Starting and running a business in the Philippines can be both exciting and challenging. While there are plenty of opportunities to tap into the country’s growing economy and emerging markets, there are also hidden costs that entrepreneurs need to be aware of.
In this article, we’ll explore some of the most common hidden costs of running a business in the Philippines, and how you can manage them to ensure your success.
Business permits and licenses
One of the highest hidden costs of running a business in the Philippines is the cost of permits and licenses. To legally operate a business in the country, you need to secure various permits and licenses from the local government units (LGUs) and national government agencies (NGAs). These include business permits, zoning clearances, sanitary permits, health certificates, environmental permits, and other regulatory requirements.
The cost of these permits and licenses varies depending on the type of business and the location. In some LGUs, the cost can be as low as ₱1,000, while in others, it can be as high as ₱50,000 or more. NGAs also charge fees for registration, accreditation, and certification, which can add up to thousands of pesos.
To manage this cost, it’s essential to research the requirements and fees for your specific business and location. You can also consult with a lawyer or a business consultant to ensure that you comply with all the necessary regulations and avoid penalties for non-compliance.
Labor costs and benefits
Another hidden cost of running a business in the Philippines is labor costs and benefits. The country has a minimum wage law that sets the minimum compensation for workers in various industries. As of 2021, the minimum wage ranges from ₱537 to ₱537 per day, depending on the region and industry. However, many companies offer wages that are above the minimum to attract and retain talent.
Aside from wages, employers are also required to provide benefits to their employees, such as social security, health insurance, and retirement benefits. These benefits can add up to 20% to 30% of an employee’s salary, depending on the type of benefit and the employer’s contribution.
To manage this cost, it’s essential to budget for wages and benefits in your business plan. You can also explore alternative compensation models, such as profit-sharing or performance-based pay, to incentivize your employees and reduce labor costs.
Operational costs
Running a business in the Philippines also entails operational costs, such as rent, utilities, supplies, and equipment. The cost of these items can vary depending on the location and the type of business. For example, rent for a commercial space in Metro Manila can cost anywhere from ₱20,000 to ₱100,000 per month, while rent in the provinces can be much lower.
To manage this cost, it’s essential to create a budget and stick to it. You can also negotiate with suppliers and landlords to get better deals and reduce your expenses. Additionally, you can explore alternative work arrangements, such as remote work or shared office spaces, to lower your overhead costs.
Taxes and fees
Finally, running a business in the Philippines also entails paying taxes and fees. The country has a complex tax system that requires businesses to pay various taxes, such as income tax, value-added tax (VAT), and withholding tax. The rates and requirements for these taxes vary depending on the type of business and the amount of income.
Aside from taxes, businesses also need to pay other fees, such as registration fees, renewal fees, and penalty fees for non-compliance. These fees can add up to thousands of pesos, especially if you fail to comply with the regulations.
To manage this cost, it’s essential to consult with a tax expert or an accountant to ensure that you comply with all the necessary tax requirements and avoid penalties. You can also explore tax incentives and exemptions for specific industries and locations to lower your tax liability.
Understanding these hidden costs
Starting and running a business in the Philippines requires careful planning and management of costs. By understanding all these hidden costs, you can create a realistic budget and avoid financial pitfalls. Remember that running a business is not just about making a profit, but also about managing your expenses and building a sustainable enterprise.
Minimize your business cost
If you’re running a business in the Philippines, consider using StoreHub, a cloud-based POS system that can help you manage your sales, inventory, and customer data all in one place.
With StoreHub, you can streamline your business operations and stay on top of your finances, all while minimizing the hidden costs of doing business in the Philippines.
Try StoreHub today and see the difference it can make for your business!
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