Are you ready to start a small business in the Philippines?

Starting a small business in the Philippines is becoming an accessible venture for many Filipinos.

Some entrepreneurs start young with barely any capital at their disposal, using their skills and talents to produce goods or render services, and marketing their business on social media. Others, meanwhile, find that after years of employment, they now have enough savings to invest in an idea that has been brewing in their heads.

That being said, not all businesses guarantee success. There are a number of different reasons for a small business to falter several months after its inception.

To avoid immediate failure, it will be helpful for any budding business owner to know how to start a small business the right way.

The three types of business organizations

First off, let’s go through the basics of starting a business which is identifying your enterprise. Here are the three ways to structure a business:

• Sole proprietorship - It is the easiest type of business organization you can set up in the Philippines. Being the sole proprietor, the business becomes an extension of yourself, including your net worth. This makes it riskier compared to the other types of business organizations, because sole ownership means you’re responsible for managing all assets and liabilities. Small businesses often follow this business model.
  
• Partnership - It refers to the joint collaboration between two or more parties, wherein they share resources and various assets in growing the business. This means that liabilities and revenue are shared and distributed accordingly as well.
• Corporation - It is often the type of business organization for larger companies, as it allows a group of individuals to operate as a single entity and participate as shareholders, effectively providing the business certain tax benefits.

Three most common types of businesses

As the demand for products and services continue to grow, more and more small businesses are propping up. You can grow your finances by starting a business venture and being your own boss. Here are the three main types of businesses to consider:

• Service - These businesses involve the exchange of work at an agreed upon rate between the business and a client. Examples include barber shops and laundry.
• Merchandising - This involves the buying and selling of products, wherein the business sources the products at wholesale costs and delivers them at retail prices. Examples include groceries, sari-sari stores, and online stores.
• Manufacturing - This involves the production of certain goods through business sourcing and processing raw supplies, materials, or ingredients to produce the goods for sale. A few examples include food and beverages, such as bread, snacks, milk, and soda; and a wide range of goods, like soaps, shampoo, and other personal care items.

It’s wise to study and consider which type of goods or services can be most profitable. Taking out a car loan to start a transportation or courier service business or applying for a home loan to provide rental space are possible options for a small business with long-term returns.

When starting a small business in the Philippines, it is important for any business owner to be financially educated. Knowing how to manage debt, for instance, can impact the survival and growth of a business.

Learn how to manage your money with resources like Metrobank’s Money Basics and Moneybility. so you’re equipped to start a business.

What are the steps in starting a small business?

A business often starts with the seed of an idea. However, for this business idea to be successful, you have to nurture and take care of this seed so it can grow and bear fruits.

Here are five main steps on how to start a small business in the Philippines:

• Planning
• Funding
• Naming
• Registration
• Operations and Marketing

Planning the business

Once you have an idea for a small business, validate its potential for growth by conducting a business study. This includes three main components:

• Market study - An analysis on demand for the business and its target audience
• Marketing study - A comprehensive look on the strategies to be implemented in promoting and selling the product or service
• Feasibility study - A thesis study on the viability or sustainability of the business’ performance

While these may seem too much for a small business, carefully entertaining all possible scenarios is practicing due diligence as an entrepreneur.

After completing these project studies and evaluating the results, gauge if you should proceed with the business. If you decide to go for it, prepare a business plan, which is a compilation of different documents detailing everything about the business: its structure, goals, and how it works.

A business plan can include any of the following sections:

Executive summary - A summary of the business.

• Business overview
  External analysis - An overview of the business’ industry.
  Internal analysis - An overview of the business as an organization.
  SWOT analysis - A comprehensive look at the business and its strengths, weaknesses, opportunities, and threats.
• Business goals and objectives – This answers what the organization wants to achieve. It can include the business and the organization’s mission and vision.
• Business model and framework – This provides insight on how the business operates, including its systems and processes.
• Summary of products and/or services – This defines the value of the business through what it offers.
• Marketing models - These are the plans of the business related to reaching customers, promoting the business and its brand, and selling its goods and services.
• Financial projections – These detail the pertinent cash flow necessary to keep the business operating.

When done correctly and accurately, the business plan serves to legitimize your business into a document that shows you there is a valid potential for success. Small businesses are no exception, as most great companies today once started out as humble ventures.

Having all of these can also give you access to credit. Lenders such as banks are more likely to lend you money if they see that your business idea truly has the potential to be successful.

Funding your business

The viability that the early project study and business plan presents should allow you to proceed with funding. Here are the expenses you have to prepare for before starting your small business:

• Capital Expenses – These include the cost and value of equipment and other assets
• Pre-operational Expenses – These include the miscellaneous expenses to get the ball rolling. These cover the usual transactional costs like deposits, licensing and registrations fees, marketing budget, etc.
• Operational Expenses (or Working Capital) – These include the costs necessary to keep the business running for at least six months, or at least until revenue becomes self-generating.

You might think that it’s risky to borrow money to invest in a business. However, it’s even more risky to put your life’s savings on the line for a business idea that might fail. Furthermore, a lender scrutinizing your business idea before they give you access to credit already acts like a safety net to protect you from pursuing a business that might not work out.

Consider applying for Metrobank’s personal loans and business loans to help fund your business idea.

Naming your business

Once funding is good to go, it’s time to decide on the name of your business. It helps to think ahead, as your business name can eventually transform into a brand that represents what the business and the organization is all about.

Business registration

With all the necessary information complete, you can make your small business official by registering it. Here is a list of the necessary business documents:

• SEC Articles of Incorporation
• DTI Registration
• BIR Clearance
• Barangay Clearance
• Mayor’s Permit

Even if you run an online shop and no physical store exists, these documents serve to legitimize your small business.

Operations and marketing

The last step to starting a small business is fulfilling operations and implementing your marketing strategies.

Going digital has become more beneficial for small businesses. Utilize the available and relevant social media platforms to market your small business and reach your target audience.

Constantly review your processes and seek ways to improve methods for better productivity and delivery. There are innovative solutions for nearly every business process, so if you have the capacity to upgrade, better invest in modern technology and equipment.

Are you ready to start a small business?

Don’t let the name fool you. Starting a small business is no small feat. Like any investment, a business involves taking a lot of risks. Success is not guaranteed. But by doing your due diligence and really scrutinizing the viability of your business idea, you can raise your chances of success.