Henry Ong
Always short of cash?
Have you ever wondered why you sometimes experience cash shortages even if your business is booming? No matter how much money your business generates, perhaps you always feel that you are always short of cash every time your suppliers are knocking on your door. The cause of the problem may be poor accounts payable management. When managing cash flows, therefore, you should remember that timing your accounts payable payments is as crucial as collecting your accounts receivables.
You can manage your accounts payable by stretching out the payment terms as long as possible without damaging your credit standing to suppliers. There are some business owners who pay their payables too early simply because they have so much cash in the bank, but they don’t know that they lose the opportunity to earn extra interest income on their cash. On the other hand, there are entrepreneurs who pay their suppliers too late and end up being slapped with penalties and charges. It is thus important that you manage your payables to the best interest of both parties.
As a guide, you can determine your days payable outstanding by first computing your payable turnover. For example, assume that your accounts payable at the start of the month was P150,000 and that during the month, you made total merchandise purchases of P250,000. After one month of operation, you found out that the balance of your accounts payable by month’s end was P100,000.
To compute for the payable turnover, divide your total purchases of P250,000 by the average accounts payable of P125,000; this will give you a ratio of 2.0x. This ratio simply tells you that you pay for your purchases two times a month. To get the number of days payable outstanding, divide 30 days by the ratio 2.0 to get the average of 15 days.
What this means is that on the average, it takes about 15 days for you to pay your suppliers. With this information on hand, you can now check how many days it takes you to sell your inventory and collect all your receivables. Ideally, the total number of days of inventory and receivables should not exceed your days payable outstanding; this way, you would receive all cash collections just in time when you are about to pay your suppliers. In this example, let us say you can convert all your inventories into cash in 12 days.
This would mean that on the 12th day, you would already have the available cash to pay your suppliers and enjoy three more days before your accounts payable becomes due. You can then take advantage of this by depositing the cash in an interest-bearing bank account.
If business is slowing down and you are finding it difficult to unload your inventory and to collect from your customers, you may consider stretching out your credit terms with suppliers. From the same example, if the number of days to convert your inventory to cash is rising to 18 days from 12 days, you may need to negotiate your credit terms with your suppliers, for instance by having them extended by at least three more days up to 18 days to protect your cash position.
Sometimes, so you will be encouraged to pay early rather than on the due date, suppliers may offer you a trade discount like, say, a 2 percent discount if you pay within 10 days for an account payable due in 30 days yet. In general, trade discounts are good because it allows you to take advantage of it to lower your purchase costs. But there are times when trade discounts are not favorable.
How would you know if it is good or not? You can do this by computing the effective interest cost assuming that you are going to borrow the money to pay your account in 30 days. You then should compare this to the prevailing borrowing rate from the bank. The formula for effective interest cost is EAI = (discount / 100 percent - discount) x (365 / payment period – discount period).
Suppose the prevailing borrowing rate is 16 percent per annum and you are offered a 2 percent discount if you pay in 10 days an account that is otherwise payable in 30 days. Using the above formula, we will find that the effective annualized interest cost is 37 percent as compared to only 16 percent, so it is wise to take advantage of the discount.
If you have negotiated your credit terms to 60 days, your effective interest cost would be 14.9 percent, lower than the prevailing bank rate of 16 percent. In this case, you can afford not to take the 2 percent discount because it is cheaper to stretch out your payment.
It is perfectly all right for you to control the terms of accounts payable so it is to your advantage. Perhaps, it will be helpful if you can put a monitoring system where you can sort all accounts payable that will soon be due; this way, you will know just how much cash you will need to prepare to pay your suppliers on time.
Showing posts with label Business Bits. Show all posts
Showing posts with label Business Bits. Show all posts
Monday, November 17, 2008
Monday, November 10, 2008
BUSINESS BITS
Henry Ong
Always short of cash?
Have you ever wondered why you sometimes experience cash shortages even if your business is booming? No matter how much money your business generates, perhaps you always feel that you are always short of cash every time your suppliers are knocking on your door. The cause of the problem may be poor accounts payable management. When managing cash flows, therefore, you should remember that timing your accounts payable payments is as crucial as collecting your accounts receivables.
You can manage your accounts payable by stretching out the payment terms as long as possible without damaging your credit standing to suppliers. There are some business owners who pay their payables too early simply because they have so much cash in the bank, but they don’t know that they lose the opportunity to earn extra interest income on their cash. On the other hand, there are entrepreneurs who pay their suppliers too late and end up being slapped with penalties and charges. It is thus important that you manage your payables to the best interest of both parties.
As a guide, you can determine your days payable outstanding by first computing your payable turnover. For example, assume that your accounts payable at the start of the month was P150,000 and that during the month, you made total merchandise purchases of P250,000. After one month of operation, you found out that the balance of your accounts payable by month’s end was P100,000.
To compute for the payable turnover, divide your total purchases of P250,000 by the average accounts payable of P125,000; this will give you a ratio of 2.0x. This ratio simply tells you that you pay for your purchases two times a month. To get the number of days payable outstanding, divide 30 days by the ratio 2.0 to get the average of 15 days.
What this means is that on the average, it takes about 15 days for you to pay your suppliers. With this information on hand, you can now check how many days it takes you to sell your inventory and collect all your receivables. Ideally, the total number of days of inventory and receivables should not exceed your days payable outstanding; this way, you would receive all cash collections just in time when you are about to pay your suppliers. In this example, let us say you can convert all your inventories into cash in 12 days.
This would mean that on the 12th day, you would already have the available cash to pay your suppliers and enjoy three more days before your accounts payable becomes due. You can then take advantage of this by depositing the cash in an interest-bearing bank account.
If business is slowing down and you are finding it difficult to unload your inventory and to collect from your customers, you may consider stretching out your credit terms with suppliers. From the same example, if the number of days to convert your inventory to cash is rising to 18 days from 12 days, you may need to negotiate your credit terms with your suppliers, for instance by having them extended by at least three more days up to 18 days to protect your cash position.
Sometimes, so you will be encouraged to pay early rather than on the due date, suppliers may offer you a trade discount like, say, a 2 percent discount if you pay within 10 days for an account payable due in 30 days yet. In general, trade discounts are good because it allows you to take advantage of it to lower your purchase costs. But there are times when trade discounts are not favorable.
How would you know if it is good or not? You can do this by computing the effective interest cost assuming that you are going to borrow the money to pay your account in 30 days. You then should compare this to the prevailing borrowing rate from the bank. The formula for effective interest cost is EAI = (discount / 100 percent - discount) x (365 / payment period – discount period).
Suppose the prevailing borrowing rate is 16 percent per annum and you are offered a 2 percent discount if you pay in 10 days an account that is otherwise payable in 30 days. Using the above formula, we will find that the effective annualized interest cost is 37 percent as compared to only 16 percent, so it is wise to take advantage of the discount.
If you have negotiated your credit terms to 60 days, your effective interest cost would be 14.9 percent, lower than the prevailing bank rate of 16 percent. In this case, you can afford not to take the 2 percent discount because it is cheaper to stretch out your payment.
It is perfectly all right for you to control the terms of accounts payable so it is to your advantage. Perhaps, it will be helpful if you can put a monitoring system where you can sort all accounts payable that will soon be due; this way, you will know just how much cash you will need to prepare to pay your suppliers on time.
Always short of cash?
Have you ever wondered why you sometimes experience cash shortages even if your business is booming? No matter how much money your business generates, perhaps you always feel that you are always short of cash every time your suppliers are knocking on your door. The cause of the problem may be poor accounts payable management. When managing cash flows, therefore, you should remember that timing your accounts payable payments is as crucial as collecting your accounts receivables.
You can manage your accounts payable by stretching out the payment terms as long as possible without damaging your credit standing to suppliers. There are some business owners who pay their payables too early simply because they have so much cash in the bank, but they don’t know that they lose the opportunity to earn extra interest income on their cash. On the other hand, there are entrepreneurs who pay their suppliers too late and end up being slapped with penalties and charges. It is thus important that you manage your payables to the best interest of both parties.
As a guide, you can determine your days payable outstanding by first computing your payable turnover. For example, assume that your accounts payable at the start of the month was P150,000 and that during the month, you made total merchandise purchases of P250,000. After one month of operation, you found out that the balance of your accounts payable by month’s end was P100,000.
To compute for the payable turnover, divide your total purchases of P250,000 by the average accounts payable of P125,000; this will give you a ratio of 2.0x. This ratio simply tells you that you pay for your purchases two times a month. To get the number of days payable outstanding, divide 30 days by the ratio 2.0 to get the average of 15 days.
What this means is that on the average, it takes about 15 days for you to pay your suppliers. With this information on hand, you can now check how many days it takes you to sell your inventory and collect all your receivables. Ideally, the total number of days of inventory and receivables should not exceed your days payable outstanding; this way, you would receive all cash collections just in time when you are about to pay your suppliers. In this example, let us say you can convert all your inventories into cash in 12 days.
This would mean that on the 12th day, you would already have the available cash to pay your suppliers and enjoy three more days before your accounts payable becomes due. You can then take advantage of this by depositing the cash in an interest-bearing bank account.
If business is slowing down and you are finding it difficult to unload your inventory and to collect from your customers, you may consider stretching out your credit terms with suppliers. From the same example, if the number of days to convert your inventory to cash is rising to 18 days from 12 days, you may need to negotiate your credit terms with your suppliers, for instance by having them extended by at least three more days up to 18 days to protect your cash position.
Sometimes, so you will be encouraged to pay early rather than on the due date, suppliers may offer you a trade discount like, say, a 2 percent discount if you pay within 10 days for an account payable due in 30 days yet. In general, trade discounts are good because it allows you to take advantage of it to lower your purchase costs. But there are times when trade discounts are not favorable.
How would you know if it is good or not? You can do this by computing the effective interest cost assuming that you are going to borrow the money to pay your account in 30 days. You then should compare this to the prevailing borrowing rate from the bank. The formula for effective interest cost is EAI = (discount / 100 percent - discount) x (365 / payment period – discount period).
Suppose the prevailing borrowing rate is 16 percent per annum and you are offered a 2 percent discount if you pay in 10 days an account that is otherwise payable in 30 days. Using the above formula, we will find that the effective annualized interest cost is 37 percent as compared to only 16 percent, so it is wise to take advantage of the discount.
If you have negotiated your credit terms to 60 days, your effective interest cost would be 14.9 percent, lower than the prevailing bank rate of 16 percent. In this case, you can afford not to take the 2 percent discount because it is cheaper to stretch out your payment.
It is perfectly all right for you to control the terms of accounts payable so it is to your advantage. Perhaps, it will be helpful if you can put a monitoring system where you can sort all accounts payable that will soon be due; this way, you will know just how much cash you will need to prepare to pay your suppliers on time.
Sunday, November 2, 2008
BUSINESS BITS
Idle no more
Marie Anne Fajardo
Marcial “Mars” Aaron had always wanted to be an entrepreneur, but opportunities in the corporate world would keep him from becoming one for more than 30 years. It was only in 2004, after retiring as president and CEO of Unilever’s food subsidiary Unilever Best Foods Philippines, that he became one, tending to his own farm in Pagsanjan, Laguna, growing trees, and coming up with livelihood-generating projects for the farmers there.
Aaron, who acquired the 11-hectare farmland from his mother-in-law in 1997, had since planted nine hectares of it to banana trees and some forest trees. He has already planted 8,000 bananas and he plans to plant 12,000 more in the next five years. He also raises cattle in a two-hectare portion of the property.
Today, Aaron now also produces banana chips and has been encouraging farmers near the area to grow the saba banana variety. He sells the banana chips at P30 per 100-gram pack at the farm and at the Aaron residence in Manila, then directly uses the proceeds for the farm’s maintenance.
In November 2007, he started putting up cottages in the property, transforming it into what is now known as the Villa Socorro Agri-Eco Village and Farm Resort, which he named after his wife, the former Socorro Fernandez. The cottages, which can provide overnight accommodations to 30 people, are complemented by a pavilion for hosting wedding receptions and other social functions for 120 guests or more.
Says Aaron: “We target corporate clients and big families holding reunion parties. We also welcome companies holding team-building seminars.” The farm resort does not accept walk-in clients and limits its services to providing bed-and-breakfast accommodations to organized groups. Among its major attractions are river-rafting and swimming as well as fruit- and vegetable-picking during harvest times.
When Typhoon Milenyo felled some of the farm’s big trees in 2006, Aaron made various pieces of furniture out of them and also built a tree house out of the fallen tree trunks. These have since become part of the resort’s attractions.
Whenever the resort has guests, Aaron engages the services of nearby residents as cooks and housekeepers. “We save on overhead costs because we only call in additional help when we need them,” he says.
He initially thought of just developing the property as a vacation destination for his family, but he later realized that “it wasn’t too late to become an entrepreneur at age 54.” In becoming one, in fact, he has already spent about P5 million in development costs for the property.
Aaron, now 57, explains that decision: “I now live in a farm after a very successful corporate life, and I help the farmers by just using the asset that I already have together with my business experience.”
He found, though, that he had to adjust to doing most everything himself after giving up the comforts of being a senior manager at a multinational company. “When you start a business at an age like mine, you know that time is limited and failure is not an option,” he says. “And as you get older, it’s not enough to find a place to visit. You should get to enjoy nature when you do and you should get to show your kids what nature was like when you were growing up yourself.”
He makes every effort to preserve the eco-friendliness of the farm, including doing proper waste disposal measures and teaching guests to be environmentally conscious. He is also open to the idea of working with other environmentalists to maintain the farm’s natural diversity.
“Some trees here were planted by me and my colleagues at Unilever,” he explains. “It’s our way of paying back what God has given us, and it’s also our way of sharing it with other people. If I earn from this, it’s just going to be a bonus.”
Through word of mouth, the Villa Socorro Agri-Eco Village and Farm Resort has been attracting a growing number of visiting groups, and it has been getting inquiries even from abroad since it put up its own website in March. Currently, four farmer families are helping maintain the farm and six contractual employees are doing carpentry work and other special jobs there.
A banana-chip manufacturing plant is now also rising within the property. Once operational, it will produce 100,000 packs of banana chips monthly and employ at least 20 more people. “I also want this place to become a business model for other idle lands, a showcase for the idea that environmental consciousness, social responsibility, and business viability can co-exist,” says Aaron.
Marie Anne Fajardo
Marcial “Mars” Aaron had always wanted to be an entrepreneur, but opportunities in the corporate world would keep him from becoming one for more than 30 years. It was only in 2004, after retiring as president and CEO of Unilever’s food subsidiary Unilever Best Foods Philippines, that he became one, tending to his own farm in Pagsanjan, Laguna, growing trees, and coming up with livelihood-generating projects for the farmers there.
Aaron, who acquired the 11-hectare farmland from his mother-in-law in 1997, had since planted nine hectares of it to banana trees and some forest trees. He has already planted 8,000 bananas and he plans to plant 12,000 more in the next five years. He also raises cattle in a two-hectare portion of the property.
Today, Aaron now also produces banana chips and has been encouraging farmers near the area to grow the saba banana variety. He sells the banana chips at P30 per 100-gram pack at the farm and at the Aaron residence in Manila, then directly uses the proceeds for the farm’s maintenance.
In November 2007, he started putting up cottages in the property, transforming it into what is now known as the Villa Socorro Agri-Eco Village and Farm Resort, which he named after his wife, the former Socorro Fernandez. The cottages, which can provide overnight accommodations to 30 people, are complemented by a pavilion for hosting wedding receptions and other social functions for 120 guests or more.
Says Aaron: “We target corporate clients and big families holding reunion parties. We also welcome companies holding team-building seminars.” The farm resort does not accept walk-in clients and limits its services to providing bed-and-breakfast accommodations to organized groups. Among its major attractions are river-rafting and swimming as well as fruit- and vegetable-picking during harvest times.
When Typhoon Milenyo felled some of the farm’s big trees in 2006, Aaron made various pieces of furniture out of them and also built a tree house out of the fallen tree trunks. These have since become part of the resort’s attractions.
Whenever the resort has guests, Aaron engages the services of nearby residents as cooks and housekeepers. “We save on overhead costs because we only call in additional help when we need them,” he says.
He initially thought of just developing the property as a vacation destination for his family, but he later realized that “it wasn’t too late to become an entrepreneur at age 54.” In becoming one, in fact, he has already spent about P5 million in development costs for the property.
Aaron, now 57, explains that decision: “I now live in a farm after a very successful corporate life, and I help the farmers by just using the asset that I already have together with my business experience.”
He found, though, that he had to adjust to doing most everything himself after giving up the comforts of being a senior manager at a multinational company. “When you start a business at an age like mine, you know that time is limited and failure is not an option,” he says. “And as you get older, it’s not enough to find a place to visit. You should get to enjoy nature when you do and you should get to show your kids what nature was like when you were growing up yourself.”
He makes every effort to preserve the eco-friendliness of the farm, including doing proper waste disposal measures and teaching guests to be environmentally conscious. He is also open to the idea of working with other environmentalists to maintain the farm’s natural diversity.
“Some trees here were planted by me and my colleagues at Unilever,” he explains. “It’s our way of paying back what God has given us, and it’s also our way of sharing it with other people. If I earn from this, it’s just going to be a bonus.”
Through word of mouth, the Villa Socorro Agri-Eco Village and Farm Resort has been attracting a growing number of visiting groups, and it has been getting inquiries even from abroad since it put up its own website in March. Currently, four farmer families are helping maintain the farm and six contractual employees are doing carpentry work and other special jobs there.
A banana-chip manufacturing plant is now also rising within the property. Once operational, it will produce 100,000 packs of banana chips monthly and employ at least 20 more people. “I also want this place to become a business model for other idle lands, a showcase for the idea that environmental consciousness, social responsibility, and business viability can co-exist,” says Aaron.
Wednesday, October 29, 2008
BUSINESS BITS
Idle no more
Marie Anne Fajardo
Marcial “Mars” Aaron had always wanted to be an entrepreneur, but opportunities in the corporate world would keep him from becoming one for more than 30 years. It was only in 2004, after retiring as president and CEO of Unilever’s food subsidiary Unilever Best Foods Philippines, that he became one, tending to his own farm in Pagsanjan, Laguna, growing trees, and coming up with livelihood-generating projects for the farmers there.
Aaron, who acquired the 11-hectare farmland from his mother-in-law in 1997, had since planted nine hectares of it to banana trees and some forest trees. He has already planted 8,000 bananas and he plans to plant 12,000 more in the next five years. He also raises cattle in a two-hectare portion of the property.
Today, Aaron now also produces banana chips and has been encouraging farmers near the area to grow the saba banana variety. He sells the banana chips at P30 per 100-gram pack at the farm and at the Aaron residence in Manila, then directly uses the proceeds for the farm’s maintenance.
In November 2007, he started putting up cottages in the property, transforming it into what is now known as the Villa Socorro Agri-Eco Village and Farm Resort, which he named after his wife, the former Socorro Fernandez. The cottages, which can provide overnight accommodations to 30 people, are complemented by a pavilion for hosting wedding receptions and other social functions for 120 guests or more.
Says Aaron: “We target corporate clients and big families holding reunion parties. We also welcome companies holding team-building seminars.” The farm resort does not accept walk-in clients and limits its services to providing bed-and-breakfast accommodations to organized groups. Among its major attractions are river-rafting and swimming as well as fruit- and vegetable-picking during harvest times.
When Typhoon Milenyo felled some of the farm’s big trees in 2006, Aaron made various pieces of furniture out of them and also built a tree house out of the fallen tree trunks. These have since become part of the resort’s attractions.
Whenever the resort has guests, Aaron engages the services of nearby residents as cooks and housekeepers. “We save on overhead costs because we only call in additional help when we need them,” he says.
He initially thought of just developing the property as a vacation destination for his family, but he later realized that “it wasn’t too late to become an entrepreneur at age 54.” In becoming one, in fact, he has already spent about P5 million in development costs for the property.
Aaron, now 57, explains that decision: “I now live in a farm after a very successful corporate life, and I help the farmers by just using the asset that I already have together with my business experience.”
He found, though, that he had to adjust to doing most everything himself after giving up the comforts of being a senior manager at a multinational company. “When you start a business at an age like mine, you know that time is limited and failure is not an option,” he says. “And as you get older, it’s not enough to find a place to visit. You should get to enjoy nature when you do and you should get to show your kids what nature was like when you were growing up yourself.”
He makes every effort to preserve the eco-friendliness of the farm, including doing proper waste disposal measures and teaching guests to be environmentally conscious. He is also open to the idea of working with other environmentalists to maintain the farm’s natural diversity.
“Some trees here were planted by me and my colleagues at Unilever,” he explains. “It’s our way of paying back what God has given us, and it’s also our way of sharing it with other people. If I earn from this, it’s just going to be a bonus.”
Through word of mouth, the Villa Socorro Agri-Eco Village and Farm Resort has been attracting a growing number of visiting groups, and it has been getting inquiries even from abroad since it put up its own website in March. Currently, four farmer families are helping maintain the farm and six contractual employees are doing carpentry work and other special jobs there.
A banana-chip manufacturing plant is now also rising within the property. Once operational, it will produce 100,000 packs of banana chips monthly and employ at least 20 more people. “I also want this place to become a business model for other idle lands, a showcase for the idea that environmental consciousness, social responsibility, and business viability can co-exist,” says Aaron.
Saturday, October 18, 2008
BUSINESS BITS
Lalah M. Varias
Campus entrepreneurs
With mostly talent and just a little money, professors can become entrepreneurs, too.
Four Ateneo de Manila University professors—Dr. Rosula Reyes, Noel Patron, Carlos Oppus, and Jose Claro Monje who all teach at the university’s electronics and computer engineering department—have put up a company that provides integrated hardware and software solutions to both in-campus and outside clients. The company, Blue Chip Designs Inc., started as a research and development venture of the department in the design of computer hardware, software, and firmware.
“We only had our talent, and we were lucky that we were able to start the company with only a little money,“ says Dr. Reyes, the company’s chief operating officer. The group’s first major project in 2002 involved the development of a controller for a thermal printer so it can produce erasable printouts as well as firmware for its microprocessor and Windows printer driver. Since then, a company has been asking them to develop controllers for different specifications and applications.
This was followed in 2004 by their creation of software for a portable ECG (electrocardiogram) machine. Reyes explains the innovation: “An American company developed the hardware, but their machine couldn’t transfer data into a PC. The hardware only recorded the ECG signal, but it did not give any reading. Our software enabled it to do that.”
In 2003, seeing the growing demand for its R&D services, the group incorporated Blue Chip Designs, but all four ran the company at the Ateneo department. This was because by being housed at the department, the company’s overhead expenses were very minimal, and they were also receiving compensation from the university as research consultants. “Of the amount remitted to us as consultants, 30 percent was going to ADMU,” Reyes explains. “That percentage was actually equivalent to renting the space in the department.”
The incorporation of Blue Chip Designs required them to open a bank account with P6,250, which
was 1/16 of the company’s total authorized capitalization of P100,000.
Two years later, in 2005, the company moved out of the Ateneo campus and established an office along Loyola Heights in Quezon City independent from the university. This allowed the four, who still teach at the Ateneo, to properly entertain their increasing number of clients who were not from the university. “You just cannot allow people to come in and out of the department if they are not connected with the university,” says Reyes.
This time, the group increased the authorized capitalization of Blue Chip Designs to P1 million, thus enabling the company to buy computers and pay for its office rentals one year in advance.
Currently, the company continues to serve clients they had acquired back when they were still with the university. Reyes says that the secret to maintaining clients is keeping your promises. “If you can deliver, clients would stick with you,” she adds.
A major client of Blue Chip gives them several projects at a time; in fact, it has appointed the company as its research and development arm, handling all software and firmware needs for color printers, point card printers, and finger and print scanners.
Blue Chip currently has 11 personnel, including the four owners. Most of its projects are for foreign companies but it has put up another company, Bughaw Electronic Solution & Technologies Inc., to cater to the needs of local companies.
Campus entrepreneurs
With mostly talent and just a little money, professors can become entrepreneurs, too.
Four Ateneo de Manila University professors—Dr. Rosula Reyes, Noel Patron, Carlos Oppus, and Jose Claro Monje who all teach at the university’s electronics and computer engineering department—have put up a company that provides integrated hardware and software solutions to both in-campus and outside clients. The company, Blue Chip Designs Inc., started as a research and development venture of the department in the design of computer hardware, software, and firmware.
“We only had our talent, and we were lucky that we were able to start the company with only a little money,“ says Dr. Reyes, the company’s chief operating officer. The group’s first major project in 2002 involved the development of a controller for a thermal printer so it can produce erasable printouts as well as firmware for its microprocessor and Windows printer driver. Since then, a company has been asking them to develop controllers for different specifications and applications.
This was followed in 2004 by their creation of software for a portable ECG (electrocardiogram) machine. Reyes explains the innovation: “An American company developed the hardware, but their machine couldn’t transfer data into a PC. The hardware only recorded the ECG signal, but it did not give any reading. Our software enabled it to do that.”
In 2003, seeing the growing demand for its R&D services, the group incorporated Blue Chip Designs, but all four ran the company at the Ateneo department. This was because by being housed at the department, the company’s overhead expenses were very minimal, and they were also receiving compensation from the university as research consultants. “Of the amount remitted to us as consultants, 30 percent was going to ADMU,” Reyes explains. “That percentage was actually equivalent to renting the space in the department.”
The incorporation of Blue Chip Designs required them to open a bank account with P6,250, which
was 1/16 of the company’s total authorized capitalization of P100,000.
Two years later, in 2005, the company moved out of the Ateneo campus and established an office along Loyola Heights in Quezon City independent from the university. This allowed the four, who still teach at the Ateneo, to properly entertain their increasing number of clients who were not from the university. “You just cannot allow people to come in and out of the department if they are not connected with the university,” says Reyes.
This time, the group increased the authorized capitalization of Blue Chip Designs to P1 million, thus enabling the company to buy computers and pay for its office rentals one year in advance.
Currently, the company continues to serve clients they had acquired back when they were still with the university. Reyes says that the secret to maintaining clients is keeping your promises. “If you can deliver, clients would stick with you,” she adds.
A major client of Blue Chip gives them several projects at a time; in fact, it has appointed the company as its research and development arm, handling all software and firmware needs for color printers, point card printers, and finger and print scanners.
Blue Chip currently has 11 personnel, including the four owners. Most of its projects are for foreign companies but it has put up another company, Bughaw Electronic Solution & Technologies Inc., to cater to the needs of local companies.
Sunday, October 12, 2008
BUSINESS BITS
Henry Ong
Managing your inventory
Do you often experience cash shortages and feel that you are losing when you are actually making good profits according to your accountant’s report? You may have this problem when you overstock your merchandise inventory for an extraordinary length of time.
Many entrepreneurs tend to overbuy inventory to take advantage of quantity discounts especially if the merchandise is imported abroad, or when they project their sales targets too high for a forthcoming holiday season. While this could be financially beneficial, the risk of loss could be greater than the potential rewards.
Losses from overstocking happen when inventory is purchased from the supplier on credit and you are unable to pay on time, forcing you to borrow cash from your relatives and friends often at high interest rates. When payment of the loan becomes due, you are pressured to raise cash by cutting your selling price to get rid of your inventories. This cycle could go on without you noticing that you are incurring real losses from interest costs and lower gross profits. It could then lead to a serious cash flow problem.
So how do you manage your inventory better? Every entrepreneur, regardless of size of business, needs to understand the importance of efficient inventory management. When we say efficient management, it doesn’t mean that inventory must be kept low at all times; doing that could actually result in losses to your company in terms of lost sales and missed opportunities. Instead, what it means is that there should be a system that could enable your company to balance its inventory requirements.
Depending on the industry where you belong, you should identify the factors that affect your inventory demands so you will be able to control and manage them. To begin with, demand for inventory is affected by seasonal factors.
For example, since retail sales are expected to be weak right after the Christmas season, you may need to relax your inventory buying during the first quarter of the following year. By the second quarter, on the other hand, you may need to start building your inventory in anticipation of the summer season.
In managing inventory, you need to consider the average turnover period of your products. Some items move quickly, others move only after some time. Because different items are bought by different buyers, not all of your merchandise would have the same inventory turnover. You can compute your inventory turnover by dividing your cost of sales by the average inventory. The cost of sales is the cost of the products you sold during the period; the average inventory is the average of the beginning inventory and ending inventory.
For example, assume that your sales for the month was P500,000 and that your cost was about 40 percent of it, or P200,000. If the balance of your inventory at the start of the month was P100,000 and your inventory at the end of the month was P75,000, your average inventory would be P87,500. To compute for the inventory turnover, you simply divide P200,000 by P87,500, which gives you 2.29 times. This figure means that you sold more than twice your average inventory during the month.
To convert this ratio into turnover days, you simply divide 30 days by 2.29 to give you the average turnaround time of 13 days. This figure suggests that on the average, you are able to sell out your inventory every 13 days.
With that information in mind, you can manage the lead-time of merchandise delivery. You can determine your ordering day by deducting the lead-time from your turnover period. If it takes five days for your supplier to deliver after you place your order, you can compute the ordering day by deducting 5 days from the turnover period of 13 days to give you eight days. In this example, you can order your merchandise every 8th day of the average turnover period.
This way, you can receive the new purchases at a time when you expect your old inventory to be sold out. You can also use the turnover period as your basis for determining terms with your supplier. Ideally, the payment terms should be at least equal to or greater than your turnover period. Under this example, you can negotiate with your supplier that you will settle your account after 15 days. In this scenario, you need not shell out cash to purchase the inventory. Instead, after you dispose all of your inventories in 13 days, you can use the proceeds from your sales for some other purpose.
Different industries have different turnover periods. There are situations when the payment term is less than the average turnover period. When you know your inventory turnaround time, you can have a rough idea of how to negotiate your terms so you can properly control and manage your inventory level. If you are just starting in the business and you still don’t have any idea of your turnover period, it may be good to establish benchmarks by spending some time researching and determining the industry average turnover period. You can then use this as basis for your negotiations with your supplier.
When you benchmark your actual ratio with the industry, the industry average turnover period is also a good performance measure. If you are underperforming against the industry standard, you may need to consider reducing your inventory level. You can do this by eliminating slow-moving products and obsolete items or by simply increasing your sales.
When you are familiar with the behavior of your inventory levels, you have the advantage of managing your inventory level more efficiently. You can anticipate changes in product demand ahead of time and at the same time control your costs and manage your cash flows better. Indeed, creating an efficient inventory system is the ultimate key to business success.
Sunday, October 5, 2008
BUSINESS BITS
Debbie J. Pepito
The culture
For three times now since 2007, property developer Megaworld Corp. has hit the billion-peso mark in its monthly real-estate sales. The secret behind this performance, says Noli D. Hernandez, vice president for marketing, is the company having successfully inculcated the entrepreneurship culture among its 132 sales staff.
“A company’s culture is very important,” he explains. “In Megaworld, we teach our people to treat themselves as entrepreneurs. If you can get people to think themselves as entrepreneurs, then you’re off to a very good start.”
Hernandez handles Megaworld’s Marketing I unit, which sells residential condominiums, lots, and villas at the company’s projects in McKinley Hill Village in Taguig City and at the Forbes Town Center at the Bonifacio Global City (BGC) in Makati City.
All of the Megaworld sales personnel, Hernandez says, undergo at least a two-week orientation and value-formation training before they are sent to the field to sell real estate. These programs have been designed to appeal to what Hernandez says are two things that ultimately motivate people to work harder: “the pursuit of pleasure, and the avoidance of pain.” This approach involves explaining to new sales staff recruits how fast it is to achieve financial security if only they would work harder and smarter, and how economically and socially painful it would be if they miss on these opportunities.
“Most of our sales people used to commute by public transportation,” Hernandez says. “Now, almost all of them—and they are still in their 20s to early 30s—already have their own brand-new cars and condos.”
Megaworld’s sales people usually establish initial contact with prospective clients by distributing flyers in places with heavy foot traffic (they call it “flyering”), putting up booths inside malls and department stores, and getting referrals from existing clients as well as from relatives and friends. Since the sales people earn their money through commissions (2.7 percent of the gross sale in the case of Megaworld), they are not treated as employees but rather as the company’s business partners.
Says Hernandez: “I tell them: ‘This is your business and it’s part of our business. If you do your business well, we can go on doing more business and be financially successful together.” He elaborates on this approach: “If everybody sees this job as his or her own business, the synergy is there and all we have to do is cultivate it. I’m sitting on top of a well-oiled machine and I’m happy that it’s like that because now I’m counting on people to think for themselves and realize that they’re not working for me but for themselves. As entrepreneurs, they can put in as many hours in this business as they like and I don’t have to breathe down their necks. If we get them to realize this truth, then my job is half done.”
Rachel Peñaflorida, senior sales manager and a one-time protégé of Hernandez, has found the Megaworld culture very contagious and appreciates the fact that it allows each sales staff to do what works for him or her. She recalls that when she was new to the job, some of her colleagues preferred to do flyering to get new clients but she found that the approach didn’t really work for her. Instead, she used the referral approach, made her first sale through it, and has been doing business through referrals ever since. “The best strategy is finding what works for you, then creating a solid reputation among your existing clients,” she explains.
According to Peñaflorida, part of building a reputation is setting limits. Most first-time property consultants would do anything for a prospective client to the point that they may lose out in the end, thus sending the wrong message. “Don’t promise something you can’t deliver, it’ll only hurt you,” she says.
As to dealing with rejections by prospective clients, she gives this advice: “Don’t take rejections personally. Stay nice and courteous even when you don’t make a sale and your clients will likely remember you at a later time when they do want to buy. They may even recommend you to their friends.”
Since she is now a senior sales manager, Peñaflorida no longer makes active client calls but she continues to make sales through referrals from satisfied clients. According to Hernandez, one major boost to Megaworld’s sales performance is the robust demand from overseas workers and from the work force of the business process outsourcing industry (BPO), coupled with the country’s improving economy.
“When I was a property consultant several years back, we couldn’t even make a billion in a year’s time,” he says. “But now, we can hit that target within a month. In fact, we actually made over P7 billion last year, and that’s just the Marketing 1 department alone, not the whole of Megaworld. In 2008, we made close to P800 million in January, P1.078 billion in February, and another P1 billion in March. So that says a lot about the real estate industry today.”
Tuesday, September 30, 2008
BUSINESS BITS
By REEZA SINGSON
Catch that recruiter
There are many types of illegal employment agencies, the most notorious of which is the illegal recruiter for jobs abroad. But there is another type that is astonishingly widespread and yet is apparently left unchecked by authorities: the cabo agency.
A cabo agency is an employment agency that practices labor-only contracting, a type of job recruitment and placement that is prohibited primarily because it circumvents the laws on the protection of labor. Labor-only contracting applies when the contractor or subcontractor merely recruits and supplies workers to perform a job for a principal.
This, for instance, is the case when a contractor, say ABC Manpower Agency, supplies delivery riders to XYZ Fastfood Company but does not exercise control over the performance of the work of the riders and does not have substantial capital or investment in the form of motorcycles, among others, to have the job actually performed under its own account and responsibility.
In other words, ABC Manpower is merely a “revolving door.” It recruits as many riders as it can and then quickly turns them over to XYZ Fastfood, which in turn hires the riders as “casual employees” and uses their services for a short and specified period only, usually around four months per contract. And at the end of this period, XYZ will either renew the contracts for another three to four months or so, or—citing “unsatisfactory performance during the probationary period”—will dismiss the riders before their employment becomes regular under the law (that is, six months after date of hiring).
Either way, XYZ avoids having regular employer-employee relations with the riders and avoids the responsibilities that come with it. These responsibilities include granting them fair wages, security of tenure, safe and healthful working conditions, separation benefits, overtime pay, 13th month pay, holiday pay, rest leaves, social security and welfare, and the right to self-organization, collective bargaining, and peaceful concerted action.
This constant hiring and firing may seem tedious, but to some very profit-oriented businesses, a long-term investment in people is considered a waste of time and resources. In the first place, XYZ would rather invest in state-of-the-art ovens, grills, freezers, dining area, drive-through window equipment, and other fast-food must-haves. XYZ’s justification for this choice is that unlike people, these facilities do not form labor unions, never aspire for collective bargaining, never go on maternity leaves, never go on vacation and sick leaves, and can be replaced at any time with newer models without need for severance pay and without worrying about threats of lawsuits on grounds of illegal dismissal.
In the second place, XYZ would argue that fast-food delivery riders often figure in road accidents because they are constrained to drive fast to stay within the 30-minute limit for deliveries. These are sources of potential lawsuits and miscellaneous expenses that the riders’ employers must deal with, which of course XYZ does not want to do. Finally, XYZ knows that there are millions of desperate job hunters out there who are willing to take any job, no matter how low the pay and how bad the working conditions. Indeed, to replace dismissed riders, XYZ simply knocks on ABC’s revolving door to get a fresh batch of riders.
This system is called cabo because it arose out of Philippine shipping ports, where each gang of cargo handlers was headed by a cabo (foreman) who contracted to perform the loading and unloading of goods directly with the vessel owner. The cabo made money by pocketing the difference between what the vessel owner paid him and what he paid to his cargo handlers.
Under present laws, a cabo refers to a person or group of persons or to a labor group that, in the guise of a labor organization, supplies workers to an employer with or without any monetary or other consideration, and whether in the capacity of an agent of the employer or as an ostensible independent contractor.
In our current economy, the cabo system is no longer confined to cargo handlers, messengers, janitors, riders, security guards, and other blue-collar workers. It has invaded even the sphere of white-collar jobs such as IT specialists, accountants, and even lawyers.
The strongest but not the sole indicator of labor-only contracting is the worker’s being required to sign (as a precondition to employment or continued employment) an antedated resignation letter, a blank payroll, a waiver of labor standards including minimum wages and social or welfare benefits, or a quitclaim releasing the principal (for example, XYZ Fastfood) and the contractor (for example, ABC Manpower) from any liability as to payment of future claims.
Despite a worker’s acceptance of these conditions, however, XYZ and other hiring companies can still be held directly liable under the law to pay the claims of their agency-supplied workers if it is subsequently determined that they had engaged the workers through labor-only contracting.
Catch that recruiter
There are many types of illegal employment agencies, the most notorious of which is the illegal recruiter for jobs abroad. But there is another type that is astonishingly widespread and yet is apparently left unchecked by authorities: the cabo agency.
A cabo agency is an employment agency that practices labor-only contracting, a type of job recruitment and placement that is prohibited primarily because it circumvents the laws on the protection of labor. Labor-only contracting applies when the contractor or subcontractor merely recruits and supplies workers to perform a job for a principal.
This, for instance, is the case when a contractor, say ABC Manpower Agency, supplies delivery riders to XYZ Fastfood Company but does not exercise control over the performance of the work of the riders and does not have substantial capital or investment in the form of motorcycles, among others, to have the job actually performed under its own account and responsibility.
In other words, ABC Manpower is merely a “revolving door.” It recruits as many riders as it can and then quickly turns them over to XYZ Fastfood, which in turn hires the riders as “casual employees” and uses their services for a short and specified period only, usually around four months per contract. And at the end of this period, XYZ will either renew the contracts for another three to four months or so, or—citing “unsatisfactory performance during the probationary period”—will dismiss the riders before their employment becomes regular under the law (that is, six months after date of hiring).
Either way, XYZ avoids having regular employer-employee relations with the riders and avoids the responsibilities that come with it. These responsibilities include granting them fair wages, security of tenure, safe and healthful working conditions, separation benefits, overtime pay, 13th month pay, holiday pay, rest leaves, social security and welfare, and the right to self-organization, collective bargaining, and peaceful concerted action.
This constant hiring and firing may seem tedious, but to some very profit-oriented businesses, a long-term investment in people is considered a waste of time and resources. In the first place, XYZ would rather invest in state-of-the-art ovens, grills, freezers, dining area, drive-through window equipment, and other fast-food must-haves. XYZ’s justification for this choice is that unlike people, these facilities do not form labor unions, never aspire for collective bargaining, never go on maternity leaves, never go on vacation and sick leaves, and can be replaced at any time with newer models without need for severance pay and without worrying about threats of lawsuits on grounds of illegal dismissal.
In the second place, XYZ would argue that fast-food delivery riders often figure in road accidents because they are constrained to drive fast to stay within the 30-minute limit for deliveries. These are sources of potential lawsuits and miscellaneous expenses that the riders’ employers must deal with, which of course XYZ does not want to do. Finally, XYZ knows that there are millions of desperate job hunters out there who are willing to take any job, no matter how low the pay and how bad the working conditions. Indeed, to replace dismissed riders, XYZ simply knocks on ABC’s revolving door to get a fresh batch of riders.
This system is called cabo because it arose out of Philippine shipping ports, where each gang of cargo handlers was headed by a cabo (foreman) who contracted to perform the loading and unloading of goods directly with the vessel owner. The cabo made money by pocketing the difference between what the vessel owner paid him and what he paid to his cargo handlers.
Under present laws, a cabo refers to a person or group of persons or to a labor group that, in the guise of a labor organization, supplies workers to an employer with or without any monetary or other consideration, and whether in the capacity of an agent of the employer or as an ostensible independent contractor.
In our current economy, the cabo system is no longer confined to cargo handlers, messengers, janitors, riders, security guards, and other blue-collar workers. It has invaded even the sphere of white-collar jobs such as IT specialists, accountants, and even lawyers.
The strongest but not the sole indicator of labor-only contracting is the worker’s being required to sign (as a precondition to employment or continued employment) an antedated resignation letter, a blank payroll, a waiver of labor standards including minimum wages and social or welfare benefits, or a quitclaim releasing the principal (for example, XYZ Fastfood) and the contractor (for example, ABC Manpower) from any liability as to payment of future claims.
Despite a worker’s acceptance of these conditions, however, XYZ and other hiring companies can still be held directly liable under the law to pay the claims of their agency-supplied workers if it is subsequently determined that they had engaged the workers through labor-only contracting.
Wednesday, September 24, 2008
BUSINESS BITS
Rafael Santos
Creative Moves
Surging fuel prices and high inflation rates in recent months have put a damper on the country’s economic activity, making “belt tightening” and “streamlining” the vogue among entrepreneurs hard-hit by them. Which brings us to this question: How does an entrepreneur survive the economic downturn? According to three small and medium enterprises, what’s needed to weather the storm is a mix of creative cost-cutting and a dose of practicality. Here’s what they are doing along those lines:
Nancy Villacrusis, vice president for operations Topserve Manpower and Logistics Inc. says their company is engaged in employee placement services and in cargo logistics and distribution. With more and more companies downsizing their workforces and laying employees off, it is creatively using multitasking to keep itself on top of the situation.
“Multitasking is the name of the game when it comes to manpower services,” says Villacrucis. “Just for an example, if our employees were simply performing janitorial duties before, now we ask them to help out in the loading of the client’s cargo as well. This way, we keep them more productive and at the same time help save the client some money. If we don’t do this, the client might just opt to cut the janitor’s job to save the loader’s job.”
She says that two other multitasking routines—car-pooling for employees and “rationalizing” shipping and delivery schedules—have saved the company at least 5 percent in its fuel bill.
She explains: “We have instituted the rationalization scheme in our delivery routes to minimize the number of vehicles we have out on the road at any one time. Also, as a way of maximizing the use of our assets, we try to squeeze in every trip as many tasks as possible. We are doing this without sacrificing our reliability and the timeliness of our deliveries.”
Villacrusis says that despite the economic downturn, prospects for Topserve remain bright. “Manpower is such a critical factor for companies, especially those in the manufacturing services,” she explains. “That’s why the demand for skilled labor won’t go down even if the economy is not doing well at the moment.”
***
Michael Santos, marketing manager of The Christmas Factory says their factory which exports holiday decorations to Europe, Australia, and the United States, has been hit hard by the continued strengthening of the peso against the US dollar. In fact, the shaving of the profit margins of exporters by as much as 50 percent has already forced a number of them to close shop.
Santos says that what has helped The Christmas Factory stay afloat in these trying times is the seasonal nature of its business. The company does not maintain a regular work force, and manufacturing activity peaks only during the third quarter of the year, thus sparing the company from big overhead costs and heavy payrolls.
He explains the strong peso has both its disadvantages and advantages: “Although it has shrunk our profit margins—we used to have our products pegged to the exchange rate of P52-P54 to the US dollar—it also drives us to make even better quality products just to remain competitive.”
Santos says his company is banking on the good quality of Philippine-made goods to fend off the growing threat of China’s cheaper products. He explains: “Chinese-made products are indeed cheaper, but their build quality remains suspect. That is why although we are suffering from low margins, we make up for it by the bulk of the orders we ship, which has been growing steadily because of our higher quality.”
As a cost-cutting measure, The Christmas Factory now uses leftover fiberglass from their manufacturing process as “extenders” for other products. “Before, we just threw them away for scrap,” he says. “Now we gather and reprocess them so we can use them for something else, like building a base for a different product. This has saved us at least 3 percent in fiberglass purchases since last year.”
***
Jun Yupitun, director for operations of Pilipinas Teleserv says while most other companies are getting themselves busy formulating ways to cut down on spending, the local contact center operator Pilipinas Teleserv is going in the opposite direction: it is increasing spending to create a stronger demand for its services.
“We are putting more money into marketing the company and attracting more clients,” says Yupitun. “The way we see it, the better the company performs, the better we will be positioned to augment our employee’s salaries and help them cope with the rising cost of living.”
Pilipinas Teleserv currently has a partnership arrangement with the Philippine government for the processing and delivery of passports and birth certificates, an undertaking that’s geared for the OFW market. The company also operates contact centers for the fast-food delivery services of some of the biggest chains in the country, such as McDonald’s.
Yupitun says that Pilipinas Teleserv has always been a thrifty company and that this attribute is working to its advantage in the current economic crunch. He explains: “It has become a culture for our employees to be conscious of the cost of everything we do. This is something we have been consistently doing over the years. Because of this, we are not that affected by the rising costs, and we believe that we will weather this current storm with flying colors.”
Indeed, the very location of the company’s offices is strong proof of Pilipinas Teleserv’s long-range cost-cutting vision. While other call centers locate themselves in high-priced business districts, the company had opted to set up shop in the Quiapo area, right in the heart of Manila, where office rentals are much cheaper.
This choice of location also has another advantage: it gives Pilipinas Teleserv a steady supply of skilled office and contact center staff from Manila’s University Belt, which covers the area of Recto-Legarda-Morayta all the way to Intramuros.
Yupitun explains this choice of location: “When we put up the company in 2000, we looked for a place that had good telephone lines and affordable lease rates. After a careful search, we chose Quiapo, which is not a place you would normally associate with a contact center. But the lower lease rates are great for us, and the infrastructure costs are cheaper than those of other commercial areas in the city.”
Creative Moves
Surging fuel prices and high inflation rates in recent months have put a damper on the country’s economic activity, making “belt tightening” and “streamlining” the vogue among entrepreneurs hard-hit by them. Which brings us to this question: How does an entrepreneur survive the economic downturn? According to three small and medium enterprises, what’s needed to weather the storm is a mix of creative cost-cutting and a dose of practicality. Here’s what they are doing along those lines:
Nancy Villacrusis, vice president for operations Topserve Manpower and Logistics Inc. says their company is engaged in employee placement services and in cargo logistics and distribution. With more and more companies downsizing their workforces and laying employees off, it is creatively using multitasking to keep itself on top of the situation.
“Multitasking is the name of the game when it comes to manpower services,” says Villacrucis. “Just for an example, if our employees were simply performing janitorial duties before, now we ask them to help out in the loading of the client’s cargo as well. This way, we keep them more productive and at the same time help save the client some money. If we don’t do this, the client might just opt to cut the janitor’s job to save the loader’s job.”
She says that two other multitasking routines—car-pooling for employees and “rationalizing” shipping and delivery schedules—have saved the company at least 5 percent in its fuel bill.
She explains: “We have instituted the rationalization scheme in our delivery routes to minimize the number of vehicles we have out on the road at any one time. Also, as a way of maximizing the use of our assets, we try to squeeze in every trip as many tasks as possible. We are doing this without sacrificing our reliability and the timeliness of our deliveries.”
Villacrusis says that despite the economic downturn, prospects for Topserve remain bright. “Manpower is such a critical factor for companies, especially those in the manufacturing services,” she explains. “That’s why the demand for skilled labor won’t go down even if the economy is not doing well at the moment.”
***
Michael Santos, marketing manager of The Christmas Factory says their factory which exports holiday decorations to Europe, Australia, and the United States, has been hit hard by the continued strengthening of the peso against the US dollar. In fact, the shaving of the profit margins of exporters by as much as 50 percent has already forced a number of them to close shop.
Santos says that what has helped The Christmas Factory stay afloat in these trying times is the seasonal nature of its business. The company does not maintain a regular work force, and manufacturing activity peaks only during the third quarter of the year, thus sparing the company from big overhead costs and heavy payrolls.
He explains the strong peso has both its disadvantages and advantages: “Although it has shrunk our profit margins—we used to have our products pegged to the exchange rate of P52-P54 to the US dollar—it also drives us to make even better quality products just to remain competitive.”
Santos says his company is banking on the good quality of Philippine-made goods to fend off the growing threat of China’s cheaper products. He explains: “Chinese-made products are indeed cheaper, but their build quality remains suspect. That is why although we are suffering from low margins, we make up for it by the bulk of the orders we ship, which has been growing steadily because of our higher quality.”
As a cost-cutting measure, The Christmas Factory now uses leftover fiberglass from their manufacturing process as “extenders” for other products. “Before, we just threw them away for scrap,” he says. “Now we gather and reprocess them so we can use them for something else, like building a base for a different product. This has saved us at least 3 percent in fiberglass purchases since last year.”
***
Jun Yupitun, director for operations of Pilipinas Teleserv says while most other companies are getting themselves busy formulating ways to cut down on spending, the local contact center operator Pilipinas Teleserv is going in the opposite direction: it is increasing spending to create a stronger demand for its services.
“We are putting more money into marketing the company and attracting more clients,” says Yupitun. “The way we see it, the better the company performs, the better we will be positioned to augment our employee’s salaries and help them cope with the rising cost of living.”
Pilipinas Teleserv currently has a partnership arrangement with the Philippine government for the processing and delivery of passports and birth certificates, an undertaking that’s geared for the OFW market. The company also operates contact centers for the fast-food delivery services of some of the biggest chains in the country, such as McDonald’s.
Yupitun says that Pilipinas Teleserv has always been a thrifty company and that this attribute is working to its advantage in the current economic crunch. He explains: “It has become a culture for our employees to be conscious of the cost of everything we do. This is something we have been consistently doing over the years. Because of this, we are not that affected by the rising costs, and we believe that we will weather this current storm with flying colors.”
Indeed, the very location of the company’s offices is strong proof of Pilipinas Teleserv’s long-range cost-cutting vision. While other call centers locate themselves in high-priced business districts, the company had opted to set up shop in the Quiapo area, right in the heart of Manila, where office rentals are much cheaper.
This choice of location also has another advantage: it gives Pilipinas Teleserv a steady supply of skilled office and contact center staff from Manila’s University Belt, which covers the area of Recto-Legarda-Morayta all the way to Intramuros.
Yupitun explains this choice of location: “When we put up the company in 2000, we looked for a place that had good telephone lines and affordable lease rates. After a careful search, we chose Quiapo, which is not a place you would normally associate with a contact center. But the lower lease rates are great for us, and the infrastructure costs are cheaper than those of other commercial areas in the city.”
Tuesday, September 16, 2008
BUSINESS BITS
Rafael Santos
Fuzion Café’s profit strategy
Since opening its doors in 2005, Fuzion Smoothie Café has already cornered a sizable loyal following. And today, it continues to win an ever-increasing number of health-conscious customers for its fresh fruit smoothies, power fruits shakes, and other healthy fare such as South Beach diet meals, pastas, and Asian snacks.
Despite the market’s warm reception for it, however, Fuzion admittedly remains a niche brand for the affluent market. This is because the products are relatively expensive, with prices that start at P99 and go upwards to P239. A primary reason for this higher pricing is that smoothies don’t have ice mixed with them and don’t have added sugar either. They have a natural sweetness and refreshing coolness because the fruits they come from are flash-frozen at their peak of ripeness, thus rapidly sealing in all their freshness, taste, and nutrients.
Because of these product attributes, Fuzion owner and managing director Meredith Ngo says that the café’s offerings do not particularly appeal to the C segment of the market where the volume is. A lot of people don’t even know what a smoothie is, and this drawback is somehow curtailing the growth of the business.
She explains: “We have long wanted to tap the broader C segment of the market, but with the current price-points, we found that we appeal more to the AB market. So what we did was to tweak some of our products, like gradually introducing rice meals to make our food offerings better suited to the market.”
Fuzion is a Singaporean smoothie brand that Ngo brought to the Philippines in 2005. She says that as the master franchiser for Fuzion in the country, she has already made the local version outpace the mother company in terms of growth. Indeed, there are now six Fuzion stores, all located in shopping malls: three in Quezon City (Eastwood City, Trinoma, and The Block at SM North EDSA), and one each in Makati City (Greenbelt 3), San Juan City (Greenhills Promenade), and Pasig City (Podium). Already in the works are Fuzion stores for Shangri-la and SM Fairview.
“The healthy-eating trend is slowly catching on in the Philippines,” Ngo says. “Because of this, we are confident that in a matter of years, we will be better established in terms of market presence. Also, although we are tweaking the café to appeal to the broader market, we are committed not to sacrifice the quality of the products that we are serving to our customers.”
Fuzion is now accepting franchise applications for the business. It offers attractive investment packages ranging from P1.5 million for a kiosk to P3 million for a full café, and also customizes investment packages to suit the potential franchisee. “We are excited about the prospects for the upcoming years,” Ngo says.
“Smoothies can be enjoyed by people of all ages, and because more and more people are getting into healthier lifestyles, we expect the demand for our products to grow even more. We are not just a flash in the pan. We are a brand that we believe will always be in demand and more so in the coming years.”
Fuzion Café’s profit strategy
Since opening its doors in 2005, Fuzion Smoothie Café has already cornered a sizable loyal following. And today, it continues to win an ever-increasing number of health-conscious customers for its fresh fruit smoothies, power fruits shakes, and other healthy fare such as South Beach diet meals, pastas, and Asian snacks.
Despite the market’s warm reception for it, however, Fuzion admittedly remains a niche brand for the affluent market. This is because the products are relatively expensive, with prices that start at P99 and go upwards to P239. A primary reason for this higher pricing is that smoothies don’t have ice mixed with them and don’t have added sugar either. They have a natural sweetness and refreshing coolness because the fruits they come from are flash-frozen at their peak of ripeness, thus rapidly sealing in all their freshness, taste, and nutrients.
Because of these product attributes, Fuzion owner and managing director Meredith Ngo says that the café’s offerings do not particularly appeal to the C segment of the market where the volume is. A lot of people don’t even know what a smoothie is, and this drawback is somehow curtailing the growth of the business.
She explains: “We have long wanted to tap the broader C segment of the market, but with the current price-points, we found that we appeal more to the AB market. So what we did was to tweak some of our products, like gradually introducing rice meals to make our food offerings better suited to the market.”
Fuzion is a Singaporean smoothie brand that Ngo brought to the Philippines in 2005. She says that as the master franchiser for Fuzion in the country, she has already made the local version outpace the mother company in terms of growth. Indeed, there are now six Fuzion stores, all located in shopping malls: three in Quezon City (Eastwood City, Trinoma, and The Block at SM North EDSA), and one each in Makati City (Greenbelt 3), San Juan City (Greenhills Promenade), and Pasig City (Podium). Already in the works are Fuzion stores for Shangri-la and SM Fairview.
“The healthy-eating trend is slowly catching on in the Philippines,” Ngo says. “Because of this, we are confident that in a matter of years, we will be better established in terms of market presence. Also, although we are tweaking the café to appeal to the broader market, we are committed not to sacrifice the quality of the products that we are serving to our customers.”
Fuzion is now accepting franchise applications for the business. It offers attractive investment packages ranging from P1.5 million for a kiosk to P3 million for a full café, and also customizes investment packages to suit the potential franchisee. “We are excited about the prospects for the upcoming years,” Ngo says.
“Smoothies can be enjoyed by people of all ages, and because more and more people are getting into healthier lifestyles, we expect the demand for our products to grow even more. We are not just a flash in the pan. We are a brand that we believe will always be in demand and more so in the coming years.”