A by cathy.

Free Pagerank Checker

I am Cathy. I am a Certified Public Accountant and a business consultant for years. I want to share my expertise thru this blog which is intended to help people who are planning or who are already in business. The topics range from Accounting for Small Business, Cash Management, Inventory Management, Assets Management and Financing. The terminologies will be simplified for laymen and business jargons will be explained for clarity.

Tuesday, November 06, 2007

Reasons why small businesses fail 4

Having been in business and a business consultant myself, I feel that publishing the small businesses that an OFW may engage into is not enough. The manuals and the articles do not discuss the whole shebang of putting all your hard earned money in a business that spells SUCCESS. Although there is no such thing as guarantee in getting into business, the risk of loss is minimized when there is adequate planning before the first peso saved rolls out from the pocket.

1. Verifiying if there is really a market demand or demand is not yet fully satisfied--in short the market is not yet saturated. You do not need to hire someone to conduct a survey.

For example, you like to put up a beauty parlor. Easy. Wear your walking shoes, start from the point where you plan to open the business, count the number of beauty parlors that you can find within the next few kilometers. Same with fastfood or restaurants eateries, not unless it is located in a food court in a mall. But even then, the kind of food served in that location where you compete with a lot of food stalls will make you stand out from the rest. If you see that beauty parlors are more in number than the street blocks that you have passed by, forget the business.

Not because your relative can cook and or you learned the " how tos" in some seminars or manual, you can already put up a sign and say welcome to my business. That's dealing only with one aspect, the technical. The market demand is the most important factor in considering a business. Not because, you have some hobby that makes your friendslashrecepientslash of the custom made or handmade stuff as gifts encourage you to start producing in quantities, you will already start arranging for a loan.

Honey, try looking at your products and your friends. Are they only patronizing you, then keep the gifts in their closets --never used or displayed. Were your gifts recycled like the fruit cake that goes around the neighborhood or offices that if you're lucky, you get it back in a different
cute wrapper?

There may be success stories about how hobby turned into multi-million business but the writers may have omitted the part where the successful business owners learned the nuts and bolts of the businesses the hard way before they saw their "bottomlines" with profits.

2. Starting a business without adequate capital

Okay so there is a market. Allelujah. So you dance the dance of joy and start registering the business, getting the place and buying the equipment and other fixed assets.

Honey, the word CAPITAL does not refer to the size of the letters or the fonts used in writing. In business, there are three kinds of capital that you need. Kung baga, magkakamag-anak sila.

Fixed Assets Capital- Does your business need big capital outlay before you can even open your door to start the business ? Does you business need some special equipment like oven, stoves, kitchen utensils, tables, chairs and other minor machines to operate a restaurant? Does your business need a lot of chairs, computers, need renovations for the rented office or place to operate an internet cafe ?

Inventory Capital- Does your business require you to stock up some inventories of the products to be processed or sold or to be used in the day-to-day operation? You can not start a beauty parlor with just one color of nail polish or one bottle of nail polish remover. Iirapan ka ng beauty counsellors ninyo or ni Parloristang si Tanya aka Tonio.

You cannot start a boutique with all goods that are on a consignment basis.

Working Capital- This is the capital that "works" for you while you are waiting for the revenues to be adequate to roll over. Salaries for employee if you have one, rental payment, utilities,
replenishment of inventory stocks, transportation and other unexpected expenses.

Dapat mahaba ito as in if you estimate that the business will pick up only after six months, then your working capital should be more than six months. Ganiyan dapat kalalim ang bulsa ninyo.

We had this experience in the business that we put up here in the US. Our fixed assets capital were merely office desks and chairs and a reliable phone system.

What we did not expect was that in a matter of days, we were able to deploy nurses in hospitals. After a week, they need to receive their paychecks. That's industry practice. Violate that and you will see them moving to another registry. The hospitals and nursing homes pay only after six weeks. Others issue their checks more than six months especially of it is a hospital system where the parent company is in another state.

The bank would like to see our profit and loss. Actual not the projected one. So what did we do? I include that in my discussion of tapping sources of capital.

Related articles:

1. Reasons Why small businesses fail part 3

2. Reasons for the Failure of Small businesses Part 2

3. Reasons why small businesses fail Part 1



Monday, November 05, 2007

Hapinoy Store Program

The easiest business to put up is a sari-sari store; the difficulty is maintaining it.

Good news is there is a new project in town called Hapinoy Store program.


The target participants are the SAHMs or stay-at-home-moms who are going to be trained about inventory management, credit management and other stuff. (This is close to my heart because these were the types of seminars that I conducted in the Philippines when going to the different regions sponsored by foundations that help marginalized sector of the population).

According to Salve,

Microventures will take a chance on these stores by giving sari-sari stores a makeover with bright paint and the huge Hapinoy smile plus additional capital from CARD. The stores will have direct access to manufacturers resulting in a bigger margin, the nanays can qualify for trainings under sari-eskwela where they will learn about inventory management, credit management and other stuff.

For more of the concept go to inquirer.net.blogs.



Sunday, November 04, 2007

Reasons why small businesses fail part 3

This is the continuation of the discussion of causes of failure of businesses put up by OFW/OF.

2. Poor inventory management
This pertains to businesses that stock inventories. Even service businesses like restaurants, beauty parlors and motor shops carry inventories of supplies.

They say that restaurants or anything about food is "tubong lugaw"( porridge) . Yes, you're going to eat nothing but porridge when your business goes bankrupt because of poor inventory management.

Are you aware that there may be people in your business who's doing their grocery shopping in your restaurant's food storage? This is what we call pilferage. And how do they do it when you got your security or they are being checked before they leave the premises?

The easiest way to bring the items out is thru the trash can. The dressed chicken or kilos of prime beef or pork are wrapped in thick waterproofed plastic and then put in the trash cans. The pilferers do not operate alone. Another individual or individuals retrieved the pilfered goods from the trash bins. They know the shedule of garbage disposal. Then they sell these to small rstaurants or to public market stall holders who sell them in chop-chop.

The easiest to pilfer are the beauty parlor supplies. The owner cannot exactly monitor the consumption of the acetone, the nail polish and the cotton swabs.

I remember the conversation of a friend with her sister working in a big-time beauty parlor. She said that she had an appointment the following and she did not have time to go to the parlor for retouch of her manicure, so if the sister could please bring the color that she needed.

Pilferage does not only happen in big businesses. Office supplies are the common items which are easily taken home by employees.Ouch does it hurt?

In the grocery store where I do my food shopping, I noticed an employee dropping some
good fruits in a cart full of soiled vegetables as he went about restocking the vegetable and fruit sections.

Last Friday, I noticed that the exit going to the back side of the grocery was padlocked. There is just one exit open for customers and employees.

One of the experiences I had when I was an auditor was the discovery how new unauthorized copies of books were sold in small second hand books at a price of used books.

The employees were subjected to body search. Both men and women and yet the pilferage problem never abated.

The books were being taken out chapter by chapter. Then they were compiled, bound and sold without the signature of the author.

Inside the printing room, parts of a book were just lying down in every corner because no one suspected that these could be put together as long as they know the
sequence of the pages.

Related articles:

1. Reasons for the Failure of Small businesses Part 2

2. Reasons why small businesses fail Part 1

3. Reasons why small businesses fail Part 4.


Saturday, November 03, 2007

Promotion and ads

Come to think of it, those ambulant vendors of dirty ice cream and popsicle outside our school were already practising innovative promotion for their products.
Photo Sharing and Video Hosting at Photobucket
When I bought a popsicle, I was in a hurry to eat the topmost part of that icy thing. I looked for the word FREE in the popsicle stick. O di va, di another popsicle yon. Yong iba naman, mayroon silang garapon ( a wide mouth-bottle) filled with water. Inside the garapon was a smaller bottle which catches the coin that you drop from the mouth of the garapon. If it goes inside the smaller bottle, ice cream and or popsicle is free.

I observed that these promotion practices were only done near schools where there were several competitors. Those who were getting by our house did not have free stuff. But they knew when to make "kling kling" of their bells. After our afternoon siesta.

Now, ads are very sophisticated. Billboards are most often used to reach more consumers.
So what kind of ads do you think attracts the consumers?

Photo Sharing and Video Hosting at Photobucket
photo forwarded by Trosp.

For more of the photos, go to innovative ads.