We’ve tried a number of small home-based businesses, some thrived until now while some didn’t work out. By small, we mean as low as P500 capital. Posting this not to give you an earth-shaking new business venture, but just to list down insights we’ve gained from such ad-ventures.
1. Market Niche
Kapeng Barako. This started when we went to my mother’s hometown in Batangas and saw the big disparity between the price of kapeng barako there and the ones sold online, as well as those in the supermarkets. Price-wise, we figured we can compete even if incorporating shipping costs from Batangas. Not much people selling coffee online too (OLX or Facebook), and the few who do, have not so good-looking packaging. We figured we can improve on the packaging too. Priced between online sellers and those in supermarkets, with competitive packaging — so somehow this was our niche.
We’ve been doing this for more than 3 years now, and margins are really good. Just create an ad via OLX or set-up a page on Facebook where people can find your product and order, then you’re good to go. Online selling also relies heavily on courier services (we sell via xend.com.ph and fastrack.ph) which deliver your products to customer’s address. Managing customer expectations on expected delivery date is also important. If you can underpromise and over-deliver, better.
Likewise, it must be easy for the customer to pay you, as such having accounts in major local banks, and accepting payments via money remittance centers, also works. We even get FB inquiries from overseas. You’ll be surprised, we also get inquiries from those residing in Batangas, as they’d rather look for coffee sellers online than troop to their nearest public market.
3. Quality and Inventory Management
Do not scrimp on quality. Pinoy consumers are willing to spend a little more as long as they know that they’re getting quality products. There are cheaper coffee variants available from where we source our coffee but we always stick to our trusted supplier, even if their coffee is P60/kg more expensive than the rest. But we know that in doing so, we’re getting quality coffee for resell to our customers.
If you can, find an online business that’s easy in terms of inventory management. For the coffee, it’s just a matter of having ground coffee and whole coffee beans in proper sealed storage. We are also careful not to overstock so that we keep the freshness and aroma of our coffee. Then managing the packaging to ensure that our different size-variants have ample supply of packaging.
If you want to get an idea on business packaging, just head to Divisoria, near Juan Luna and Ilaya streets.
4. Ease of Production / Operation
We tried selling export overruns before as we found a potential cheap supplier. It was then we realized that selling clothes online (home-based) is quite tedious in terms of inventory management: various sizes, various colors etc. Too many combinations. It’s also tedious to display online, and some you even have to wash or iron just to make it look sellable. Some you even have to wear and model yourself in front of a camera. Lol!
I also got to try selling personalized notepads, bag tags, button pins etc. Margins were also good, but aside from inventory management nightmare, producing the products were also labor intensive. It came close to a point that we considered hiring a daily-wage worker just to keep up with the orders. And for those who have a day job, one cannot easily leave “employees” at his/her house while s/he is at the office. Plus, our product pricing was not ready for a surge in labor costs.
My parents are retired (and not tech-savvy) so they are the ones managing the “operations-side” of producing customer’s kapeng barako orders since it’s easy anyway.
We Pinoys are bandwagon. If we see booming businesses, we tend to imitate them, join them. I’ve previously shared my thoughts on this so I’d rather not bug you with more.
My well-meaning colleague also told me to start a sari-sari store in our house so that my parents will not get bored, and for extra income. He kept on repeating this suggestion even if I already told him that there are 5 sari-sari stores within a 15-meter radius from our house. He also suggested a water purifying station and delivery service. Even if there are 3 tricycles per 30 minutes who pass by our house who also sell the same thing (plus the fact that capital costs for a water purifying business are also big).
Point is, if you can, be unique.
6. Small Gains, Big Margins
So my parents, aside from selling recess snacks in a nearby grade-school, they also sell ice, ice candy, bottled water, juice in tetra packs. Para may pagka-abalahan, cure for boredom. I’m actually surprised that people still buy ice even if they have their own refrigerator at home. And oh the classic ice candy. So far, we’re the only ones selling ice candy in our whole street, which is good.
The point is, these products might give you small gains in terms of actual amount, loose change you might say, but in terms of profit margin, it can beat even the risky basuras for sale in the stock market. It’s tough to get 40% to 50% ROI in big businesses, but in these businesses, it’s easily attainable. Plus, as we’ve mentioned before, Juan should never underestimate the power of small loose change gains.
We Pinoys are impatient with wealth and success. We prefer the instant ones (such as winning in game shows or lotto) so instead of starting small, we just dream big and wait big, in the process we don’t get to start at all. Unlike the Chinoys, they are very much fond of small but steady income. Di bale nang liit kita, basta tuloy-tuloy.
7. O.C. about Costing
Whenever I see my mom preparing ice, ice candy, turon, kwek-kwek, etc, I always ask her what her unit cost is. And she knows! She knows how much revenue she’ll get by selling all of the items, and she knows how much her profit margin will be.
A friend of mine used to have a small cupcake business (very labor intensive by the way), and when I asked her how much it costs her to bake one cupcake (since she’s selling it to us at a discount), she was not sure. She says she just pegged the pricing to comparable cupcakes sold online.
Point is, you have to be OC in knowing the costing of your products. For our kapeng barako, we know the costing for each size variant, and we know how much our SRP is. So that when customers ask for discounts, we can readily give them discounts because we know how much our costs are, and how much we’ll still earn even if we sell at a discount.
How about your small business stories? Please share them here.