Living in the Philippines – Best "Passive" Businesses to Start

For those OFW’s and foreigners wishing to start a business, but not wishing to involve themselves with the stress of a business involving day-to-day operations, employees, landlords, inventory, and so forth, there are several available opportunities for foreigners living in the Philippines. Buy fixer upper properties, improve them, then rent or sell them.

1. Buy Fixer Upper Properties, Improve Them, Then Rent or Sell Them. This is a great business for those of you who have experience in your home country in buying, fixing up and renting or selling properties. Over the past 10 years, a lot of people got involved in this kind of business in their homeland.

With the overall economic problems in the world the past couple of years, the Philippines has not been immune, and there are a lot of properties in a state of disrepair, as well as lot of distressed and foreclosed properties.

2. Build An Apartelle. An Apartelle is an apartment building where all but one of the units are rented out long term, and you are left to operate on a nightly or weekly basis, like a hotel – hence the combined name of apartelle. These are common in the Philippines.

This business will require a heavier capital investment, yet with the right property and by focusing in the more rural areas or smaller cities, you can construct a small 4 unit apartment building for Peso 3,000,000 – not counting cost of the land.

You would want to rent out 3 units on a long term rental basis, and keep one for short term rentals – for the many traveling salesmen that frequent the countryside. They like booking into such short term apartelle units rather than the much more expensive hotels in the area.

3. Condotels. I have not given this business my “thumbs up” in all instances. Condotels have been heavily touted and promoted the past several years and there have been many, many new condominiums built in Manila, and now even in Cebu and starting in Davao.

The problem is that although the developers offer great down payment terms (usually around 30% down financed over 3 years) and in some cases carry back the mortgage and finance for perhaps 10 years, the interest rates are incredibly high, and the split of rentals with the management team runs around 50%/50%. There is also always a nominal monthly maintenance fee.

What looks like “cheap” entry point and cash flow out each month, in many cases simply becomes a bet on long term property appreciation – finding someone willing to pay you more for it than you paid for it.

This is because with all the inventory on hand, there is a surplus of condos which have been into hotel type rental pools, but not enough visitors to rent them all.

Consequently, what an investor thought would be a good positive cash cow, turns out to be a continuous negative cash flow – not what a new retiree to the Philippines is looking for to supplement his pension or annuity! This type investment will only drain you pension.

However, having written all this, I HAVE FOUND the past several month two exceptional condotel investments which DO meet my criteria of creating good ongoing rental income.

4. Farming. The likely cessation of the Agrarian Land Reform Program (CARP) will give the rural sector renewed confidence to invest in agricultural production capacity. CARP has held back investment in both production capacity as well as farm acquisition. An end to CARP will mean higher land prices since land will be valued for its higher income producing potential.

However, higher land prices are simply a “serendipity”, an added value, to the type of farming business I am writing about. I have found an extremely unique business opportunity, which will generate a great ROI (return on investment) and is completely passive. It has been structured by the developers (all foreigners) to be a one turnkey investment price. The price includes cost of the land, plus all

Clearing, planting, cultivation and harvesting for the first 5 years.

The business has been priced to fit the capital investment budget of the average foreigner retiree, and all landowners will be members of a cooperative which will share the farming equipment (tractors, equipment shed, and others). The farm will be “farmed” by the developer’s management team

The hottest trend now is in organic farming, and yet it is only in its infancy stage in the Philippines. There is one export product in particular which has caught my attention – the pili nut. The Philippines is the ONLY country with which produces and processes this nut in commercial quantity.

The current status of the pili is equivalent to that of the macadamia some 30 years ago. It has huge potential to develop into a major industry. They are in demand not only in Hong Kong and Taiwan but also in Singapore, Korea and Austria.

Types of Businesses – Definition of Business Types

A man is known by the company he organizes. – Ambrose Bierce

[Types of Businesses] – Owning your own business is a major part of having great economic success in a capitalistic society. There are many types of businesses to choose from so one of the first decisions you’ll make is the type of business to open. There are several options to explore for the structure of your business. This article will give you the definition of three of the most popular business types. These types of businesses are: (1) Sole Proprietorship, (2) Corporation, and (3) Limited Liability Company.

(1) Sole Proprietorship – individual ownership and operation of a business.

A sole proprietorship is not a separate organization and does not have any formal requirements for formation. The individual simply begins doing business. Most sole proprietorships are small businesses, and initially their business capital needs are small. Typically, the individual provides the funds. In order to get financing, a sole proprietor takes personal financial risk. The income of the business is the income of the sole proprietor and is reported on the individual’s income tax return. The proprietor is the manager of the business. The business can be transferred only if the owner allows it.

(2) Corporation – any entity formed by statue that has rights of a legal person along with limited liability for its shareholder owners.

Formal public filing is required to form a corporation. A corporation may use short-term financing or debt and equity financing. Limited liability for shareholders is one of the advantages of corporate organization. Corporations have the tax consequences of double taxation. Many shareholders may own a corporation but the board of directors controls the operations. Shareholders have the opportunity to express their views at the annual meeting by electing directors who represent their interests. A corporation can be dissolved voluntarily or involuntarily.

(3) Limited Liability Company – newer form of business organization in which liability is limited except for conduct that is illegal.

An LLC is formed by filing the articles of organization with a centralized state agency. Members of an LLC make capital contributions in much the same way as partners make capital contributions. Members of an LLC have limited liability; the most they can lose is their capital contributions. The LLC does not pay taxes; income and losses are passed through to the members to be reported on their individual returns. Members of an LLC adopt an operating agreement that specifies the voting rights, withdrawal rights and issues. A member’s LLC interest is personal property and is transferrable. Most LLC statues provide that the LLC dissolves upon the withdrawal, death, or expulsion of a member.

The definition of these business types is just the beginning of understanding how to fully utilize each structure. Because there are several types of businesses it is important to know the advantage and disadvantage of each. The type of business you organize will determine a lot about how you reduce liability, protect your assets and pay your taxes. Defining the business type for you is important in “Creating Your Own Lane” in business success.

Types of Restaurants and Their Characteristics

A restaurant is a place where food & beverages are sold & served to customers. There are different types of restaurants that have evolved to meet the dynamic demands of consumers. The following are some well-known types of restaurants & their special characteristics:

Bistro: it is a small restaurant that serves simple, moderately priced meals & wine. Braised meets are typical dishes that are provided in a bistro. It may not have printed menus.

Brasserie: formal restaurant which serves drinks, single dishes & other meals. The waiters are in traditional uniform of long apron & waistcoats.

Coffee shop: mainly serves snacks & beverages 24 hours a day; however it may serve all the three meals. This concept has come from the USA. A ‘cover’ is a term referring to a place setting with necessary cutlery, crockery & glassware required at the beginning of the service for one person. Though the main feature is 24-hour operation, some coffee shops may close early, depending on their location.

Specialty Restaurant: it serves specialty dishes which are its strength & contribute to the brand image. It operates during luncheon & dinner hours, between noon & 3 PM & between 7 PM & 11 PM. The ambience & décor of the restaurant reflect the theme of the specialty restaurant. The dishes of a particular region of a country or a particular set of people are also termed as ethnic cuisine.

Fine Dining Restaurant: this kind of restaurant primarily caters to the requirement of the affluent market segment which wants to experience fine dining. The restaurant may either offer dishes of one particular region or country or exotic dishes from various cuisines, wines, spirits & digestives. It opens mostly during dinner time. The ambience & décor of the restaurant will be elegant & rich. The wait staff employed is skilled & has a sound knowledge of the dishes served. The restaurant employs sommeliers to serve wines & other alcoholic beverages.

Popular Restaurant: this type of restaurant is informal, yet hygienically kept & it is located in a busy area such as bus stands, railway stations, shopping area & so on, catering to the requirements of the middle class & the customers who are in a hurry. The menu may either be displayed on a board at a prominent place or printed & laminated. It operates from 7 AM to 11 PM. The food is plated in the kitchen & carried to the table on a tray & served. The service standards are low & informal. Space is utilized to the maximum to accommodate more covers. The seat turnover is very high but the average revenue per cover is low.

During busy lunch hours, these restaurants serve business lunch, mini-lunch, & thali meals in a separate area to speed up service.

Dhaba: it is a roadside food stall found on national & state highways, mainly catering to the requirements of heavy vehicle crew. It specializes in ounjabi cuisine & tandoor cooking, serving very limited dishes, which are freshly prepared. The service is very informal & there is hardly any cutlery used. The dishes served here are inexpensive & taste like home-made food.

Fast food joint: the fast food concept was first introduced in the USA & now it has become popular around the world. It is characterized by the speed of service & the affordable price of the menu items. Changes in eating habits, non-availability of time to wait at the table & eat, increase in the number of working women, advancement in food processing technology, growth of teenage market, & so on, have contributed to the success of fast food operations. It is located in very busy area.

Rotisserie: this type of restaurant specializes in grilled or roast meat, poultry, & fish, which are prepared in front of the guests.

Barbeque restaurant: the marinated pieces of meat, poultry, fish, vegetables, paneer, & so on, are inserted into skewers & cooked over live charcoal or electric griller. It is generally located near a swimming pool, roof top, lawn, sea side, & so on, & is open during evening hours.

Night club: it operates during the night & offers dinner, dance, & live entertainment. Cabarets or floor shows are the main attraction of the night club. Guests are required to wear formal wear.

Night clubs levy an entry fee.

Discotheque: it operates during night hours. It provides a dance floor for guest to dance on. Special sound & lightning effect is created for an appropriate ambience. Drinks, especially beer, & snacks are made available during the operations. The service is very informal. It is patronized mostly by the youth & couples. The entry is limited to a certain number of guests according to the floor/room capacity & an entry fee is levied.

Ice Cream parlor: it serves different kinds of ice creams-sundae, coupe, bombe, cassata, & so on. These ice creams are stored in ice cream containers & are kept in refrigerated displays with see through glass. The parlors may either be a franchisee or an independent one making its own varieties of ice creams. The seating arrangements & service are very informal. Guests may either eat in the premises or have it packed & carry.

Cafe: this is a restaurant of French origin, mainly serving coffee & snacks. The French colonies in India, but served Indian snacks such as vada, samosas, bonda, & so on, along with coffee & pastries. The customers are served at the table following the American style which increases the seat turnover, but the average revenue per cover is low due to the lower pricing of dishes.

Cafeteria: the traditional cafeteria system consists of a straight line of counters containing a variety of hot & cold dishes. The cashier who is at the end of the counter makes bills for the items selected & collects payment. This form is widely followed in institutional & industry catering establishments.

In modern ‘ free flow cafeteria’ system, the counters are segregated according to the type of dishes offered-hot or cold, appetizers, soups, breads, sandwiches, entrees, salads, pastas & so on. In most cafeteria-style operations in India, guests make payment at the counter beforehand for items they want to eat & collect them against the bill at the appropriate counters. Cafeterias are situated in railway stations, cinema halls, shopping complexes, college premises, office premises, & so on, where the guest expects quick service.

Food Court: it refers to a number of independent food stalls, each serving items of food. The customers order the food items they want to have & consume them at a common dining area. The types of dishes offered represent local cuisine & dishes that are popular globally. Food courts are found in big shopping complexes, entertainment complexes, amusement parks, airports, & so on where there is a heavy traffic of customers.

Kiosk: it is small permanent or temporary structure on a sidewalk from which items such as coffee, tea, chocolates, pastries, savories & so on, may be sold. Most kiosks do not have seating provision.

Drive-in: customers drive in, park their vehicles at a parking lot, & remain seated in their vehicles. The waiters go to the customers with menu cards, collect orders, & deliver the food items on specially designed trays & the customers remain parked while they eat.

Oyster Bar: it is a restaurant that specializes in the serving of fresh oysters. The oysters are opened or shelled behind the counter, within the sight of guests. Fresh oysters are served on a bed of crushed ice with oyster cruet, brown bread, & butter.

Pub: it mainly serves various kinds of beer, especially draught beer, & snacks.

Bars: it offers all kinds of spirits such as whiskey, rum, gin, vodka, brandy, tequila, wines, & beers. Hotels & restaurants have an additional bar in the food service area/restaurant to dispense wines, beers, & spirits during the service, called a dispense bar.

Carvery: it is restaurant serving roast meat & poultry, which are carved at the carving counter by a carver in the presence of guests. Table d’hôte menu of three or four courses with roast meat or poultry as the main course is offered.

Products And – Or Services – Defining "Service-Oriented" Products and the Related Role of Technology

The economy can be analyzed using both market-driven and production-driven approaches to industry classification. The North American Industry Classification System (NAICS) uses a market-driven approach; the older Standard Industrial Classification (SIC) uses a production-driven approach.

Under a market-driven approach, the economy comprises goods-producing and service-providing industries. Goods-producing industries include: natural resources and mining, construction, and manufacturing; service-providing industries include: wholesale and retail trade, transportation (and warehousing), utilities, information, financial activities, professional and business services, education and health services, leisure and hospitality, and public administration.

Under a production-driven approach, the economy comprises product-driven and service-driven industries. Product-driven industries comprise enterprises that manage inventories available for sale as primary activities (regardless of whether they transform them or not). Under this approach, the retail, wholesale, and food service industries are product-driven. (The kitchens of food service providers are equivalent to factories.) Product-driven enterprises may have extensive cost accounting and operations practices for inventory management.

Industry classifications can be applied to an enterprise as a whole (the primary industry), and to the establishments within it, which may be in differing secondary industries. Establishments are facilities that include plants (factories and warehouses) and branches (retail and wholesale outlets).

For example, the hospitality industry is service-driven; under the production-driven approach, the bar and restaurant establishments within a hotel are product-driven. The entertainment industry is service-driven; under the production-driven approach, the retail and bar establishments within a theater are product-driven. The health care industry is service-driven; under the production-driven approach, the retail pharmacy establishment within a hospital is product-driven. Under the market-driven approach, all of these establishments are service-providing.

For example, a manufacturing enterprise is goods-producing under a market-driven approach, and product-driven under a production-driven approach. If it also operates a retail delivery system, the stores are service-providers under a market-driven approach, and are product-driven under a production-driven approach. If all sales revenue is sourced from its own products, the enterprise is in two primary industries. However, if forced to decide, its selection should be based upon core competencies – activities that it performs well. The enterprise can be divided into two separate business units: manufacturing and merchandising. The merchandising unit is an internal customer of the manufacturing unit. However, depending on strategy and policy, the manufacturing unit could sell products to wholesalers and other retailers, and the merchandising unit could buy products from other manufacturers and wholesalers. Under a market-driven approach, the manufacturing unit is goods-producing and the merchandising unit is service-providing, whereas under the production-driven approach, the merchandising unit is product-driven.

The make-up of the economy changes overtime as newer industries emerge and grow and older industries mature and decline. For example, the manufacturing industry is shifting from vertically integrated to strategically outsourced. Strategic outsourcers may manufacture specialized components and assemble finished products. However, by outsourcing the manufacturing of utility components to specialty scale manufacturers, strategic outsourcers can lower their production costs.

Biotechnology and nanotechnology are emerging industries. The information industries are growing as technology becomes more ubiquitous, and as knowledge is packaged in digital products. Knowledge is information that has been learned and retained. In the future, knowledge will be retained extensively in electronic form.

Products and services…

The term “product” is associated with something that is tangible – the resulting inventory from agricultural, mining and drilling, construction, and manufacturing activities. Outputs are either end-products, or components that are assembled into end-products in downstream processes within the enterprise or in its customers.

The term “service” is associated with something that is intangible – capabilities either delivered at the point or time of sale, or shortly thereafter, or as a supporting service. Supporting services can be purchased at the time of sale for downstream use, or later, and consist of such items as warranties beyond those bundled with the product, preventive maintenance, and routine cleaning and repairs.

Functions and features of products are easier to discern than those of services, which are event or activity driven, and may occur in the future.

The term “time of sale” means when a contractual or non-contractual agreement between a buyer and a seller is made, and does not necessarily mean when revenue is recognized and earned. Revenue is recognized and earned according to the accounting principles that fit the service offering, which may be over a period of time.

A commodity is a product or service that is indistinguishable and interchangeable with another of the same type because there is little to no value added. Many commodities are natural, such as produce, minerals, oil, and gas. Services can be commoditized too. The distinguishing factors of a commodity provider include convenience, quality of service, and price.

Product-driven enterprises also offer delivery and supporting services. Delivery services include arranging for transportation, dealer preparation, training, and gift wrapping. Supporting services include cleaning, repairs, and maintenance. To remain competitive over time, enterprises have to add services with their product offerings that exceed customer expectations. However, if customers require such services, then they must become part of the basic offerings. For example, bathroom facilities and color TV are included in modern hotel rooms, even though the primary purpose is providing a place to sleep.

Although services are intangible, their effects are not. Transportation services move people, cleaning services remove dirt and stains, and repair services restore items to working order. Services require facilities, equipment, and supplies that are bundled in. When products are bundled in, the enterprise pays sales or use tax, if applicable; when products are sold with services, the customer usually pays sales or use tax, if applicable.

Service-driven enterprises can produce tangible deliverables. For example, dry cleaners produce clean and pressed clothes; professional service firms, such as architects, accountants, attorneys, and consultants produce reports; and engineers produce design drawings that can be transformed into facilities, equipment, or other tangible products.

The recording and movie industries employ technologies that can capture sound and pictures. Starting in laboratories, these industries transform science into art. Hence, live entertainment performances (services) can be transformed into recorded products. As a consequence, an event or activity can be reproduced, duplicated, distributed, and repeated to the public-at-large indefinitely. Digital products are impacting traditional manufacturing, distribution, and consumer buying behaviors, and placing intermediaries at risk.

Process control and information technologies have enabled seamless integration between designers and manufacturers. The “design-to-construction” process becomes ubiquitous as computer-aided design and manufacturing technologies (CAD/CAM) enable a designer in one location to transmit specifications to manufacturers in others. The designs are virtual, and result in instructions that control manufacturing equipment in both local and remote locations. As a consequence, manufacturing can be outsourced strategically to any manufacturer that can accept electronic designs anywhere at any time. Because the process is seamless, the precision is higher.

As more enterprises adopt the design-to-construction model, dramatic changes will occur in the structure of industries. For example, in the publishing industry, books can be printed on demand from electronic files upon receipt of orders placed over the internet, eliminating the need for physical inventory available for sale at printers, publishers, and bookstores. The electronic files represent a virtual finished goods inventory from which physical products can be made when necessary. As a consequence, inventory carrying costs are lower.

Both product-driven and service-driven industries render service from centers that receive inbound and place outbound service and telemarketing calls. Call center activities can be outsourced in a similar fashion to manufacturing.

The notion of strategic outsourcing can be applied to almost every function in an enterprise provided intellectual property is protected. However, although management consultants may be used in the development of strategy, the ultimate responsibility for planning, deployment, execution, and performance remains in-house with the governance function.

Products and/or services…

The term “products and/or services” describes collectively all types of products and services.

Service-driven industries are evolving into providers of both “product-oriented” and “service-oriented” services. In order to differentiate product-oriented services from the delivery and supporting services, the term “service-oriented” products provides more clarity. Service-oriented products must be definable, duplicable, and repeatable. They are intangible outputs of processes that are represented by tangible items, packaged in a definable form. Technology plays a major role in the delivery through hardware, software, and both voice and data telecommunications. “Hard” products are tangible and “soft” products are intangible.

For example, traditional land phone line services were offerings with few differentiating features, primarily in the style of equipment. As the telephone system migrated from electro-mechanical to electronic, the offerings were transformed into service-oriented products with features such as call forwarding, caller identification, call waiting, and voice mail. Cell phone offerings are service-oriented products with more extensive functions and features than land lines. Cell phone service-oriented products have cameras built-in, and have delivery and supporting services bundled in such as account information, internet access, and application software for calculators, calendars, contact information, notes, games, music, pictures and movies. Cell phone and computer technologies are converging.

In the financial and business and professional services industries, service-oriented products are packaged with such items as accounts, agreements, brochures, contracts, databases, documents, equipment, facilities, policies, procedures, and statements.

In the leisure and hospitality industries, service-oriented products such as flights, hotel rooms, car rentals, and limousine services are packaged with facilities, equipment, and supplies. The types of facilities and equipment define specific offerings. For example, an Airbus A380 renders a different experience from a Douglas DC3 even though the principal service is the same: providing air transportation. A hotel room with a view of the ocean renders a different experience from one with no windows at all, even though the principal service is the same: providing accommodation. The quality of the accoutrements such as blankets, pillows, towels, newspapers, cable TV, internet access, and fruit baskets can affect the overall experience. A Cadillac renders a different experience from a Chevrolet, even through the principal service is the same: providing a rental car to drive, or a limousine.

Travel-related service-providers bundle air, hotel, car rental, and limousine services into packages to make the buying decisions easier for consumers. Event planners bundle travel-related services with conference and convention services for enterprises.

Consumables, durables, and facilities…

Manufactured products consist consumables and durables.

Consumables are products change or wear out as they are used and comprise food, clothing, personal care, health care, household supply, and office supply items. Media such as books, records, audio and video CDs, and DVDs are classed as consumables – the intellectual property is worth far more than the media.

Durables are long lasting equipment items such as appliances, furniture, and vehicles.

Digital products may involve no media if they delivered electronically other than the server of the publisher and the electronic device of the user.

Facilities are the outputs of construction activities and are made of durable materials.

Contractual or non-contractual products and/or services…

Agreements are contractual or non-contractual based depending upon the type of offering, and the nature of the relationship between buyers and sellers.

Consumable products can be sold with the right to return for exchange or refund within a certain period of time. Durable products can be sold with agreements that define warranties and maintenance.

Service-oriented products and services can be sold with agreements that specify exactly what is to be delivered and when, with procedures for reporting problems or complaints.

In negotiations, discussions should embrace the specific functions and features of hard and soft products, and the delivery and supporting services. Experienced negotiators pay attention to both the tangibles and intangibles because the total cost of ownership comprises both.

Digital-construction and digital-manufacturing…

As technology continues to develop, service-oriented products will become more common because it makes intangible items definable. New knowledge-based industries will emerge.

The reproduction of software on physical media is classified as goods-producing, and all other development and publishing activities are classified as service-providing under NAICS. However, software and other digital products are durable because they can last indefinitely, even if they have to be transferred among storage media. Software products are developed by service-providers such as business and professional services firms, publishers, and “in-house” developers. Nevertheless, software development activities require the project management disciplines of goods-producing industries, such as construction and manufacturing, to be successful.

The “digital-construction” and “digital-manufacturing” industries are evolving: digital construction delivers software; digital manufacturing delivers soft service-oriented, information, and knowledge-based products. However, through CAD/CAM processes, software delivers hard products too. In the future, almost all hard and soft products will result from digital-construction and digital-manufacturing processes.

Defining product and/or services is an enterpriship (entrepreneurship, leadership, and management) competency.