Good day Sir,

I am an officer about to launch a cooperative by January 2008… [W]e wish to have an idea on how to completely run a bakeshop since it’s a good business in the location we have. I would appreciate any help that you could extend to us.

Regards,

Charlie Mejos Jr

My comments:

Before you start, you must realize that there are five groups of people or “publics” that you need to face the moment you start your business: 1) your organization - this includes your staff, sellers, book keepers, managers, bakers, coop members etc.; 2) government - local gov’t, baranggay, city hall for permits, BIR for taxes, Food & Drug Adm, DOH,etc. 3) your suppliers - where to get your basic ingredients like flour, sugar, eggs, butter, fats, flavorings, etc. 4) your competitors - neighborhood bakeries, supermarkets around, household bakeshops doing small quantities for special orders, and 5) your customers - who are they and where do they come from; what they want (variety) and when they want it; the price they are willing to pay for it; seasonality involved like christmas season, summer vacation and special occasions, etc.,

For a coop to survive, the key issue is the selling price to your coop members. Too low mark-up will make your operations lose money. Too high a mark-up will turn off your members and force them to buy outside. I believe that you must first survey from among your members and find our what their budget for bread is per week. From this survey or interview, try to set a sales target. The next step is to determine your fixed and variable costs. Fixed costs include utilities, depreciation, rent, salaries, etc. Variable costs include costs related to the production of a specific bakery product, say pullman bread or pandesal, which may include direct raw materials used, etc. In business school, we teach our students how to compute for their BEP or break-even point in sales. This means that upon selling that much quantities of products, your profit will just be able to pay for the fixed costs that you shall be incurring on a month-to-month basis.

At the risk of sounding too mathematical, let me introduce you to a formula which I regularly teach anyone who consults me:

BREAK EVEN POINT (Sales) =               FC
—————
1 - VC

where FC = Fixed Costs
VC = Variable Costs

Let’s take an example. After summing up your rent, light, water, taxes, labor costs, etc. you realized that your fixed cost is Php50,000, the question now before you is how much sales must you realize a month in order for you to “break-even”? The concept of break-even is based on the expectation that whatever gross profit you realized will have been enough to just pay for all of your expenses or costs, including adminstrative costs. Before you continue, try to compute for your variable cost and averge it out. Let’s say for a coop, instead of applying the industry mark-up of cost times 2.5 or 3, your opted to just mark-up at cost times 2 to make your price attractive to the members. This means that your variable cost is 50% of your selling price or something like 0.50 for every 1.00 selling price. After applying the formula, you will be able to determine your BEP at Php100,000. On a daily basis, you must be able to sell at least 3,300 in order to stay in business without losing. The final step is for you to come up with a product list that will motivate your members to buy your bakery products and make it to the 3300 sales target, on average, daily.

The above is the finance part of the business. Ultimately, it is the quality of your baked goods that will make your customers come back. You must have a “product-man” who knows the baking process from start to finish. He may or may not be a baker. He is just someone who understands the intricacies of the baking process, if not the business in general.

JOHNLU KOA

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How can i improve my financial IQ to manage my resources better?

Terence

Hi Terence -

Financial IQ, unlike Mental IQ, is not inborn but learned. Start by understanding how business works and how financial resources are used to produce goods and services. Go to National Book Store and pick up a book on accounting. Read the first chapter. If that proves confusing, then pick up a marketing book and read the first chapter. Understand how finance empowers an organization to produce goods and services, extend credit, etc.

Write me back after you’ve read it. By the way, don’t buy the book just read thru it and perhaps make some notes.

Regards,
JOHNLU KOA

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I would like to go into business supplying pigeons for hotels and restaurants — mainly Chinese ones — here in Metro Manila. My problem is: I dont know the prevailing market price of pigeon. Where could I ask for their purchase price and dressing standard for pigeons and their weekly requirements? Any help towards this direction will be highly appreciated.

Benson

Dear Benson,

Doing some research is always necessary and useful so that you don’t go into the business blindedly.

Try to make phone calls to existing restaurants and even suppliers and inquire.  Getting them to talk lengthily to get as much information will be challenging.  Also, try to visit them personally and get information.  If there is a restaurant association, they can also be very helpful.

Let me know if you have some developments.

Regards,

Jay Aldeguer

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Dear Joey,

At present, I’m working here at Kabul, Afghanistan as Logistician/Bookkeeper/Office Manager  for a US Government contractor.  My savings are temporarily invested in mutal fund. That’s the only investment I can rely as of now since I’m still working abroad.  When times come that I need to stay at home for good and do business, I want a business where my savings will not go into waste.  Before, I have a small retail business (Variety Store) for 15 years but I stopped it when I left Manila again for overseas employment.  I will appreaciate very much any assistance you could provide me on business matters.  By the way, I’m 49 years old, same with my wife and has 3 children…Two are already professionals and my youngest will be graduating this coming March with a degree of Business Entrepenuership from UST. I’m looking for an early retirement if possible and set up a business of my own.  Again, thanks a lot and God Bless You.

Best regards,

Jhune

Dear Jhune,

Having your capital is a good start and the requirements would vary in different businesses.  What is more important however is to carefully analyze and identify what are opportunities in your area. By this, I mean what do you believe is a product or service with a strong need in your area that is not being served at all or adequately.  You can develop a new business to serve this NEED.  It is is also important to assess whether this particular need is something you would like to do or enjoy doing and something you are or can be good at.

You must study that particular industry or sector, to know the ins and outs if you will decide to pursue such undertaking.  These are vital factors that can help increase the probability of your success, while enjoying what you do.

Again, whatever that is, it will be helpful as well to have a better handle of your business.  Nothing beats a business personally well run by the entrep, having the passion and drive for it and a lot of perseverance and patience..

Thank you.

Joey Concepcion

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I’m a president and general manager of an exclusive distributor of ISO certified Ilhwa Ginseng Products in the Philippines.

Our mother company has given us the green light to manufacture an imported product locally. My plan is to start operating by 3rd quarter of next year.

My biggest challenge is how to get some research data on the health drinks manufacturing process, as I don’t have experience yet.

I’ve seen your program on the TV and I’m happy hearing the stories of successful people in the field of entrepreneurship.

I hope that my inquiry would not be an added burden to your already loaded schedules to attend to. I’m looking forward to your wisdom and guidance on the matter above.

God Bless.

Venus

Dear Venus,

It might interest you to know that in preparation to answering your business question, I visited one of your stores yesterday, while I internalized what I would do, had I been in your situation - the head of a respected health drink company whose expertise lies more in retail and marketing, faced with the challenge of setting up production in the Philippines. My approach would be to research from the Internet on Health Drink manufacturing processes -specifically here in the Philippines, as much as I could.

Simultaneously, I would put out an ad in the papers to hire experts and consultants in the field. Chances are, these will be technical people. If possible, I would request the head office to send a product manufacturing expert to help with the shortlisting of potential candiates and consultants for the manufacturing facility. This way I am guided accordingly, and adhere to the high standards for iSO certified firms. I acknowledge that I am not a specialist in everything essential to my business - so the next best thing is to hire the necessary expertise . I would also consult the Academe, like UP Los Banos , (University of the Philippines) that is known for plants - and perhaps, the manufacturing process.

I hope I was able to help.

Here’s wishing you the Best of Luck in your new locally produced health related drink!

Delby Bragais

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Dear Sir,

I am a Hotel Restaurant Management Graduate with 100k capital. what is the best business that you can suggest.

Thanks in advance

Althea

Dear Althea,

Having your capital is a good start and the requirements would vary in different businesses. What is more important however is not to enter any business. I would suggest for you to carefully analyze and identify what are opportunities in your area.

By this, i mean what do you believe is a product or service with a strong need in your area that is not being served at all or adequately. You can develop a new business serve this NEED. It is is also important to assess whether this particular need is something you would like to do or enjoy doing and something you are or can be good at. You must study that particular industry or sector, to know the ins and outs if you will decide to pursue such undertaking. These are vital factors that can help increase the probability of your success, while enjoying what you do.

Again, whatever that is, see if you have the passion and drive for it and a lot of perseverance and patience..

Thank you.

Joey Concepcion

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