a rich resource of talented people. Our wage rates give us a comparative advantage over other countries. Investments are pouring in to improve communications.
Moreover, although traffic and transportation issues continue to hound the country, there are other strong growth areas that start to flourish after years of being largely ignored. Best of all, our economy is growing, thereby opening doors for the 10 of the best business investment ideas for 2016.
1. Real Estate Company
In 2014, Cuervo Far East released its study on the property values in the west growth area in Alabang, Muntinlupa. The study cited rapid development and improved facilities and infrastructure as the key factors in the appreciation of property prices.
However, I can add the worsening traffic condition in Makati City, Taguig City, and EDSA as a key factor in the driving activity toward the south.
Back in 2009, real estate prices in Alabang subdivisions averaged Php 14,000 per square meter, except those in plush Ayala Alabang, which were pegged at Php 30,000 per square meter. True to the forecast of the study, the properties in Alabang have soared toward Php 65,000 per square meter.
A strong demand also exists despite the steep prices. Brokers have no problem matching potential buyers and sellers. From what I’ve seen so far, real estate remains a seller’s market. Property owners can dictate prices because the upside is up to Php 100,000 per square meter by 2019.
A real estate company with a focus toward the south would be a great business investment in the Philippines. I see development moving south in the next few years. The Sta. Rosa Laguna area is slowly coming up; the development in both the commercial and residential sectors is ongoing.
If they can improve the communication facilities there, and if the capacity of the schools in the area can be accelerated, increased investment can be attracted. Not all residential areas have Internet connectivity.
2. Business Process Outsourcing (BPO)
The new millennium ushered in the New Economy. The evolution of digital technology, the popularity of social media, global warming, and world events that tore down barriers and changed the course of history have made business unpredictable and volatile.
Business development strategies veer away from rigid structures and head toward flexible solutions. The challenge is to find a system that streamlines cost without compromising revenue. The best option is outsourcing, and the best destination is the Philippines.
We’ve been in a tight battle with India over the global market share in BPO, but the tide has shifted in favor of the Philippines. A key indicator here is commercial property development. According to property management consultant CBRE, 600,000 square meters of commercial property has been committed to back office outsourcing. The astonishing part is that back office only accounts for 30% of BPO receipts!
The BPO industry in the Philippines is estimated to grow at an average of 15% per annum over the next five years.
BPO can be capital intensive, and the bulk of the industry’s $ 15.5 billion receipts comes from the big companies, such as Convergys, Accenture, JP Morgan, 24/7 Philippines, and Telephilippines Inc. As a start-up, you may not have the scale to comply with lease requirements.
I suggest starting out with an off-site or home-based business model. Your initial objective should be to sign up clients for various services. Don’t be afraid of adopting a home-based model because many companies worldwide have been incorporating telecommuters into their workforce.
As the outsourcer, build up a network of talents for in-demand jobs, which include content marketing, website design, virtual assistance, blogging, and telemarketing.
Once your portfolio has grown, you will have the option to lease a facility and run operations from there.
3. Recruitment Services
Workforce remains our number one export. The Philippines is a rich resource for talent.
The Philippines has a literacy rate of 97.5%, and our proficiency rating in business English is supposedly higher than that of the United States of America!
However, as a proprietor of BPO services, I do not agree with the recruitment systems prevailing in the country. Here are my two observations:
Too much focus on technical and fundamental competencies
Too much focus on talent acquisition not right fit acquisition
I remember a story shared by one of my friends. He was walking through a food court one afternoon. Then, he was approached by a recruiter for BPO services. The recruiter asked him to apply to their company as a telemarketer for health care services. My friend asked the recruiter, “You do have an idea that I am over 40 years old right?” The recruiter then answered, “Yes sir. But that’s okay. No one will SEE you anyway.”
That wasn’t even the punchline. The punch line is that the recruiter represented one of the top BPO companies in the Philippines! If BPO companies continue down this road, we will lose our global standing in BPO.
I believe that there is a room for a new niche in recruitment services in the Philippines. One of the new branches of BPO is resource process outsourcing or RPO.
Unlike traditional recruitment practices, RPO focuses on right-fit qualifications. The principle behind RPO is to build a solid team that is committed to attaining a long-term sustainable success for the client. Companies here are too fearful of their own people.
Human resource departments are dictated upon by their fear of being unionized or infiltrated. The result is that even the best people are terminated because no one wants to regularize them. A business ideology like this is predicated on self-preservation and does not work for the best interest of clients.
4. Inbound Marketing Agency
When someone gives you a flyer inside a mall, do you patronize the establishment or does the flyer end up in the trash receptacle?
As far as I am concerned, I don’t take flyers unless I am interested in the product. It’s not because I’m being standoffish or rude to the person who is just doing his job. In fact, it is precise because I am concerned about the person who is just doing his job that I don’t take flyers, especially from real estate brokers.
This is because flyers in my possession end up as garbage. These flyers cost money. Real estate agents shoulder the cost of these flyers. They are best served to those who need the product or service.
This is the problem of traditional marketing methods. It doesn’t qualify its audience or market. Purveyors of traditional marketing take a random approach to mass distribution hoping that the wider scope would improve the probability of a sale.
It probably would, but the bigger question is, What is the cost per acquisition?
An ideal option is inbound marketing. This process involves the use of online marketing tools and electronic media to promote products and services through content-driven materials. The examples of inbound marketing are search engine optimization (SEO), content marketing processes, social media marketing, and online advertising.
With inbound marketing, you do not push your products and services to consumers. Instead, you use a great content to draw or pull them into your business. Inbound marketing is not intrusive. It is also much less expensive to maintain than traditional marketing. Best of all, its results can be measured in real time!
The statistics on inbound marketing are overwhelming in favor of adopting it as a business development strategy. To set up an agency, you need to source the best talents in digital marketing, SEO, content writing, website development, and graphic design.
5. Food Delivery Services
The food business has always been the go-to enterprise of many budding entrepreneurs. The reason is that “Filipinos love to eat.”
Although this statement may be true, the harsh reality is that achieving success in the food business is more than just about having a market that loves to eat. Here are the realities that you have to face in the food business:
Food cost is high. The Philippines is basically a net importer of food ingredients. So even if the US dollar depreciates, the supplier may argue that the company purchased the ingredients when the US dollar was strong.
Rent accounts for more than 30% of gross revenues. I have a friend who was in the food business for 10 years. He said, the standard provision in rent with commercial centers is that the payable amount should be equivalent to 34% of gross sales or a fixed amount, “whichever is higher.”
Filipinos are price sensitive.Filipinos go for a low-priced alternative or an option that can accommodate their group. The average check can be lower than what you want.
The industry is very competitive. It may be difficult to compete with the established giants in the business. You need to build your brand, and you don’t have the scale to get concessions from suppliers.
In my opinion, delivery services are a better business model than standalone or brick-and-mortar establishments. With food delivery services, you can remove rent from the equation by running operations from home. When you have developed a strong following and have enough starting capital, feel free to explore the possibility of having a standalone location.
If you have any doubt, ask Mr. Rommel Juan. This was how he started his food franchise. It is one of the most successful franchises in the Philippines. I’m sure you’ve eaten at one his several Binalot stores.
6. Financial Consultancy Services
For me, nothing is more depressing than finding out a family lost their home because of foreclosure. Whenever I go online and see these advertisements from real estate companies offering foreclosed properties, it makes me feel sad knowing someone had just lost a home.
However, the truth is that many Filipinos are not well versed in managing their finances. Most are content placing their money in savings accounts. Credit cards become a quick-fix solution, and the ease of acquiring these credit cards exacerbates the problem. How many people do you know are mired in credit card debt? To know of one is already one too many.
If you have the experience, training, and expertise, setting up a financial consultancy business in the Philippines will not only be feasible but also allow you to offer a valuable service to your fellow Filipinos.
Going back to the problem of foreclosure, most Filipinos who want to apply for a home loan are not aware that it may be better to course the application through a mortgage broker than to do it themselves. Mortgage brokers have connections with several banks, and they can help you find the loan package that will suit your qualifications.
They deal with banks directly and understand their culture well. They are good negotiators, and they work for your best interest. The fees they charge are negotiable and can be set before you contract them. With a mortgage broker, you are spared from the inconveniences of having to compile all the documents needed for the loan.
Unfortunately, not many Filipinos know of mortgage broker services.
Your financial consultancy service can include mortgage broker services, which can go a long way in alleviating the rate of foreclosures in the Philippines.
7. Leadership Training Services
How difficult is it to choose the Philippine president? Having a difficult time in choosing the next leader of the country is a testament to the lack of leaders in the Philippines.
Given the interactions I had with several business people across different industries, it is not surprising why leadership is a much sought-after but rare commodity in the Philippines. Many executives are stuck in old-school management school of thought. They still manage people at an arms’ length because they don’t trust their motives. In some cases, the culture is almost feudalistic.
If you want to build leaders, you have to learn to trust people. Great leaders are defined by their ability to accept accountability for all decisions they make. They understand the risks but never give in to fear. Great leaders are those who are willing to face the repercussions of their decisions because they have been made for the benefit of the greater good.
However, great leaders are never born. Do not buy into that train of thought for one second! Great leaders are made; they are forged by years of experience in the trenches, dealing with and overcoming adversity.
Many of the Philippines’ largest companies are setting up leadership development programs. Among these companies are Ayala Land, Petron Corporation, San Miguel Food Corporation, Nestlé, and Pilipinas Shell. However, most of these services are open only to their other companies and affiliates.
To become a leadership management trainer, you should first get certified by a few of these acknowledged leadership programs, such as John Maxwell or the Strengths Based Leadership program from Gallup. You can target many small businesses, BPO companies, schools, and government agencies.
8. Tutorial Services
In a global economy, competition for skills has tightened. Companies are no longer simply looking for local talents. They have opened their doors to get the best people for the job.
In any job application, your grades serve as your passport. If you have a great-looking transcript, you will be a step ahead of someone who has a mediocre transcript. The same goes when you are trying to get into a college.
Students know this, and because information is readily available on the Internet, they will look for advantages. One such advantage is signing up for tutorial services.
Tutorial services are not limited to preschool to high school students. Even those majoring in college can benefit from tutorial services. You can set up an office, provide online tutorials, or charge a premium for a home-based instruction.
9. Health Home Care for the Elderly
Decreasing birth rates and improving life expectancies create a large population of elderly people. Approximately 4.6 million elderly people are in the Philippines. The elderly are categorized as those aged 60 years and older.
Unlike other nationalities, Filipinos prefer to take care of their elderly. In the United States and Canada, the elderly are usually booked in a home for the aged by their children.
The problem with attending to the elderly is that most households in the Philippines are dual income. Taking care of the elderly, especially those who are in the later years or those who have dementia, is like taking care of an infant. You need someone to watch over them all the time.
Interestingly, some companies in Canada offer home health care services for the elderly. I think this business idea can have a potential in the Philippines, given the rising population of the elderly.
The Philippines has a talented pool of nurses and caregivers plus doctors who look for other sources of income. There is no lack of skill when starting out a health home care business for the elderly.
A working idea is to focus on a specific geographic region to test out the system. Each elderly person shall be assigned a nurse, a caregiver, and a doctor. The caregiver stays with the elderly person, whereas the nurse visits the patient daily to make sure medicines and vitamins are taken on schedule.
Doctors are available on call in case there is an emergency or a situation that the caregiver cannot handle.
There will be concerns on adhering to schedules because of traffic. Concerns about communication may also emerge because some areas may not have cell sites.
However, I believe that this business investment idea is viable and sustainable. It would be great if the government can offer a subsidy for medications and hospitalization expenses.
10. Business Collaboration Centers
Quite a few of these business collaboration centers are sprouting in Makati and in other parts of Metro Manila. These centers offer a central area for entrepreneurs to work on their projects. It’s like the former single table cubicle has been opened up to share a floor with others.
The idea has grown to invite entrepreneurs to mingle and network with others in the hope of arriving at a strategic partnership or funding support. These spaces invest in leasehold improvement to make the area conducive to productive work. High-bandwidth Internet is available. There are PCs for rent, and administrative services, such as fax, can be requested.
I believe that this industry has a potential growth in the Philippines. Not many entrepreneurs have the budget to pay for rental space full time. Rental prices are soaring. They offer pricing options that fit your budget. So these collaboration centers are a great way to hit two birds with one stone: have a place to work and have a network of connections.
Work On Your Business Investment Ideas
The business investment ideas identified here are only a handful of opportunities that can be available in the Philippines. You may have other ideas in mind that have a greater potential than what I have listed.
If you do have a business investment idea, work on it and assess if it is feasible. If you can be certain that there is a demand, by all means, act on it and see it grow within a few years!