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.
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.
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.
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
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.
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?
@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?
@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.
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Tips and Guides in starting an iCafe
http://www.icafeproject.com
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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).
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.
What happend to the computers you used in the internet cafe?
buti na lang construction supplies ang business ko,,,, ang laki ng kita, ahehehehe
Mahirap talaga ang internet business sa Pinas, medyo dami ng competition..
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”.
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”.
http://gmtristan.com/how-to-start-your-own-internet-cafe-business/
http://gmtristan.com/start-an-internet-cafe-business-in-the-philippines-part-2/
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. :)
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
sabi nga nila, location location location.
masarap magkanet cafe sa malapit sa school.
yung mga toping on-the-go ang mga target customers mo.
Ang malupit na competition eh ung sa mga urban areas, lalo na sa makikitid na kalsada ng manila. nagsusulputan ang mga shops. at mas malupit dito, ung iba nakaJUMPER ang electric connection.
Imagine, wala ng bayad sa rent ng place, kuryenta wala na rin. Kaya kayang kaya nila magbaba hanggang 10 pesos per hour. Patay agad ung mga legal na competing shops.
I dont agree with the upgrading period of 2 years. Coputers are easily outdated every 6 month to 1 year. Many gamers know this and if they see that you are not updated, they will not patronize you anymore. it is also very important that you gain friends within the community so that people may know you better.
Do it again? If not a cafe business… web startup? ;)
good post. one of your better articles written so far.
I also owned an iCafe but we eventually closed it down due to that PLDT in our area is killing our business with FREQUENT DOWNTIMES.
Besides that, our computers were still competitive at 15 pesos per hour. But now customers just either play DOTA as a group or used up all of their time in FB.
MIcrosoft Word is just there for some and especially when printing SONG LYRICS. I think the best a computer shop to have is an all in one service, i learned that I don’t earn that much in rent but I earn A LOT in printing.
Plus the increasing illegal softwares is a threat to the iCafe business out there. All of my PC’s were legitimate windows XP, but my competitors were all WINDOWS 7. How can I compete with that?