Eternal Success Story in the Making

If you play chess you will understand that no matter how powerful your piece is (ex. Queen), it is useless when placed in a position where its mobility is hindered. With that said, even if you have the best services (high-end computers, skilled people, quality services etc.) but if you are not accessible or visible to customers, you will not survive in the business.

In choosing a location for your business you should determine first who your customers are. For me, I would go with the following ratio:

10% High school students
60% College students
30% others (Working people, Relatives of OFW, etc.)

With that ratio, I would choose a location near Universities/Colleges but it is also near residential areas and businesses. As you can see, this is where major internet café are positioned like Netopia (inside shopping Malls that are near colleges). Although this would mean going head to head with the big players, there are other features that you could employ that they can not. I’m not talking about lowering your price; I’m talking about having your business outside the mall and opening your business early and closing late. This is because shopping malls usually opens at 10a.m. and closes at 9pm. I’ll discuss other setup that you can use in another post.

Well, that is my ideal setup… You may have your own… it depends on your risk tolerance. I’ll discuss the advantages and disadvantages of each location in consideration with your target customers.

Near High Schools
Advantages:
• Rest assured that you have customers whether or not they have school assignments or projects. It is because high school students mainly play games.
Disadvantages:
• Usually putting up an internet café with “gaming” services near schools are prohibited. You should check existing local ordinances. But even if there are no existing local ordinances that prohibits you to offer gaming services near schools… there is always a possibility that they will make one (especially if the parents of addicted students will complain to schools and ask help to your local government).
• Low sales during Saturday and Sundays. But the most dreaded season is when students are taking their long long long vacation!!! Aw! You should have enough savings to pay your bills during those months.

Near Colleges

Advantages:

1. Compared to high school students, it is obvious that this market has greater resources to accommodate their gaming and internet needs and desires J
2. It is more unlikely that there would be any “strict” implementation of any rule/ordinance that prohibits internet café near colleges. Why? Because internet café is more of a need than a want when it comes to college students. They are doing more research and project compared to high school students.
3. Your “other” services will be availed more frequently by college students like printing services, research, encoding, webcams, card, tutorials etc. Unlike highschool setup, hindi na gaming and internet ang bread and butter mo! You earn a lot with these extra services.

Disadvantages:

1. Again, when sem break comes expect a slight decreased in sales. But unlike highschool, you can still survive during vacation as there are summer classes in colleges.

Working People:

I just found a perfect place if you really want to target working people especially people who belongs to the upper mid class of society. You just need to compete with Netopia. The place is at Ayala, behind Glorieta. Their current price is 50 pesos an hour!!! Last time I went there, I was on the waiting line! I guess they have around 30 – 40 computers. Imagine that.

Part I

Other Investment Options

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For People Seeking Advice:

Please don’t put your email address anywhere in a comment. It will just be picked up by spammers. I’m no longer sending Feasibility Study as it is being used by students. Spoon feeding students is not a good teaching practice.

I think, the information here are sufficient to start a feasibility study on your own. Anyway, I’m planning next week to leave my contact details for anyone who are really planning to put up an internet cafe (not for college students for their feasibility study). And maybe we can plan to meet in person if you want further advice. Please do consider that I also have activities (i.e. work, social, spiritual etc.), I may not reply as soon as you want me to.

I assume that you’ve arrived at this site because you are searching information about the internet cafe business in the Philippines for the purpose of determining whether you’ll push through with your plan of putting up one. 

Good for you! ‘Coz you have made the most important process of all to be an effective entrepreneur… Feasibility Study!

This is not an exhaustive study, but I will just point out the major factors why you should or should not put up an internet cafe in this country based on my experience as an X-internet cafe’ owner. I’ll try to break them down into seperate posts.

It is sad to know that a lot of people do not perform feasibility study before they put up a business. It is also sad to know that other people who where taught how to perform F.S. through education does not properly do it. These people are so optimistic that they are blinded by their desire to have a business of their own.

So let’s get it on! Let us start with the topic of COMPETITION

COMPETITION. “Know thy self and know thy Enemy (competitors)” – And don’t forget to ask HOW MANY ENEMIES will you have? This may be the number one factor that you must consider. Even if you have the skill, the capital, best service, positive attitude, good management, good location, passion for the business… even if you have all of these you will not survive if you will decide to ignore the LAW OF SUPPLY AND DEMAND.

We are in a free market and the “Law of Supply and Demand” will certainly apply. I just can’t understand why there are investors who put up their internet cafe in an area wherein there are 10 internet cafe’s already established! There are a lot of internet cafe that goes to bankruptcy when they ignore that law or in my case I failed to FORESEE the increased in number of internet cafe in my area.

When there are too many i-cafe in one area, the most common thing that will happen is that the i-cafe who has few customers will lessen his service price upto the point that they will go below their “break-even” point just to attract customers. Now it is impossible for you to compete with these “suicidal” competitors who are “operating at a lost”. What do I mean? How many internet cafe do you know who have a rate of 15 pesos an hour? FYI, with this rate, those internet cafe are operating at a lost. Why? Just try to compute for their monthly expenses and DON’T forget the DEPRECIATION (of course you need to get back your investment) of your computers, you will see they are operating at a lost.

Question: What is the mentality of this “suicidal” competitors of yours?

Answer: The Crowd Mentality. They think that if they run their business with their computers running 9-10 hours a day having no idle computers… they think they are gaining profit. They want to gain customers by lowering their price. Usually this is done by “new players” or new internet cafe’s. They term this as “promo”. Certainly customers especially teenagers who want to maximize their budget, they will try the new internet cafe’. This is not bad perse, but it is damaging to the whole internet cafe business in that area if that new player runs his/her promo over a long period of time. The problem in here is that you can not do anything about it! Even if half of your regular customers had transfered to that new icafe’! Well… actually you can do something, you could also try to be a “suicidal” i-cafe owner and have your rent at 15 pesos an hour. What will happen in here is that all of you i-cafe owners in your area will be engaging in a “price war”… There are no winners in such a war. It’s a domino effect really.

The proper attitude that each i-cafe must have is that one must “COMPETE WISELY”… see the bigger picture that will affect the internet cafe business in your area. Do not use the computer rental fee as a promotional tool to attract customers. Every i-cafe must realize that it is better to compete with your competitors by improving one’s services, computers, environment etc… rather than lowering your rental fee ‘coz that will only result in a PRICE WAR wherein everybody looses. If there will be only one idea that you will be remembering by reading this post is “COMPETE WISELY”. Wag nyong sirain ang internet cafe business sa inyong lugar sapamamagitan ng pagbaba ng presyo… domino effect lang ang mangyayari.

You should put up an internet cafe if:

1. There are a maximum of 2 internet cafe in your target area. Of course this all depend on the size of the market, but even if the size of the market is large I will not invest in an i-cafe if there are 3 or more competitors in that area… why? Sooner or later there will be other people who will put up an internet cafe in that area (beware of the big players like NETOPIA). That is the “gaya-gaya” mentality of Filipinos especially now, there are companies who will provide you all the things you need to setup an internet cafe (Smart) in an installment basis. The point in here is that you should only put up an internet cafe wherein your ROI will be achieved in just 1 year… at most 2 years. Why? Because the internet cafe business is easy to put up. You must be ready to convert/sell the whole business or the individual units when “Price War” begins in your area.

2. There is an association in the area that has the legal powers to empose/set the minimum service price. I’ve heard of one association that have done this and they were given the power by their local government to regulate their prices. But this is very difficult to achieve. In my case, there existed an association in our area but it has no legal powers… so it’s policies are only followed by members who understand the value of unity in pricing… but there will be always other “dumb” i-cafe owners who still do their own pricing and go below 20 pesos an hour… (some 10 per hour! gosh).

3. You can somehow make an agreement with you local government that only your internet cafe be allowed to be given a business permit. I’m not sure if this is possible with an internet cafe. But I know of some businesses like a cable company in our area in which that company is the only one allowed to operate in our town… and no other cable company are able to setup their business. Dirty Politics might be working in here… but hey “that’s business”! If you can do this, good for you!

Given the above condition, the internet cafe business is a lucrative business. Especially if you can dictate a P35 per hour price and continuous flow of customers! Hey that is not impossible with the above conditions. 6-7 years ago the rentals is about 35 – 40 pesos an hour… but instead of increasing the price because of increased in operational cost (electricity, building, labor), the computer rentals go down????!!!! Tama ba yun? Lahat nagtataasan ng presyo… ang computer rental bumababa? Hindi naman bumaba ang operational cost?

If you have finally decided to push through it… our next topic will be the second most important factor to consider… LOCATION. It would be nice if people reading this would post a comment/question or suggest a topic

Part II

How To Rob an Internet Cafe… (Internet cafe owners, don’t read!)

Other Investment Options

For People Seeking Advice:

Please don’t put your email address anywhere in a comment. It will just be picked up by spammers. I’m no longer sending Feasibility Study as it is being used by students. Spoon feeding students is not a good teaching practice.

I think, the information here are sufficient to start a feasibility study on your own. Anyway, I’m planning next week to leave my contact details for anyone who are really planning to put up an internet cafe (not for college students for their feasibility study). And maybe we can plan to meet in person if you want further advice. Please do consider that I also have activities (i.e. work, social, spiritual etc.), I may not reply as soon as you want me to.

ym: crhrazrmyrsurcrcersrsr@ryarhoro.crom  (without the aRs)

You may ask advice except for a feasibility study. Cheers!

 

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Bro. Eli Soriano’s Blog