Category Archives: money matters

REFLECTIONS OF A FORMER SMALL BUSINESS OWNER

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I tried selling on Carousell yesterday and received some inquiries today (“Last price na po ba?”). While I don’t blame buyers for asking that (it is well within their right as customers), I can’t help but feel sorry for some small and medium-sized enterprises (SMEs) who deal with similar customers who ask for discounts that cut to the bone. And they’re not even ordering/buying in bulk.

You see, we SMEs deal with high operating expenditures (opex), taxes, and damaged goods regularly. We carry those on our books without the benefit of economies of scale. At the same time, we try to price our products and services reasonably so we can retain customers while paying salaries/opex and struggle to keep afloat.

Yes, we give discounts if it is within our means but please don’t ask unreasonable rates that they cut so deep. If you do, that means you don’t want our business.

That said, I rarely ask for deep discounts because I know how SMEs bleed, especially with the kind of business environment that we have = red tape in getting business permits, crazy tax system, and high tax rates. Really unfriendly.

Selling on Carousell triggered this within me.

You see, I was thinking of going back to selling online now that LBC Express will be launching a service that would help SMEs with their logistics. (I had drinks with their key people last week so that’s how I know). I won’t preempt them but it was something that made me think whether I can go back  to it again.

In the early 2000, we used to sell items on eBay even before they thought of putting up an Ebay Philippines branch. There was no online selling platform yet at that time and Sulit.ph was just starting out. We used eBay US and had to go through the hoops of being an early adopter/user. Had to open several bank accounts due to the unfriendliness of the payment system available then (Xoom.com, Western Union, etc.) because Paypal was hard to use at that time because we needed a US bank account. I was able to set up our Paypal when the company started accepting EON by Union Bank–the first pure online/branchless banking entity (I had to give props to them on this one). Another problem with the old system before is that some of our customers do not have credit cards since we have buyers coming from Eastern Europe or Latin America or somewhere in Southeast Asia. I had to physically cut my lunch breaks to physically queue in these banks/remittance centers to get payments and go to the Post Office to ship the items.

And oh dear, the fees! The fees really do bite! We had to price them in or else we won’t have any profit at all. Ebay selling fees, listing fees, Paypal fees, etc. But those make our products expensive, on top of the expensive shipping fees.

And don’t get me started on logistics. It was (and still is) a huge headache.

Our customers complained that our local Express Mail System (EMS) is freaking expensive but that’s the only system available to us that time (tracking numbers) that ensure that our items really do arrive. Otherwise we were blind and we don’t have any assurance that our customers are not really duping us, claiming that the items did not arrive so we had to refund so the negative feedback wouldn’t gnaw out our feet. When I became a public finance reporter, I had to ask Customs/Philpost why is that our postal service is so expensive compared to Japan and the US (we bought stuff from Japan/China and their shipping costs with tracking numbers are half of ours). No one could give me a clear answer.

It was simply exhausting to the point that doing eBay was no longer an option when they changed their feedback system and increased their cuts from profits. Then there’s the logistics headache.

Then we opened our brick-and-mortar business within the fringes of the Maginhawa food hub. Half of our business was comprised of walk-in customers and being in a busy center is good. But that comes with the predatory rent rates as well so we were priced out of the area. The opex couldn’t be justified anymore.

Fast-forward, e-commerce is booming like crazy here (but we’re still lagging compared to our neighbors in ASEAN) and SMEs have all sorts of options now, from friendlier payment systems to increased online selling platforms. Websites now are easier to make too (WordPress has become friendlier to SMEs, with all sorts of widgets available).

I remember I had to deal with a cheap domain and hosting provider then but in return i got crap security so in the end I got hacked. I abandoned all ye hope for an online store at that time. Plus I had to deal with Joomla, and that one is such a pain to use since I am no computer genius. It’s not easy setting up a shopping cart and linking my Paypal account there. I had sleepless nights trying to do it by myself.

I tried Multiply (remember that one?), the blog-social-media-cum-online selling platform of the 2000s. I ordered my Lomography stuff from a girl on Multiply and a handbag from a fashionista that only lasted me three months. I tried selling on Multiply too but it had limited reach and couldn’t make money out of it since our customers are mostly international. Multiply was ahead of its time but they couldn’t figure out how to best monetize what they had. They were like the Friendster = good concept, but slow in figuring out how to make money out of something that good.

Anyway, back to being an SME. I remember somebody telling me that SMEs in the Philippines normally have a 3-year lifespan. Well, on our third year, we went bust. So much has changed, like rent rates have gotten crazier and the proprietor’s interest has waned. Keeping afloat in this environment is a struggle. You don’t have a 9-6 day. You can’t just walk away from your shop and have a two-week Christmas vacation because that is the busiest season for SMEs. Then SSS, Pag-Ibig, Philhealth…

Then you had to deal with an employee who destroys you or steals from you. And robbers taking our cellphones and other stuff. Then BIR suddenly orders a change in receipts…so we had to order PHP 3,000 worth of new receipts and ditch the old ones. Money down the drain. Then QC government came out with an order that all brick-and-mortar stores should have CCTVs installed for security or else they would not be able tos secure business permits. How come it is the SMEs who bear the burden of maintaining peace, order and security? Isn’t that what our taxes supposed to do for us? What if we couldn’t afford a PHP 6,000 CCTV system?

It was all too much to take.

So please, if you deal with SMEs, especially those who make their own products to sell, be considerate. You can ask for discounts if you order in bulk (so that way we can offset given the small economies of scale that we can have in wholesale). But not retail. Please be kind. Especially to farmers and wet market vendors. They make so little.

Remember, SMEs provide 99% of the employment in this country.

ADULTING part 2

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tea

photo courtesy of alliancecoffeeandtea.com

I’ve had a working-chatting session with a colleague in a tea shop somewhere in QC this afternoon and our conversations in between rushing to meet deadlines went from closures and moving on, to people who are not sensitive towards other people’s plights (or those who exhibit sociopathic tendencies), to investments and estate planning. All in one afternoon.

She is a couple of years younger than I am; she just entered the big 3-0 while I am inching closer to the big 4-0. We’re both at the stage where we find it exhausting just thinking about spending our Friday nights getting wasted like when we were in our 20s (she spent Friday night with our much younger colleagues who imbibed alcohol like it’s going out of fashion and they went to work today nursing a nasty headache or fighting off flu). She said she now feels like spending evenings or days off like this–just drinking coffee or tea and talking with people who are worth talking to. We both feel that socializing should not often involve alcohol. I can still drink like a man but that does not mean I should.

What have we become, L, I asked? I also answered my own question: We have become adults.

But adulting is very hard, no? When we were kids, we thought that adults knew what they were doing. We were so eager to become adults. Now that we are adults, we just discovered that everybody else was just winging it. Some are still clueless, some are just feeling their way.

We talked about lessons learned from what we witnessed from our elders–our aunts and uncles, the titos and titas who behaved abominably towards each other because of some petty things such as inheritance of inconsequential stuff like dinnerware sets, a ring, or a clock. From bad money management by some relatives or family friends. By spoiling rotten siblings or aunts and uncles who never fully made it into adulthood and feel that the world owes them a lot due to circumstances of their own making and because they were raised to be self-centered monsters.

We were talking about how long can we still do what we do. About how do we see our lives in the next five years. Next 10 years. Can we live alone during our twilight years, when our children would not or could not take us in under their roofs? L and I both agreed that we should prepare financially and mentally for the event that we have to live on our own without help from our children. We must not rely on them to take care of us since they have their lives of their own. It’s painful to see a relative being passed from one offspring to another because they could not take care of their mother/father due to financial constraints or just plain they do not care.

I do not want to be in that sad position.

While I do not expect my children to carry the burden of taking care of me or their father when we’re old, I at least expect that they would be caring enough to check up on us, visit us or see if we’re still alive.

And that boils down to how I raise my girls. Which is a different topic.

Hard to raise little human beings while you yourself still have some growing up to do.

Planning for retirement (adulting is very hard)

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courtesy of philstar.com

courtesy of philstar.com

My conversation with my friend (see previous entry) prompted me to ponder about my immediate financial future (Will I get a raise after working my butt off for a year and six months? How should i ask for a raise? Shall i ask for a change in contract?). While I did so, I couldn’t help but think of (and act on) my financial future 30 or 40 years down the road.

My mother has scrimped and saved and was brutally frugal when we were still under her roof and she’s now reaping the rewards: she has more than enough money in the bank; a generous retirement package c/o GSIS; and she will be going on an Alaskan cruise, a European religious pilgrimage and a Canadian tour all within this year.

While I don’t plan to have a grand retirement like that, I suddenly felt that I should be saving more than 50% of income for retirement since the SSS is going bust in a decade, methinks, if they don’t mend their ways and be beaten to a pulp to shape up.

The benefit of being a business journalist is that you get to learn more about investing than an average Juan from the streets. So while I was writing about Lehman Brothers going belly up and the subsequent tanking of the markets in September 2008, my mind was whirling and began gathering up my courage. On the second day that PSE was on a tailspin after Lehman, I bought 3 stocks that (having previously bought a power/energy stock prior to Lehman) I knew I could hold for the long-term until my kids enter college (I was 28 years old then and didn’t have kids). So until today I hold those 4 stocks that I bought for dirt-cheap prices that I will never see in my lifetime again. When markets bleed, I buy. When they do a rights offer, I buy. I never sold any of them yet.

Prior to Lehman (around February 2008), I bought myself a traditional insurance policy. A few months after that, I placed a huge sum of money (for me at that time) in a mutual fund.

I terminated that traditional insurance policy last year and shifted to a VUL with several riders in it (I neglected to keep up with my traditional because life got in the way and my insurance agent left the country and was an orphan policy holder until last year). My mutual fund was still intact and in fact it earned well. I just regret that I wasn’t able to top up my investment for the past 8 years because again, life got in the way (high-octane job that made going to the bank for payments a little off-putting) and because my former agent left me high and dry. *Aww shucks for the lost time, I keep telling myself* I got my financial life in order last year and a few weeks ago I just transferred my mutual fund into another fund. Then topped up my investment after the market tanked. I’m hoping the market would tank again by March or by the third quarter (US Fed hiking rates) so I could place another tranche of my savings into that mutual fund.

Last month, I bought my nearly 5-year old twins insurance policies with investment riders that hopefully we could use for their college education (the direct stock investments are for their college funds as well). The other education policies being offered to me were expensive that I felt I would be stretching myself too thin if I was suckered into buying those so I searched for other insurance products that have good investment riders. I would pay for the policies for my kids annually while my own insurance policy is a quarterly thing so my monthly budgeting would be easier.

Aside from my mutual fund and insurance policies, I’ve been putting funds in another savings account that I don’t touch. That is my emergency fund. I want to have at least 6 months’ worth of expenses for my emergency fund, just for my peace of mind. I hope I don’t get to be unemployed that long.

I’m still not satisfied with my investments since I worry about inflation and future medical costs. I’m thinking of placing some savings in time deposits but—bahahahaha! As someone who covered Treasury auctions, I know it’s nearly impossible to make money out of these unless the Philippine government goes back to its bad habits and blows its finances and starts borrowing more than it can collect revenues. Of course I wouldn’t want that. But I can revisit this time deposit option since I don’t want inflation eating into my savings in my regular savings account. Inflation is a brutal animal but at this moment, with oil prices dropping and food inflation a slightly less-than-worrisome issue, I can put it off my mind in the next 6 months.

Or I can go for a UITF. The Landbank Growth UITF looks ok to me (40% fixed income, 60% stocks) but I have to check their performance vs other UITFs. After I meet my desired emergency fund ceiling, then I can go back to thinking about investing in a UITF.

I have two vehicles that are over 5 years old (one is 10 years old and another is 7 years old) but they’re running well and have a couple of more years in them. I don’t see any need to replace them in the near future. I am renting right now but I must think about buying a property outside Manila to be the forever home. How I would budget for that is still a mystery. Either I would have to change jobs again or be brutally frugal like what my mother was, sending us to school while paying for her forever house, which by the way, worked out well in the end.

Adulting is very hard.