Skip to content
October 09, 2011

Lessons learned from a failed internet cafe business

Several months ago, we finally closed our little internet cafe business. I wrote about the viability of the net cafe business many years ago and actually started one about 2 years ago. Despite its eventual failure, I learned a lot of lessons from that little experiment.

I’d like to share these lessons with my readers and, hopefully, it will also help them decide when they want to get into the business in the future.

  • Price Competition is the biggest killer. Filipinos are a very price-sensitive bunch of people. They will look at price as the top consideration. As such, internet cafe owners will bank and fiercely compete in this front to the point that they will almost always operate at a loss just to get market share.
  • Home-court advantage. A lot of the community or baranggay-based internet cafes operate under the hood of their houses to cut down on the expensive rent. They then pass this “savings” to offset the cost of operation (DSL subs, electricity, labor) leaving renting competitors at a dis-advantage. I’d stay away from locations where this is a very likely scenario, unless otherwise it is to your advantage.
  • Reliability of internet connection. You need the best connection uptime as possible. Otherwise, you’ll bleed. In the two years we’ve operated, we encountered a number of downtimes. A single downtime would last several days to a week. That’s already a huge blow to the bottom line. Instead of getting a single huge pipe, I’d suggest getting a redundant connection that can be combined or load-balanced. That way, if one connection is down, there’s a backup to take over.
  • Forces of Nature. Natural disasters are to be expected but the most common of them all is the yearly typhoon and floods. During Ondoy, a lot of the shops near our location were closed down due to the flood waters that remained for several weeks. We were fortunate our place wasn’t affected and we benefitted from the influx of displaced customers. This year, we saw a lot of typhoons and floods that a single incident can take 2 to 5 days operational downtime. Next time, I’d pick a better location where there’s less likely to get affected by these.
  • Business Intelligence. We struggled with how to make the best margins. Will operating 24/7 make us better returns? What’s the optimal number of workstations needed to maximize customer traffic at peak hours. How do we effectively manage bandwidth to improve internet experience between gamers, chatters, surfers and YouTube streamers.
  • Preparing for upgrade cycle. Our first upgrade was in 2009. The work stations needed to be upgraded after two years. This is to cope up with faster processors, RAM and graphics cards. That does not include the already busted and out-of-warranty computers and monitors. By the end of the cycle, you should have enough funds to do the upgrade. If not, then it’s a losing proposition.

Lastly, and this is my biggest lesson — invest in money you are willing to lose. That way, you are able to make a sound and objective judgement when it is needed. You are not too emotionally attached to the business and you can easily let go when it’s time to let go.

Will I go back and do this again? Absolutely. When that happens, I think I’ll be wiser and hopefully succeed.

56 Responses to “Lessons learned from a failed internet cafe business”

  1. kapitan
    Twitter: keywordspeak

    sabi nga nila, location location location.
    masarap magkanet cafe sa malapit sa school.
    yung mga toping on-the-go ang mga target customers mo.

  2. Owen Lacoste
    Twitter: RaiLacoste

    I worked for several Internet Cafes before but now I think of it as a slowly dying business. Internet packages are so cheap and you can even do facebook at your mobile. PC has become affordable also. Most of the cafes I’ve worked for are closed now. Glad I shifted into social media :D

  3. kuya dan
    Twitter: dante noe

    It was my dream business way back early 2000… when I was employed as an internet cafe attendant…

    for 4 yrs, I saw big changes prior to your list! Lalo na pede ka ng mag set-up ng game type desktop sa mababang halaga…

    mas ok pang mag benta ng isaw+kwek2x+buko juice sa kalapit ng school kc walang price competition…

    it was an eye opener to me. :)

  4. Mon Macutay says:

    That’s sad to hear Abe. I also have a small i-Cafe and times are tough. I actually wrote a couple of articles so that entrepreneurs willing to start up have a guide of some sort. But you’re right, the best teacher is still “experience”.

  5. Mon Macutay says:

    That’s sad to hear Abe. I also have a small i-Cafe and times are tough. I actually wrote a couple of articles so that entrepreneurs willing to start up have a guide of some sort. But you’re right, the best teacher is still “experience”.

  6. Dexter | Techathand
    Twitter: techathand

    Mahirap talaga ang internet business sa Pinas, medyo dami ng competition..

  7. cocolumboy says:

    buti na lang construction supplies ang business ko,,,, ang laki ng kita, ahehehehe

  8. What happend to the computers you used in the internet cafe?

  9. iloveboracay
    Twitter: iloveboracay2

    Internet cafe business is very saturated already and most household today owns a computer with an internet, free wifi all over the place, thus making this type of business really not demanding too much now.

  10. Chazper says:

    @iloveboracay saturation is relative to location. University belt, yes I’ll agree with you bro that it’s very saturated. But I know of a prime location that has only one internet cafe. Around it are multinational companies and an international school… it’s charging Php50/hour. Their customers have access to the internet in their office and they can use their mobile phones for surfing, but how come they still hangout in that internet cafe during their breaktime and after office hours? And how come it has no competitors? hmmm…

    @Yuga. We have the same experience Abe. All the things you mentioned are true. The typical business model of internet cafe is surely dying. What is needed for this industry is to adapt and evolve to the changing time. When starting, one should be fully aware of the threats and should have a sound strategy to overcome them.

    Nowadays, those that are planning to start like a typical carinderia will surely lose. But those that will follow a structured and well thought of business plan like those first class restaurants will have a fighting chance, especially if taking the advice of people who have been burned and became wiser by venturing in this type of business. This is no longer a business that anyone can setup and expect success without careful planning.

    Tips and Guides in starting an iCafe

    • PhillipAnn says:

      Yes, truly this business is saturated. But in my case strategy matters and I’m still alive and earning the same income as before when I was the only one standing here 3-5 years ago. Today there are 7 others in our zone (a radius of 200m).

  11. omar says:

    @yuga. Do you have licensed MS Windows installed in your (recently closed) internet center? me and my wifey are going to open an internet center but I’m torn between getting licensed windows or not. majority of internet centers all use jack sparrows, and quite frankly, I don’t see any advantage of purchasing licenses. dagdag gastos lang if you ask me since law enforcement is impotent.

    but still, I would like to go legit with our business. is it still advisable to get licenses for windows?

  12. imzky says:

    I just opened an internet cafe this year and it’s not doing good. I must admit it was a wrong decision as I jump into it without doing much research and study. There are a lot of competitors in the area, though we manage to have regular customers (suki), still the gross income is not enough to pay for the expenses.Plus the problems that arise such as PC crash, connection error etc. which give me much headache. I am not good technically on computers that’s why I still look for a technician anytime there is a problem with the PC and network which means additional expenses. Any valuable inputs to help me survive in this business will be highly appreciated. Or does this mean I should give up?

  13. cyberbhlue says:

    nagwork din ako sa net cafe sa amin. sa sobrang dami ng computer shop eh ang pinakamura na rent eh 9/hour. peru di namin ginaya ung price nung nag ooffer ng mababang rent kasi madami kaming valued customer na kahit 15/hour pa rin kami eh sa amin pa rin sila talaga pumupunta. hanggang ngayon buhay pa rin ung business. lesson learned: be good to your customer, cgurado babalik sila na may kasama. dapat assist kung assist. maging approachable.

  14. michael says:

    4 years na ako nag-operate ng internet cafe ko, ang experience ko taas baba ang income kasi minsan may games na gaganahan silang maglaro, minsan naman hindi pero mga alternate lang na buwan pag may ma install na magandang laro babalik ulit ang customer. Talagang sa games lang nagsu-survive ang cafe pero ngayon mga half a year na humina na ang cafe ko, kababago ko pa lang mag upgrade kasi akala ko sa pc spec ang problema pero hindi na talaga bumalik mga customer ko. Marami na ring hulog piso na mga internet at game box sa paligid. Nasa residential ang area ko pero urban na may dalawang university na malapit pero hindi ko makuha kung bakit pakunti-konti nalang customer ko. Balak ko nga mag shift ng business pero hindi ko pa alam kung ano at kung magagamit ko paba ang mga pc ko. Any advice kung ano magandang business na magagamit pa ang mga PC ko.

    • jeff says:

      obserbahan mo pre kung ano status nung mga pumasok na hulog piso,,, kung maganda income nila gayahin mo,, den spread ur pc to your area,, as simple as that,, kaysa magbukas ka ulit ng walang kasiguruhan na new business. para di rin ma junk mga pc mo.. gud luck

  15. Phillip Lopez says:

    I have i-cafe here @ ph sa totoo lang mahirap talaga for now pero sa tingin ko di naman lahat ng internet cafe mahina. dapat servicing din meron like computer repair, xerox, cd-burn, accessories snacks. style ko kasi buy n sell wag mong hintayin na malumaan ka ng computer for sure pagnalumaan ka at di ka pa nag dispose sigurado lugi ka kagad…

    advantage kagad kung marunong ka sa pc-trouble shooting disassembly and assembly networking sideline din yan. check mo rin mga pc mo baka di gamers type and internet connection baka mabagal mapapansin mo tutumal mga costumers.

  16. jeff says:

    meron din ako internet cafe, as of now working fine.. ok ang kita.. i maintain my pc’s tumatatngap din kami pc repairs, console repair, electronic repair, celphone repair,repair sa lahat ng gadget,, naexperience ko kc dati nung my competitor ako d2 sa baryo namin my pumasok na mga hulog piso. medyo humina ung net cafe ko.. so i decide to convert my other pc na gawing hulog piso at kinalat namin ol over the place,, lahat ng posibleng pwede nila lagyan sa buong baryo naglagay kami.. well after 2 months haha nadoble ung dati gross income namin… and its my advantage kc ako lng ang my internet all over the place.. kaya napilitan cla mg pull out ng unit… as of now buhay ang business..baryo kc ung lugar namin…

    • Billy says:

      Good to know Jeff. Those tips are very helpful. Thank you

    • PhillipAnn says:

      Ako din ganon nangyari. Nong nabalitaan ko na may magtatayo ng pesonet sa harap ko kinanvert ko agad to pesonet ang cafe ko. Kaya nung magbukas sila hindi na nanibago mga customer at sa akin pa rin sila pumupunta. Pero binababa ko rate ko in 1 month, tsaka ko binalik to standard price. Ngayon ganun pa rin ang kita ko sa dati.

  17. Billy says:

    Games are now and will always be the bread and butter of Internet Cafes. I remember when I was in the elementary, we have ataris and family computers and we call it arcades not internet cafes. So if you study the trend back then and now it has always been on games. Upgrade on the games and surely you will stay in business.

    Social networking, office and school tasks are mere sidelines in cafes nowadays. Stick to games.

  18. widosy says:

    i invite all internet cafe owners to visit us, we can help you rise up and be at the Top! as we will help you with are services, features including battle-lan (interconnection of internet cafe antionwide or worldwide!)..

  19. It is good to here na marami na ring mga Filipino na nagnenegosyo.

    Para sa akin napakaganda ng Piso Net Cafe Business kasi may business na ako kahit full time working ako.

    Para makatulong din sa mga may balak na magbibizness ng Piso net cafe, gumawa ako ng Piso Net Cafe Tutorials kung paano magsimula ng ganitong bizness from scratch to operational.


Leave a Reply


Written by

Abe is the founder and Editor-in-Chief of YugaTech. You Can follow him on Twitter @abeolandres.

More articles by Abe Olandres :