Sustaining part-time businesses
Question: I want to set up a small business to augment my meager salary. Where can I go to find the best small business ideas?–A question raised at “Ask a friend, ask Efren,” a free service available at www.personalfinance.ph and Facebook
Answer: Surprise, surprise! The five rules of investing in a business are the same as the rules of investing in financial securities like stocks and bonds.
Rule 1: Know your risk and return preference. Like financial securities, a business is just a tool to help you reach your noble goals in life. Quantifying the means needed to achieve these goals and comparing them with what you have and can periodically add will determine what you need in terms of investment return.
In addition, the size of your needed return will determine the risk you will need to take. Match this level of risk with your risk preference. If the risk is too high, try to lower your goals so that you need not take on too much risk. You may also try to increase what you will add to your investment periodically to also lower the required return. Or, you can level up by increasing the level of risk you are willing to take.
Rule 2: Ask yourself if you are all “S-E-T.” There is a tendency to focus on just the set up cost of businesses, particularly for micro businesses. Regardless of business size, you must have the appropriate “S” or size of funds not only to set up a business but also to fund its permanent working capital. This means the amount of money that has to be flowing inside a business to allow it to continue to operate for a given period of time while you are producing the inventory, ramping up sales and collecting on receivables.
You also must have the “E” or expertise in running the business. To be successful, each businessperson must be an expert in the “PMPM” departments of any business (i.e. I call this the Papa, Mama, Papa, Mama for easy recall). The first “P” is for production and the first “M” is for marketing. The second “P”, on the other hand, is for people and the second “M” is for money. If you are not an expert in one of the PMPM, then you should hire people who are.
Finally, you have to have the “T” or time to run a business 24/7. You will reap what you sow. If you do not focus on your business, you might just rip what you have sewn.
Rule 3: Before you invest, investigate. There are many places to get ideas from for small and large businesses. The places range from your own home to malls, your employer, potential business competitors, trade fairs/associations, books/magazines, social networking sites and the government (i.e. DTI, DOST, SEC and DOLE). You may also go to www.philvencap.com where they facilitate meetings between people who have business ideas with people who have the funding.
Also, take the law into your hands by availing of the benefits under the Barangay Micro Business Enterprise, or BMBE Law. A business that is registered under BMBE enjoys the following benefits, among others:
1. No tax on income arising from business operations;
2. Exemption from the application of the minimum wage law;
3. Priority in the special lending windows of the government; and
4. Support in terms of technology, management and marketing training (not necessarily free).
The best part is that the maximum registration and renewal fee every two years is only P1,000.
The law, the implementing rules and regulations as well as the application form for BMBE are already at www.dti.gov.ph awaiting downloading. Check them out to see if your business is qualified.
Rule 4: Diversify. To minimize risk, diversify your business. Even if it is just one business, you can diversify on products or services. You can also diversify depending on the places where you sell or by the type of product per target market.
Rule 5: Monitor performance. Just like driving a car, your business will need a dashboard of gauges to determine how efficient you are running it and how effective you are in achieving your goals. You will need to periodically review your dashboard of performance measurements for profits, inventory and account receivables management, customer experience, return on equity and many others.
I know you just wanted ideas for a part-time business. But wouldn’t it be great to set up a business that will not only add to your cash flow, but would also eventually do away with your being an employee and even serve as your inheritance for your children?
Following the five rules will help your business live long. But the rules have more to them than what this space allows. To know more about running businesses, please visit the tools section of www.personalfinance.ph. You can also attend our EnRich™ Wealth Creation and Preservation training or our Financial Planner’s Training program in the cities of Mandaluyong, Zamboanga, Baguio, Iloilo, Davao, Cagayan de Oro, Ormoc, and Cebu. Check our website for the details.
(Efren Ll. Cruz is a Registered Financial Planner of RFP Philippines, personal finance coach, seasoned investment adviser and bestselling author. Questions about the article may be sent via SMS to 0917-505-0709 or e-mailed to [email protected]. Learn estate planning strategies, attend the Chartered Trust and Estate Planner (CTEP) on Oct. 10 to Nov. 21. For more details, inquire at [email protected] or text <name><email><CTEP> at 0917-9689774.)
