How to Start a Small Business in the Philippines
- Opening a business in the Philippines is very easy.
- In this article, we provide a list of the necessary documents.
- You need to confirm your intentions and the type of business you want to start.
- Make sure you have a well-developed business plan.
- If you don’t have the capital for a start-up, you can apply for a loan from Digido.
Today, most Filipinos have moved on to starting a business. According to statistics, 99% of registered firms in the country are Micro, Small, & Medium enterprises (MSMEs). So, how to start a small business in the Philippines?
In this article, we are going to talk about how to establish the best online business in the Philippines.
Types of Business ownership in the Philippines
There are three main types of businesses in the Philippines: sole proprietorship, partnership, and corporation.
- Sole proprietorship – a kind of business where there is only one owner registered. This typically applies to small businesses.
- Partnership – a partnership is defined by the Philippine Civil Code Article 1767 as a contract between two or more persons who own the business with equal responsibility and share of the capital.
- Corporation – a huge business with several owners and investors; the owners have shares in the business in various amounts, specified by shares or stocks. Most of the time, these businesses require big capital.
Benefits of Sole Proprietorship
The best one among the three for a small business is a sole proprietorship. It is the easiest to manage and process as far as the laws are concerned.
The benefit of a sole proprietorship is that you are the sole owner, and therefore, you are the only decision maker. However, you are also the only person risking your money.
In addition to that, you are the sole person responsible. For example, if you owe the bank and you go bankrupt, they can run after your personal properties so you can pay your debt.
Lastly, a sole proprietorship is the least messy type of business when it comes to taxes, documentation, permit, and other regulatory requirements.
How to Renew Business Permit
How to start a business in the Philippines with a small capital
To start a business in the Philippines with small capital, first you need to list down the ideas that you have. You must figure out what your market is, and what product or service you want to sell that people are willing to buy. It is easy to start a business in the Philippines because the government supports small and medium-sized businesses.
12 Best Small Business Ideas in the Philippines for 2023
To help you start, here is a list of small businesses you can start today:
- Sari-sari store or mini-convenience store
- Barber shop / beauty salon
- Massage parlor
- Dry goods like cloth
- Car mechanic /car garage
- Machine repairs for electric fans and home appliances
- Food joint, which we call as turo-ruro or canteen/pantry
- Junk shop
- Sell online like in Lazada or Shopee
- Pasalubong shop (a shop where you sell pastry goods for travelers to bring home)
There are many business ideas out there. You must ask yourself what you are good at and then decide what to sell.
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Business Ideas in the Philippines
Market and Competition Research
Once you have a business idea, the next step is to validate that idea and think how you can create a new market benchmark.
Validation of your business idea simply means you need to prove that your business will work. You must prove it on paper and create what we normally call as a feasibility study. Surely, you are not the only person selling the same stuff. What you need to think about is how you will set yourself apart.
Market and competition research should be the first thing to do before looking for funds. And that’s where most entrepreneurs go wrong when starting their business. All they think about is the capital injection and not studying the market to see what is being offered by their competitors.
Knowing what your competitors are offering in the market gives you a chance to carve a niche for yourself. Remember having a target market is a key towards sustaining your business and breaking even.
If you are starting a new business, such as a food joint, you must check what the other vendors are already selling. You must find out if you can cook the food better or offer the same food at a lower price. In addition, you must think of new products that you can sell that the competitors do not offer. Plus, you need to develop a passion for the craft and perfect it. Read books, watch videos, consult with those who are in this kind of business.
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Starting a food business in the Philippines
Prepare a Business Plan
Having a well-drawn business plan helps you meet your objectives and goals. Unless you are thinking of bringing in investors there is no need for a comprehensive plan.
If you want start a small food business in the Philippines, еhe plan takes only a few hours to come up with.
Your business plan should include a mission and goals which are achievable. You must have strategies on how you will promote the food business.
Plan your business process
Finances – how much money will you need in capital? You should list down the rent, the tools, and the payment for your employees. This should be in line with the income to ensure the business can sustain itself. If losses are greater than profits, then the any small business is not viable.
Process – what time will you open your store, and what do you expect the employees to do before opening, after opening, and closing time? Another important aspect you need to plan is your inventory and source. Where will you get your raw materials, how often, and what is your profit margin for your finished product?
Location – where will you put up the business and why are you putting it there? The right location for a business is simple: it must be accessible for people. Chose a location where there is public transportation so people can go to you.
However, you must also know that these locations are expensive. Most of the time, the rent in places where there are so many people is sky-high. If you have a vacant lot, you might as well as use that, provided that it is near the road.
Find Financing for the Business
The cost of starting a small business in the Philippines isn’t as high as you may think. However, the capital injection you make needs to sustain the business in question. This includes the ongoing cost and the one-time startup cost as well. Hence you need to think of where you’ll get the funds from. You could opt to:
✔ Take from your savings
This involves using your life savings to start the business. While at your previous employment, you were earning, in which part of the income goes to your retirement and another to your savings. Now that you have decided to start a business you will need to use your savings. This makes it easier to begin the business.
✔ Digido loan for startup
However, if you don’t have the savings to start your business, Digido offers you an affordable loan which makes your dream business come true. The online firm is known for providing startup loans at a lower interest rate of 11.9% monthly. The best thing about the lending firm is if you are a first applicant the loan is provided at 0% interest.
You can request a minimum amount of PHP 10,500 and a maximum of PHP 25,000. Therefore, if you’re thinking of how to start a business in the Philippines with small capital, Digido is the answer.
Get your Permits and Licenses
Once you have an idea of the a small business, the first step is registering it. This involves getting permits and licenses from these government offices. If you want your business to operate smoothly legal requirements in starting a business in the Philippines need to be met. Failure to do so will end up rubbing shoulders with the local authorities since the business won’t be considered legit.
So, how to register a small business in the Philippines?
Which begs the question: what permits are needed to start a business in the Philippines? To answer this, below are the needed licenses and permits.
✔Register your business with the BIR
The Bureau of Internal Revenue (BIR) requires your business to be registered under them. This particular business registration applies to both traditional and online businesses.
Once your business has been registered under the BIR, a Business Tax Identification Number (TIN) shall be issued to you.
✔ Register with the Barangay and LGU
The next step would be registering with the Local Government Units. The government gives you a permit to operate your business either online or offline. The Barangay clearance is what is issued by the local government. However, it’s vital to note the registration may differ from one region to another. That’s because of the municipality or city in question. Though the permit is issued by the barangay hall.
How to Get a Business Permit Clearance in the Philippines
✔ Register with DTI
The last permit to seek is a license from the Department of Trade and Industry (DTI). If you are a sole proprietor your firm needs to be registered at any of the DTI offices. Having a DTI certificate ensures your business name and products are attached to you alone. Hence there won’t be any other business using the same name. Thanks to their system which counter checks your firm’s name alongside others. Hence, your consumers can easily identify your products or your brand with your name.
Steps to Apply for a Business Permit
The next step is to apply for your business licenses and permits. The process can vary from one municipality to another, but the general process is below:
- Apply for DTI Business Registration; you can do this online
- Get a Community Tax Certificate from the Municipal Hall
- Get a Barangay Business Permit from your Barangay Hall
- Apply for City Health Office Clearance
- Apply for a Fire Department Clearance
- Apply for a City Engineer’s Clearance
- Apply for Mayor’s Business Permit from the Municipal Hall
Once all of these are completed, the last step is to apply for a Tax Identification Number for your business, which you can do at the regional office of your Bureau of Internal Revenue. It would help if you took the services of an accountant.
Wait for the approval of the BIR, then go to a certified printing press to print your standard official receipt. Take that back to the BIR, and then they will issue you the necessary permits to operate your business
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Learn About Tax for Business in the Philippines
Taxation in the Philippines is a complicated thing. What we recommend is that you speak to a tax lawyer or accountant. Accountant fees are affordable, and some will charge as little as ₱1,500 per month as retainer’s fee. The accountant will teach you how to manage your tax books. Many of them will do the books for you, and they will also process all the legalities with the BIR.
Once you have a tax specialist, all you have to do is issue receipts to the buyers. Keep the other copy of the receipt and write down your daily sales and expenses. The accountant will balance your books at the end of the month and tell you how much you must pay in taxes. It is also the tax accountant who will go to the BIR to pay the fees. As you can see, it is a good set-up that prevents hassles.
How to Build Brand Identity
Once your business is open, the next step is to create a brand. A brand means you are building your business identity that people will know you for. Essentially, you are creating an identity to separate you from your competitors.
How to Name Your Business
Once thing you need to think about before applying for your permit is the name of your business. You must decide on this before you even register in the Department of Trade and Industry.
The Philippines has laws about business names. Essentially, your business name:
- Must tell the reader what your business is about
- Must not contain offensive words
- Must not be the same as other names of trademarked brands
These are the top three things you must take into account as far as the law is concerned. However, you must also create a name that you can use for excellent marketing. The business name must be easy to remember and catchy.
Create a Business Logo and Design
If you have the budget, the next step is to create a logo. Here are some good tips to creat a logo:
- The logo is part of your branding activities – make sure hat the logo represent what your business is about.
- Go to print shops who have graphic artists. You will only pay a small amount for their services.
- Create the logo by yourself! There are many online free software programs you can find via Google
- Make sure you are not copying the trademarked logo of other people or companies as it is illegal.
- The logo you make should catchy and refreshing.
- Do not forget that your business name or brand name must be in that logo.
- File for trademark in the Philippines Intellectual Property Office (IPOPHL).
Having a promotional strategy is crucial to your business. What are the things you need to do to promote traffic either online or offline?
Website makes it easier for your business to tap into the global market. That, in turn, increases sales and profits. Therefore, if you are relying on your offline shop, it’s time to create a website.
The business site should be mobile, responsive, and fully optimized to enable the users to navigate it. Plus, the side comes with an e-commerce plug-in that allows you to sell your products online.
There are many companies that offer free websites you can find via google. If you want, you can hire someone from Fiverr or Ipwork to build the website for you.
You should to ensure your business has a digital footprint on all social media sites. This helps you when running a discount promotion or a black Friday sale. According to studies, over 45 million Filipinos are using Facebook. Now, what about Instagram, WhatsApp, YouTube, or Telegram? Social media is free, and you can post as many items as you want.
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Work with the Right Business Suppliers
One of the things you must do is choose your suppliers. These people must be dependable because your business relies on the raw materials, they provide you. Of course, you must choose suppliers who also sell raw materials cheaply t you.
Do not get your raw materials from grocery stores because they already have a profit. Instead, try to look for sales agents of raw materials. If you cannot do this, go to a public or wet market where you can get raw materials at a really low price.
Starting a business in the Philippines sole proprietorship or a partnership, you need employees. They are a crucial organ of the business to ensure daily operations are carried out smoothly. The number of employees you hire depends on the business and the services needed. Therefore, identify all the positions which require personnel and the requirements which need to be met. The hard work begins in finding qualified personnel. But you could check for referrals from your family members, friends, colleges, and even freelancing sites.
5 Best Tips to Start a Small Philippine Business
Here are some things to remember:
- Build a perfect website with a strong social media presence– build a website on Tilda or WordPress as it is free. If you do not know how to build a website, use social media. The best one you can use for any business is Facebook. The next one we can suggest is Instagram.
- Create a target consumer persona – in marketing, we call this persona. It is a drawing of a target buyer, like a mascot. This drawing represents what he is, what he wants, etc. From here, you can determine what products you can sell to this person and at what price.
- Make a back-up plan– you must have a back-up plan when things fail. For example, where will you get supplies f your primary supplier failed to deliver?
- Tighten the belt and save money – do not spend all your earnings. You must be thrifty, and you must make sure that you save for the rainy days.
- Trust your employees – you must assign task to your employees, so you do not stress yourself to much.
Starting a business in the Philippines for foreigners or locals is simple since the required documents are the same. Though foreigners need to have extra documents to prove their intentions and the kind of business they want to start.
That said, you need to have a passive income and this can be obtained from having a side business. Hence, take time and research the kind of business you want to start. Ensure you have a well-drawn business plan that caters your needs. And if you have a problem with finding capital to inject you can opt for a loan from Digido.
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