Doing Business 101

A group of young entrepreneurs pulled their resources together and ventured into a new business which they thought they knew best. They recently organized a corporation and got a big office space on the top floor of an office/hotel building. It was an impulsive decision not aided by economic fundamentals. Their hopes and dreams were big and exciting. However, starting a business is not all hopes and dreams.

For every opportunity, there is always a risk. More than the opportunity, careful scrutiny must be done to minimize or mitigate concomitant risks in doing business.

They were excited with the great prospects of their new business venture. It’s nice to have a big office with panoramic views of the metropolis but before they signed the contract of lease, they did not do careful study and some pencil pushing other than mental calculation.

How much is the lease, the common area dues, yearly escalation, deposits, advance, penalties, security deposits, other charges, electricity costs, water, parking, and a whole gamut of expenses that could fill up a yellow pad. Construction costs including but not limited to construction bonds, permits, materials and labor costs, etc.
Then after the calculation, ask yourself, WHAT IF? What if your sales are not yet that strong in the beginning? Where would you get the money to pay for the huge rent? What if you decide to leave and transfer your office? How much would you lose in investments? The money you spent for the renovation, the deposits, this and that? You must strike a balance between having a nice, presentable and decent office and good address, and the cost.

After you’ve done your research and studied your risks, make sure the money you paid to the lessor must be fully acknowledged, receipted, dated, signed. You must have a record of your payments with specifics on the breakdown of payments and for what particular account. Remember, once you give the deposits to the landlord, it would be difficult to get it back should your business plans changed.

If presented with contracts to sign, please read it several times, highlight the important provisions, bring home a copy, ask questions, review documents, ask a capable and well experienced lawyer to walk you through the provisions in the lease contract.

In some cases, even if the parties have piles of documents reviewed by the lawyers and signed by both parties, pagwalanghiya ang kausap o ka-deal mo, they will not follow your contract, at lalamangan ka pa rin. So do some background checking on the kind of people you are dealing with.

Always have an EXIT STRATEGY. When I was still a director of a small bank, I remembered a few times we discussed the lease contracts for the bank’s branches. We always focused on the exit strategy. What if the location turned out to be bad? How can we get out of the lease contract with minimal damage? How about the deposits? What if your plans don’t materialize? What if your business transfers to another city? How can you get out of the lease contract before the term ends? What happens with your money? What happens with the deposits? Ask ask ask.

In business, as in life itself, there are many unexpected events that are not within our control. Many things could happen that we did not foresee. We would be able to protect ourselves by doing due diligence. Do not be impulsive and careless in your decisions. I myself was victimized by this carelessness. I trusted my judgment too much. I thought the people I was dealing with were like me. It was a painful and costly lesson. Many people are motivated differently. My family does business with a HEART. Meron kaming malasakit sa kapwa at marunong kaming makipag-kapwa tao. We’re not out there to extract more money from people. We are not motivated by greed.

Last Sunday, Edmund and I were driving around when I saw a karatula -for sale or lease. It’s a commercial property right beside a fast food chain. Tumbok and it does not meet my frontage requirement. Just the same I immediately called the number listed.
The old man on the other line said P25,000 per square meter if one wants to buy.
He said the frontage is 24 meters. with a depth of 1,000 meters. Huh, Ang haba naman nun, then he said 20 meters, ang liit naman, then he said 200 meters. 200 x 24 = 4,800 square meters more than the size of his lot which is only 2,030.
A——“Ako na lang ho ang magko-compute.
He proceeded by saying that if I want to lease it, they require 36 months of advance rental. Oh wow wow wow. Grabe. Why would anyone agree to paying 3 years advance rent. Again, think of the EXIT STRATEGY. Goodbye.

We cannot teach Doing Business 101 in a day. It’s a whole life lesson.