Personal Lessons Learned From the Computer/Internet Rentals Business

Posted by Jozzua on Feb 10, 2006 in Uncategorized | 8 comments

I?ve tried my hand at a couple of businesses. My very first business, back in 2002, was an Internet/Computer rental. I took out a loan from some friends and started my very small shop just at the corner of the main road in our residential subdivision somewhere in Antipolo, Philippines.

The financial numbers, back then, looked well. There were 2 competitors at the time. One was a small shop with 4 old, low-end computer systems while the other was a bigger shop with 8 computers. I was able to get a case study out of that:

• The rent was round 40 per hour
• If I got 4 people who used 4 computers for even just one hour, I?d get at least P640 per day.
• P640 at 30 days was P19,200 a month ? this would be my gross income.
• My expenses included rental of the place (P2,500), a telephone business line (P1,500), Electricity (P2,000), and Staff Salaries (P4,000).
• I?d have gotten at least P9, 200 as net income!
• My loan was around P100,000 – I?d have it paid in at least a year.

(Note: The foreign exchange rate back then was around P30 pesos = 1$US)

It turned out however, that the real world wasn?t that simple. Computer
systems back then were much more expensive. One decent gaming machine
needed at least P35,000. I was only able to get 2 computers from the
P100,000 loan. The remaining P30,000 was used to fix up the place, air
conditioning, painting, renovations. Etc?

Needless to say, it
wasn?t enough. I soon found myself looking at another loan or finding
some investor to pitch in. Two computers were simply not enough. I had
tried to supplement it with printing and typing services. I still found
myself only getting at least P300 /day.

After six months, I closed the shop. Some lessons I learned were:

• More
  computers simply meant more business. I?ve noticed that gamers tended
  to play in groups. People playing the Half-Life Mod Counterstrike, for
  example, preferred to have at least 2 on 2 fights. One on one gaming
  would not do. I probably should not have started without getting enough
  funding for at least 6 ? 8 computers.
• Daily accounting and cash
  flow monitoring was important. I was very good with computers, but not
  well versed with numbers. I should have noticed that the monthly cash
  flow would not be sufficient for the shops needs. These days, I?m more
  financially literate.
• I should have had a team to help me out.
  Working solo on the project made me unable to cope up with some of the
  business details. I would have probably had more success if I had an
  accountant, an operations guy, a marketing person, and a financial
  backer with me.
• I should have had other sources of income like
  printing, encoding, and perhaps digital layout design. The shop had
  these, but it was not really well marketed.

Despite this
setback, I?m still optimistic with entrepreneurship. I still dream,
every now and then, of starting my own Internet caf?. These days,
however, the market is saturated with them. It?s a different target
market now:

• With the introduction of Ragnarok and other
  Massive Multiplayer Online Games, fast Internet connectivity is a must.
  Every computer shop must have a Digital Subscriber Line (DSL)
  connection. If you don?t have that, people will just ignore you shop.
• There
  is now a bigger market for female gamers. Online Role-playing games
  have allowed more and more people to interact with each other
  anonymously. This allows girls, who were not really into games before,
  to get in the fun and enjoy playing with chatting. There is more social
  networking.
• Computers are comparatively cheaper today than four
  years ago. One can now get a computer gaming machine for almost
  20thousand Pesos. This will probably last a year until the motherboard
  starts to glitch up. Some shops now annually change their computers.
• You
  can play games or use the Internet for only P20 an hour these days.
  Although the big Internet cafes still charge
  30-50 pesos, the smaller
  ones allow you to have computer access affordably. A friend even told
  me that, outside of Metro Manila, the rates even go as low as P10 per
  hour!

For a shop to have a decent income, you should
probably have a place that has low monthly rental, low electricity
costs, and lots of computers. It also pays to be friendly with the
customers and try to have fun with them. Having group competitions
really boost the cash flow too.

I?ve thought about this and looked at my friend?s computer shop as a sample case study.

Say
you have a computer shop with, at least, 10 machines. You rent it out
for P20 per hour. Let?s assume that each computer average around 6
hours minimum per day. That?s 10 x P20 x 6 = P1,200 per day. If you are
open everyday, that?s almost P36,000 a month. If you have electricity
costs of around P8,000, labor expense of P4000, Internet subscription
of P5,000 and rental of P5,000, you can get at least P14,000 a month
net income.

If computers were around P20,000 per machine, then
10 computers would be around P200,000. Realistically though, your
initial investment would probably reach at least P300,000. P300,000
divided by P14,000 (per month) would be 21.43 (almost 22). If my
numbers were correct in would take you almost 2 years to get your
return on investment. If you are lucky, you might get ROI earlier. I
know some people who have.

These financial estimates are
conservative and are really just from the top of my head. It seems it
would take a long time before you can really make money out of a
computer shop business. I?ve realized, however, that some people still
simple because they have fun playing games or surfing the Internet
themselves. Maybe you are like that, then you should try it on your
own. Heck if I had half a million pesos extra money, I would!