Braving the crisis to start a business INQUIRER.net
April 14, 2009
(This is part of Take Charge of Your Money , a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)
Question: I have always wanted to start my own business. I love fashion, and I have set my sights on opening a small boutique in Greenhills. Although I am currently working, I plan to resign by August so I can concentrate on my business and prepare for the holiday shopping season. But with the current economic crisis, I am having second thoughts. Is this a good time to start a business? What if things don’t go well? — Myra
Answer: A lot of people are faced with the same dilemma, Myra: to start a business now or not? Times are indeed hard, and this is true whether one is aiming to start a business in the Philippines, in Japan, the United States or anywhere else in the world. The global financial crisis has affected everyone, although in different degrees.
But although times are hard, it doesn’t mean that we all should hide under the bed. Throughout history, there have always been periods when economies slow down but they always recover after some time. As to when recoveries happen, the length of time vary greatly.
It’s true the current times call for more prudence in setting up a business, and for those who already have an existing business, in expanding operations. Credit may be tighter, meaning, banks and financial institutions may be stricter in granting loans to entrepreneur applicants. So before deciding to open a business or expand one, make sure you have enough capital to finance much of the business yourself as possible.
The following are some more tips on how you can tread this new avenue safely and surely:
1. Have a solid business plan. You may already have an idea of the kind of merchandise you want to sell in your store, but there are a lot of other things to consider. Who is your target market? What does he/she like? How can you entice him/her to go inside your store and make a purchase? Among other things, also consider your pricing strategy—it should be at the right range for your target market so that you won't push him/her away be being too expensive or too cheap. Your business plan should also detail how much you need to sell so you can break even. It should plot an expected timetable for return on invesment (ROI).
2. Have your financial system in order from the get-go. Make sure that your business registration with the proper government agencies (BIR, DTI, SEC, SSS) are taken care of and you have official receipts and books. Hire an accountant or bookkeeper to set up your financial recording system. Then choose a bank you can build a long relationship with. Ideally, your bank should be near your place of business and should allow access to your account online and on mobile phone. Also, it would be good if you can enroll your bills in your account so you won't have to queue up physically at the bank to pay utility bills – just pay for these online or over the phone. By establishing a good relationship with your bank, you will have built up trust by the time you are ready to take out a loan and avail of other bank services such as ATM payroll services and the like.
3. Avail of insurance. Get enough insurance coverage so you can get back the cost of your inventory should a fire happen. Choose a reputable insurance company that has a solid track record for decades. Do your research first and find out all you can about the insurance company before signing the deal.
4. Find other revenue streams. You may want to operate mainly from your Greenhills outlet, but consider joining bazaars in other places during the Christmas season. The overhead is minimal. You may just need additional manpower for the season.
5. Have a safety net. Going into business entails assuming some risk. Make sure you have your own savings to fall back on should you find yourself having cash flow problems. Make this your emergency fund which should be enough to cover three to six months' worth of your personal expenses. Dip into this fund only when you absolutely need to do so.
6. Lastly, hook up with other entrepreneurs. There are business organizations for young entrepreneurs out there, such as Network for Enterprising Women, among others. Join groups like this to network and to learn from other successful entrepreneurs.
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