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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.

Yugatech 728x90 Reno7 Series

  • 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.

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Avatar for Abe Olandres

Abe is the founder and Editor-in-Chief of YugaTech with over 20 years of experience in the technology industry. He is one of the pioneers of blogging in the country and considered by many as the Father of Tech Blogging in the Philippines. He is also a technology consultant, a tech columnist with several national publications, resource speaker and mentor/advisor to several start-up companies.

68 Responses

  1. Avatar for Akukini Akukini says:

    thank you for sharing this

  2. Avatar for Ebz Ebz says:

    Ano sa tingin mo ang viability ng console games cafe, I mean Xbox1 and PS4 for rent per hour din? Naiisip ko lang kasi madami ding mga games na magaganda sa console na alam ko gusto din malaro ng madaming pinoy pero masyadong mahal kasi.

  3. Avatar for Jayson Jayson says:

    nabalitaan ko nga sa TV na grabe ang brownout sa Mindanao mali ang price na 10 pesos sa totoo lang dahil nga sa competition kaya ito nanyare sana yung mga may shop mag bigay na lang ng discount don sa mga matatatagal maglaro or sa suki na hindi yang 10 pesos per hour! Hindi din totoo na dahil afford na ng tao ang net at PC eh mahina na ang shop or PC rent boring po ang maglaro sa bahay kaya ang mag totropa sa shop naglalaro iba din kapag magkakatabi mas madali ang paglalaro.

  4. Avatar for marwin marwin says:

    i work for the pc supplier since 2007, nakita ko ung market ng net cafe dami nga bumabagsak. pero last month sinubukan ko sumugal with a basic knowledge, inisip ko more on gaming ung install sa kc kung internet lang ung mga phone ngayon accessible sa mga net. halos lahat ng kabahayan ngayon may kanya kanyang computer nma sa bahay. pero mas masarap pa din kc maglaro pag madami kyo ung tipong may kanchawan asaral lan game ba, ika nila di kc nila nagagawa un sa bahay nila.. so far sa 6 unit na meron ako medyo kumikita naman,, bullshit lang kc ung brownout dito sa zamboanga city,, imagine 10 pesos lang per d2.
    dami kc adik sa laro,,

  5. Avatar for sarah sarah says:

    s akin din may peso net din ako 7moths p lng ako s business ko at 3 unit p lng itong akin ok lng ang income s umpisa ngayon humina n tlga ang kita s dami din ng compitition dito sa amin ang mga customers ko palipat lipat lng cla kung saan cla gusto magnet nakaka give up tlga nakakapagod ikong peso net daming compitition kailangan p ng maitenace at repair technician bawasan p buwan2 ng billing ko expencess p namin wla akong saving npakahrap tlga ito

    • Avatar for sarah sarah says:

      anu po b ang magandang payo ipagpa2toy ko n lng 2ng peso net khip n napaghihina ng isip?aside 4 advice anu pang ibang business n hindi mdaling makuyya s iba n maccmula p lng ng buseniss?

    • Avatar for Jayson Jayson says:

      May advice is let it go focus ka na lang sa alam mong negosyo ang piso net now natatalo ng mga shop dahil sa shop andun yung tunay na may alam sa ganitong negosyo.

  6. Avatar for Jayson Jayson says:

    @Joseph survey ka then look if ano bang laro uso sa location then research anong spec requirements nung game don mo malalaman if how much kelangan mong ipuhunan.

  7. Avatar for Joseph Buquiran Joseph Buquiran says:

    Sa panahun ngayun magkanu ba ang dapat e.puhunan pra sa isang internet shop na may 11 PC?

  8. Avatar for Jayson Jayson says:

    Maipapayo ko lang tatag ng loob, kaalaman sa negosyo, puhunan na hindi tinipid & good customer service. Simula tayo sa tatag ng loob tandaan hindi biro ang puhunan dito hindi din to masasabing tubong lugaw pero bakit dami nagkaka interest sa ganitong negosyo? Dahil sa kabataan, daming bata ano? Siguro dating kading bata na naglalaro ng pa rent kaya akala mo malakas ang kita ano? Pero sa totoo lang maraming namamatay sa maling akala. Pangalawa kaalaman sa negosyo ito ang sandata na kailangan para may laban ka, tandaan pag alam mo panong mag-asembol ng computer, mag network, mag trouble shoot ng may problemang PC sa pag hire palang ng technician malaki na matitipid mo. Ma makakaiwas ka na din sa technician na palit or bawas pyesa. Kelangan din na meron kang plan a,b,c kahit hanggang z! Ito yung mga hakbang na kelangan mong isunod kapag hindi nag work ang plan a, tandaan dahil dati ka din rumerenta alam mo panong maging isang customer ituloy na lang natin ito sa panghuli. Pangatlo puhunan nasabi ko na sa pang-una malaki puhunan ang kailangan dito HUWAG mong titipidin dahil makakaapekto to sa performance ng PC mo sa labanan ngayon hindi na din padamihan pabilisan na ngayon kahit 10 lang at isang server (for other service like Photo Editing, Printing, Typing etc…)as long na kayang maglaro ng gustong laruin ng potential customer mo mabibigay mo. Pang huli ito good customer service tandaan na nasabi ko na dapat may kaalaman ka mas makakabuti kung ex customer para alam mo pano ka makikiharap sa potential loyal mo na customer kahit medyo hustle ang kaharap wag kang mag-susungit matatandaan nila yan at sa malamang hindi na sila babalik ika nga 1st impression last! Kahit pikon na pikon ka na sa customer upakan mo na lang paisip ahihihi!
    Ito ang 4 na importante kong mai-share sa 4 years kong pag nenegosyo nito. Sa totoo lang marami din ups & down pero ito survivor padin at nakapag patayo na ng bagong negosyo dadagdag inspirasyon lang 10 lang ang PC ko tamang diskarte lang po! Salamat…

  9. Avatar for Piso Net Owner Piso Net Owner says:

    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.

    Thanks

  10. Avatar for widosy 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!)..

    https://www.facebook.com/widosy

  11. Avatar for Billy 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.

  12. Avatar for jeff 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…

    • Avatar for Billy Billy says:

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

    • Avatar for PhillipAnn 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.

    • Avatar for Jayson Jayson says:

      isa pang tip kahit hindi mo convert sa hulog piso basta higitan mo ang rate niya may laban ka padin kung kaya mas gandahan mo spec like upgrade. Kaaka tayo lang ng negosyo niya ikaw anjan na mas eager yon makabawi sa pinuhunan ikaw sa malamang bawi na or atleast pumasok na ang balik focus ka lang sa advantage mo & lalo mong alagaan ang regular customer mo. Ito ang ating tatandaan kahit saan larangan ng negosyo as long na may kaalaman ka sa iyong tinataguyod may laban ka.

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