I'm looking to buy a business in the Philippines. Any advice?

I haven't visited the Philippines ever. But I'm going to fix that. I'll make one or two exploratory trips and do some investigation before applying for an SRRV. Once all that's done, I want to buy a business. I have 40+ years of business experience in various countries, including in "developing" countries. Yes, sure, doing business in the Philippines is different, but I'll figure it out (including how to grease palms - the techniques differ from country to country, LOL).


I've already learnt a fair bit and am aware of the 1991 Foreign Investment Act, and the "negative lists" ie. businesses that can't be majority owned by foreigners. In some sectors, you need to have 60% ownership in the hands of the locals. I want to avoid those sectors.


Other sectors are fine, and Domestic Market / Retail Enterprises can be 100% foreigner owned - subject to a minimum of $200K paid up capital. There is an exception for export oriented businesses which are (usually) also exempt from the min cap requirements. BPOs, call centres etc are considered export oriented businesses.


But it's so difficult to get information about buying businesses in the Philippines. The market for buying / selling businesses is nowhere near as developed as it is in the west (and I get the reasons for this so this is not a complaint!).


Link Business Brokers seem to be the largest brokers there but even they don't seem to have a clear buy-side operation. They take on sell-side mandates but don't seem geared (despite what they say) to take on a paid commission to source deals fitting an investor's pre-defined criteria.


I would use proper local commercial lawyers etc to advise on any deal and to draw up the documentation / assist with formalities, not to mention a full due diligence check. Yes, it'll cost money to get all that done, but I don't feel this is optional.


Anyone has any suggestions on getting information / finding businesses for sale, apart from going to businessesforsale.com type portals? I'd rather look at off-market opportunities ie businesses not already listed for sale but where the owner could be persuaded to sell for the right price. I'm not looking for cafes / pubs / sari sari stores etc. I'm looking for something generating $100K - $500K in annual profit (not revenue) - perhaps a manufacturing business, a BPO or Virtual Assistant provider, maybe something in logistics / recycling / green energy / automotive / something else.


Anyone here who owns a business?

Then I guess you heard the one about, how can you wind up with a million dollars in the Philippines?  Start with two million dollars.  Is this a hobby?  Earning $2000 to $10000 A year, how much do you intend to invest?  Currently CD's here in USA paying 5.5 % a year, lot less risk and less work.

It's not a hobby, no. Like I said, I've owned and run businesses in multiple countries. I've also been a consultant and mentor to small businesses over the last several years.


When I retire, I'll do some voluntary work but I also do need to get my teeth into something with meat. I need a project. Besides, I have some capital but I won't have a pension (not even the UK state pension!), so I hope to use a percentage of the capital on an income generating asset like a business.


Given my lack of understanding of the Philippine employee psyche and the local bureaucracy etc., I would need a good general manager / top tier team running the show. I have no dream of running the business myself, it'll need to be a business with a full management team in place. I see myself more as a strategic lead, opening up new markets, finding export opportunities etc.


I'm not looking at businesses generating $2K to $10K a year. Very small businesses - the $2K to $10K businesses - are a lot, lot more risky! Crazy risky! Taking on an owner-managed micro business in a new country would be sheer madness and, for me, a 100% guaranteed route to disaster!


It'll need to be making at least $100K a year in profit - it'll probably have around 50m pesos in annual turnover with at least a few dozen employees and a full management team.


How much am I looking to invest? I'll invest what's necessary for a business of that size (in consultation with the local corporate finance/accountancy firm I appoint to assist on valuation / negotiation). It certainly won't be in the millions of dollars. I'm expecting businesses in PH to sell for lower multiples of EBITDA than we see here in the west.

@JustCallMeJoe


Joe is sounds like you are going to be a valuable asset to this forum. You do your homework and share with members.


So in the future members can Just Call Joe.

This is going to be long.


The life of your sweethearts' bikini starts in China, Indonesia, India or some other developing country. Using the USA as my only experience and example, how many stops does it take to get to your sweetie pies thighs? This bikini, or any clothing as our example, may or may not actually ever make contact with the origination (designer-maker) company. It could be an "on paper" only design. Pre-sold to a wholesaler in the USA. In such case, the designer sends a purchase order to fulfill the order placed by the wholesaler, to the sweatshop of his choosing in said developing country. Once the order is fulfilled and boxed up, the manufacturer loads it into a container and it goes on a ship, to a coastal port in the USA. We'll USE Long Beach as an example. The container clears customs and then is trucked to the local wholesaler that ordered it. Then it sits in said warehouse and palletized for shipment along with other items for the retailer before ordering up a truck to load and deliver to said retailer. Eventually the truck picks up the load in their own trailer and trucks the load possibly 1000 miles away to the regional distribution center for the retail chain that's going to sell it to your honey.


Each step of the process has profit built into it. Efficiency is what makes it more profitable. less time on shelf, fast manufacturing time, quick delivery etc. regardless, that product goes through the hands of 4-7 vendors (including the trucker) before it gets to the retail store.


But what about small mom-pop stores? Who supplies them? Often times it's specialized wholesale only distributors. They have strict contracts about whom they sell to with the manufacturers they buy from. Usually not being allowed to sell said products retail to end users. Only wholesale to retail outlets.


For a time, I had my own business in the 90's, in the aftermarket Harley Davidson motorcycle business. I sold retail initially but then designed some custom parts and started selling to wholesale distributors that sold to small motorcycle shops that would only by a few of my product per month. But then I started to also assemble complete transmissions for custom builders. The problem was getting the gears and parts at a low enough price to be able to offer better than foreign made with higher quality parts and still be able to wholesale the transmissions profitably. So not only was I a retailer with my small store, but also a manufacturer to distributors, and then WE became distributors for the gear manufacturer through sheer volume. Unfortunately I didn't have enough capitol to withstand the ups and downs of the business at the time and stretched myself too thin. But this points out the various levels of business and a small glimpse of infrastructure involved in producing things for the public.


Now to the Philippines.....


What do we see EVERYWHERE outside of major business districts (and even there to a smaller degree)?


Mom and pop restaurants (eatery) and sari sari stores! Where do they buy the products they sell? Sari Sari stores are buying from the major grocery stores! At full retail and marking up just a little bit. They buy their drinks (beer, wine, soda) from distributors. But everything else is bought retail and marked up. Small little restaurants buy the food they cook from the local meat shops and markets as well! These two businesses have no wholesale pricing distributors to buy from. But the supermarkets buy wholesale!


Shouldn't there be a viable wholesale distribution network for these two business models? I have searched high and low for the sari sari store type wholesaler because my better half has had one for 15 years plus. Her neighbor out here in the province followed her example and opened one next door as well. Now she's gone to lower pricing by 1-2 php on everything to get the business. Which makes me want to buy en-masse at wholesale pricing and bury her! But I haven't found any distributors. Seems like a hole that needs filling.

Great info guys and I'm sure if he ever gets here he will be labelled Joe even though English no different to me being called the same coming from Australia.


To the OP I like your tenacity given never getting your hands dirty here, knowing the culture and mentality here takes a long time and is not palatable to some, having said that some things to remember.


Filipino first.


Greasing palms goes on in all countries but here is an artform though corruption is under the microscope here it takes time.


If an Entrepeneur in this country or coming in from another country creates a successful model it will be copied adding more competition and less profit. Example: Larry Fisher, small scale but puts food on the table and pays the bills, I have seen this with Bens family, they opened a Sari store 10 years ago in the area they lived and knew as there was no others around, they did well, over the years 4 others in their area have opened and naturally reduce their income.


The Philippines can be a trap for the uninitiated, Sadly we have not seen one of our members here for 3/5 months that has been setting up a manufacturing business in Palawan and has posted long and hard on the pitfalls over the years (Coach53) from memory so may pay to search his input here.


For me I retired here and have income from Australia, I also looked into business opportunities here and decided to stay with what I new and not the foibles, unknowns and bureaucracy here, you will see if you get serious.


I wish you luck. Have a few visits first.


Cheers, Steve.

@bigpearl


The Philippines can be a trap for the uninitiated, Sadly we have not seen one of our members here for 3/5 months that has been setting up a manufacturing business in Palawan and has posted long and hard on the pitfalls over the years (Coach53) from memory so may pay to search his input here.


To the OP yes the above named Swedish gentleman was an omnipotent fount of knowledge regarding business opportunities in the Philippines.

The last we heard he was in a Stockholm clinic suffering from, and I quote, 'Cerebral overload' :(

Best to retire here and not fuss with native competition.


Cheers, Steve.

Best to retire here and not fuss with native competition.
Cheers, Steve.
-@bigpearl

I like that idea a lot. I don't "need" to make more. I have my quiet, humble lifestyle with my gal that I always wanted for retirement.

@Larry, if you, based as you are in PH, can't find something as simple as a food wholesaler ...what hope have I got, LOL? Perhaps there's an opportunity for you to start a wholesaler to sari saris! ;)


But, yeah, I'll visit for a bit, maybe a couple of times, stay a month or two. Do some research.


@bigpearl, yes, corruption is everywhere, even here in the UK, big time (if you're aware of the PPE supply scandals during Covid). In India, I once got told off by a cop for offering him 50 rupees to let me off a traffic ticket. He stood there shouting at me in the street, it was most embarassing to get the only honest cop in the country. But it turned out he wasn't a traffic cop, he was a sub-inspector, and his rate was 100 rupees! :) Once we figured that out, I solved the problem and collected my motorcycle.


In Bangladesh, it's common to layer the money in a cardboard box, cover with grease proof paper and fill the rest of the box with "mithai" (sweets like barfi and halwa).


To get planning permission in Ukraine, you'll have to go to the planning office and drop a packet of money in the rubbish bin, you can't give it directly to the staff. You just need to make sure they see you making the drop.


I'll figure out how thing work in PH. But I would still prefer to have a local General Manager running the business!


I'm not so worried about competition. The smaller the business, the more the threat from competitors as the barrier to entry is low. I'll be looking for moats - businesses with some clear moat around them that presents a barrier to new entrants. It may be a unique location, revolving contracts with foreign customers, whatever.


There are Jolibees and all kinds of other franchises but franchises are not my thing. Besides, a good, established Jolibee at circa 100m pesos is outside my budget. And I can't really do a great deal to grow the business / expand to new markets.


I shall check out Coach53, thanks for the tip.

I've spent a couple of hours reading Coach53 threads. They were not easy to find using the forum search feature so I had to resort to a Google advanced search: "Coach53" AND "business" AND  site:https://www.expat.com/forum/


Anyway, he went the same road I'm considering - he bought 3 businesses. It was amusing reading his frustrations and battles with bureaucracy (though I'm sure he didn't find it amusing at the time).


It seems I was right on pricing. Deals there happen at much lower prices (much lower multiples of earnings) than in the west. Significantly different! It would appear that the lack of a developed market there for buying / selling businesses depresses prices and works to the enormous advantage of the buyer.


It's a shame ol' coach ain't around. It would have been great to speak with him and exchange notes.

.

It's a shame ol' coach ain't around. It would have been great to speak with him and exchange notes.
-@JustCallMeJoe

Some miss him more than others.

@JustCallMeJoe I was amused by your experiences with what we used to call baksheesh as a merchant marine. We used to pay off in cartons of cigarettes to officials crossing the Suez Canal & the Panama Canal. Often times it would end up being over 100 cartons total for the 10-15 "officials" coming on board for permits and paperwork before crossing.


In Phils, when we adopted a kid almost 30 yrs ago, the very last office, to pick up his passport with stamps in it was $200 USD and only USD! Even though all fees had been paid, paperwork done, that last place got us. And they gave me a receipt on government letterhead! lol.

Best to retire here and not fuss with native competition.
Cheers, Steve.
-@bigpearl

Amen.

I'll retire to that.

Cheers!

Best to retire here and not fuss with native competition.
Cheers, Steve.
-@bigpearl
Amen.
I'll retire to that.
Cheers!
-@Jackson4


And I'll retire to that also, over the hard yards for 45 plus years and now time to chill and relax, one of the reasons I settled here at a 60 Y/O.


Cheers, Steve.

@JustCallMeJoe


I've spent a couple of hours reading Coach53 threads.


Did you use Google Translate?

@JustCallMeJoe
I've spent a couple of hours reading Coach53 threads.


Did you use Google Translate?
-@Lotus Eater


LOL, yes, it was hard work. 1f600.svg


But, to be fair, I once had to go through a few hundred CVs of people applying for a minimum wage job here in the UK so I've got some experience understanding gobbledegook. They had all passed GCSE English; I reckon Coach53 would also pass if he took the exam.

I seem to remember that Coach53 was also on another Philippines Forum so maybe he is still on it. Now you know his style of writing, even if he does not go by the same user name - if you have the time to search, you may find him still active on there. Just look for somebody moaning about an old sports injury.

I seem to remember that Coach53 was also on another Philippines Forum so maybe he is still on it. Now you know his style of writing, even if he does not go by the same user name - if you have the time to search, you may find him still active on there. Just look for somebody moaning about an old sports injury.
-@Cherryann01


Due to his condition I doubt if they would allow Laptops into the clinic  Cherryann.

I seem to remember that Coach53 was also on another Philippines Forum so maybe he is still on it. Now you know his style of writing, even if he does not go by the same user name - if you have the time to search, you may find him still active on there. Just look for somebody moaning about an old sports injury.
-@Cherryann01

Due to his condition I doubt if they would allow Laptops into the clinic Cherryann.
-@Lotus Eater

I soppouse your right1f923.svg1f923.svg

Perhaps he smuggled in a tablet.

Perhaps he smuggled in a tablet.
-@mugteck

Nice one! :)


Coach53 doesn't seem to reveal his exact business but he seems to like going off the beaten track. In a thread started by the equally eloquent liubov2011, Coach55 suggested he was into not beach resorts but inland opportunities (or, in his inimitable style, "in oppoite to tourst beach places =Inland hills with forests". )

Sounds like Coach was describing Sweden to me.

@JustCallMeJoe


I might be inclined to sell my business if the price is right. ****

****

To know more contact me.

Michael Lee White

***

Moderated by Bhavna 8 months ago
Reason : Contact details should not be posted on the forum
We invite you to read the forum code of conduct

@mikenmanila hello, please contact the poster in private by clicking on his username > send a message.


You can also create an advert to advertise sale of your business here : Philippines classifieds


Regards

Bhavna

Our Friend Coach 53 from what I gathered over the years was not a well man, in a wheel chair and on oxygen, He disappeared here as well as another site I lurk in some months ago as did another member. I had my run ins with both of them, one was a fool but Coach had and raised many good points and valuable information though I often wondered if he had ever been to PH. as well as the business enterprise/s he was setting up with a local villager from the mountains or if it was just all romance to fill in the days.


As for him wandering and extrapolating, I agree but I tend to do that at times. Hope he is ok and appreciate his input over the years.


Cheers, Steve. 

@JustCallMeJoe
I might be inclined to sell my business if the price is right. ****
****
To know more contact me.
Michael Lee White
***
-@mikenmanila


Mike, do drop me a private message with some headline numbers - turnover and net profit for the last 3 years, number of employees, number of hours you spend in the business every week.


It does seem like an interesting sector (I've worked out that it's an HVAC related business in the southern part of the NCR).

@JustCallMeJoe Hi. I dont have business to sell but Im looking for investor to a business that I plan to put up. I am working on my business plan right now and my projected income would be around 200k usd annual (this number is small coz my target market is small also). Its good to start small and just make expansion. Im not sure if you able to read my message. My first time to reply in public. 🙂 Thanks _Ivy

Hi Ivy, welcome to the forum.

Tell us more about what you plan to do, the line/product, capitol investment required, net and gross returns, risk factors and a time frame to see your plan come to fruition.


Cheers, Steve.

@JustCallMeJoe Hi. I dont have business to sell but Im looking for investor to a business that I plan to put up. I am working on my business plan right now and my projected income would be around 200k usd annual (this number is small coz my target market is small also). Its good to start small and just make expansion. Im not sure if you able to read my message. My first time to reply in public. 🙂 Thanks _Ivy
[email protected]


Hi Ivy, thanks for your interest but I am looking for an established, profitable business with a full management team in place. I've always, always, always avoided the startup market, sorry.


But feel free to post the details requested by Steve above, those are good questions that any potential investor will ask you. Feel free to post your answers as there may be someone else interested in investing with you.

@bigpearl Hi Steve, thank you for welcoming me in this forum. It is a poultry (broilers) business. If I pursue this business, I will be supplying minimum of 1500pcs of whole chicken to one buyer (sure buyer) every other day. I also target to supply local market nearby every other day so the delivery operation will be daily.

@JustCallMeJoe Thank you for your reply. No worries 🙂 start-up business is quite risky.

Why would any sane individual wish to invest in any type of business in one of the most opaque corrupt emerging markets in the world.

Unless of course you're investing somebody else's dough.

Leave it to the corporates.

Isn't opaque and corrupt the ideal environment to make a lot of money 1f609.svg (if you can figure out how the system works)?

But the/a business plan is great, without back up/correlation are simply numbers on paper that we can all fudge.


Joe, I have had a few start ups over 40 odd years and I never asked for an outside investor because I knew my ideas would work and they did and profitable to boot. All well good to have great ideas but asking others to invest in a shore fire idea and then sharing the dividends?


I remember talking to my older brother 45 years ago with regards to an extra door in a refrigerator, he laughed at me and asked why. I told him a split door refrigerator  will save on energy costs,,,,, who cares he said and told me i was a dreamer, remember the old saying "the world was built on dreams", regardless he wasn't paying the electric bill, dad was.


20 odd years on and split door refrigerators are readily available boasting power savings. Not sure how that would have gone with patent laws, not that I had the funds to go there as a 19/20 y/o. 




Problems with start ups are always capitol and that's why punters try to sell their dream, some times successful but many sorry stories also,,,,, buyer beware.




Any way my 2 bobs worths for the member Ivy, I wish you luck as there is lots of hard yards with research and factual figures to secure an outside investor, good luck.




Cheers Steve.

Lotus Eater said . . . . .Why would any sane individual wish to invest in any type of business in one of the most opaque corrupt emerging markets in the world. Unless of course you're investing somebody else's dough.

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Hmm, for an investor 200K USD isn't Chicken Feed.

Not for 1,500 broilers per day looking for PHP 11M from a second and perhaps 5th investor with no figures nor a decent plan, those chooks take up a lot of space (land as well as all the infrastructure) Take the money and run if someone is stupid enough.


OMO.


Cheers, Steve.

Not for 1,500 broilers per day looking for PHP 11M from a second and perhaps 5th investor with no figures nor a decent plan, those chooks take up a lot of space (land as well as all the infrastructure) Take the money and run if someone is stupid enough.
OMO.

Cheers, Steve.
-@bigpearl


Indeed, I did notice that Ivy's reply gave us the narrative, the dream and didn't address your queries on capital / investment required, gross and net profit expectations and time frames.


At first call if the entrepreneur doesn't demonstrate a good, clear grasp of the numbers, I would be out even if I did happen to be in the seed investment game (which I am not).

Remember Supertramps song? "Dreamer"


Joe, you will get this all the time from locals both here and boots on the ground, walk softly.


Cheers, Steve

@bigpearl


This Forum does tend to attract the occasional Filipino grifter. 1f644.svg