Are you starting a small business in the Philippines? Starting a business is surely exciting, especially if it’s about your dream and passion. However, being a businessperson or an entrepreneur is not always fun, as it also comes with a lot of expenses. So before starting a business and imagining about all the profits and the glories you can achieve, consider these 15 common costs of doing business in the Philippines first.
1. Office space and building improvement
If you own a building or space which is ideal for your business, you may not need to rent. However, you will still spend money on building improvement to prepare it for your business. If you don’t own any building, you will need to rent. This will make you incur monthly rental expenses. Moreover, landlords usually require advance and deposit payments. Hence, this could be one of your major costs in doing even for a small business in the Philippines.
2. Business registration and licenses
This cost includes registration fees with the Securities and Exchange Commission (for partnerships and corporations), Department of Trade and Industry (for sole proprietorship businesses), Bureau of Internal Revenue (BIR), Mayor’s Office, and other required government agencies. Most of these permits and licenses are usually renewed annually.
This cost includes the recurring taxes you will pay with the BIR, such as monthly percentage tax or Value Added Tax, quarterly and annual income tax, and monthly withholding taxes. Taxes also include the local taxes you will regularly pay with the local government. These taxes usually depend on the amount of your initial capital or gross sales.
Business registrations and compliance with the government are strenuous processes. Thus, you will most likely hire a bookkeeper to save your time and focus on the more significant and profitable steps of your business. Bookkeepers are usually hired in a monthly retainer agreement. The cost varies from business to business.
5. Legal fees
To avoid legal disputes and liabilities in the future, business owners should seek legal advice first before doing any major business decision. Legal fees also include notarial fees on important business documents, such as contracts and incorporation papers.
6. Furniture and equipment
Furniture and equipment are essential to run your business. You have to provide office tables, chairs, computers and other equipment for your workers or employees.
Your computers and other equipment will not work without electricity. Your people cannot work without water. Electric and water bills are part of your monthly business expenses. You cannot live without them.
8. Employee salaries and benefits
This includes the cost of selecting and hiring the most qualified workers for your business. Their daily, semi-monthly or monthly salaries and other benefits (SSS, Philhealth, HDMF, bonuses, etc.) are one of the biggest costs you will incur in doing business, especially if you will provide services rather than sell goods.
9. Employee training and development
Not all the people you will hire are automatically fit to do the jobs that you expect them to do. You need to invest for their training to sharpen their talents and skills. If you will be coaching them personally, expect to spend a lot of time.
10. Travel and transportation
Speaking of time, transportation can be costly in the Philippines, especially if you’re doing business in Metro Manila due to heavy traffic congestion. Travel and transportation expenses also include cost of fuel and other costs of your business travels.
11. Internet and communication
This cost includes your monthly Internet and telephone bills. Internet in the Philippines can be slow and expensive, especially in the provinces. Thus, you might want to stretch your budget to have the most reliable Internet and telephone monthly service package.
12. Repairs and maintenance
What would you do if your computers do not turn on anymore? What would you do if your car’s engine is not already starting? Your office space, furniture and equipment will certainly wear and tear. Hence, expect to incur expenses on repairing and preserving them.
Your business, employees and vehicles need insurance. The common insurances you would incur include business insurance (like fire insurance), car insurance, and life or disability insurance for your people.
14. Loan interest
Many Filipino entrepreneurs start a business without adequate capital coming from their own pocket. Consequently, they resort to getting loans with a promise to pay a monthly interest aside from the principal. Some business owners also use their credit cards to pay suppliers, thus, incurring interests and other charges.
15. Marketing, sales and advertising
A new business need to reach its target market for the first time. This requires a series of advertising, paying commissions to sales agents, and other marketing efforts. If you’re starting a business, you have to set a budget to stand out from the crowd. And even after 5 or 10 years, you would still need to continue implementing an effective marketing strategy to constantly win your competition.
There you are. Those are only some of the common costs and expenses that you should expect when starting and operating a business in the Philippines. They don’t include yet the “cost of materials” or “cost of goods to be sold” for retailers and manufactures. Those business expenses will also depend on your specific industry, location, competitors, and business size.
If you want to succeed in business, don’t ignore them. You have to come up with a sound financial plan. Finally, don’t forget that you have to spend, not only money, but also time, passion and dedication in your business to succeed.
What other business costs or expenses in the Philippines can you add to the list? Feel free to make a comment below.