Last year, a good friend of mine started an Internet business. It was different from regular Internet businesses in that it had leveraged on another existing business. Just last week, she was able to break even. Her achievement was rather good because it was her first business venture, and she was able to break even relatively quickly despite a significant capital investment.
How did she do it?
Her grandfather owned an all-ladies dorm just along Katipunan, Quezon City, Philippines. It was a simple yet nice place with around 70 rooms. It was located conveniently in front of several schools - just a tricycle ride away from Ateneo and Miriam College (Popular high-end colleges in Manila). It was also a few minutes jeepney (a transport vehicle popular here) ride away from the University of the Philippines.
The target market were female students. My friend had a hunch that there was demand for Internet Services. She noticed that dial-up prepaid Internet Phone Cards were being sold in the dorm. She wanted to offer a better service.
To confirm her analysis of the target market, she started off with a survey. She gave the following survey to students who came to the dorm. As a simple reward for those who filled up the form, she gave them candy.
Here’ s the form:
Directions: Please take time to answer the following questions. This will only take less than 10 minutes!
Check all answers that apply.
- Are you a dormer here?
- Yes, my room is _________
- No, I stay at _____________
- Do you have a computer? What type of computer do you have?
- Yes, Laptop/Notebook
- Yes, PC/Workstation
- No computer
- Do you use the Internet?
- Yes
- No
* If you answered No, please skip the next questions and continue to Question No. 10.
- What do you use the Internet for:
- Homework
- Research
- Chat
- Games
- Others __________
- How often do you use the Internet?
- Once a day
- Once a week
- Once a month
- Others
____ times a day
____ times a week
____ times a month
- What is the average time you spend for each Internet use?
- Less than 1 hour
- 1 hour
- 2 hours
- 3 hours
- Others: ____ hrs.
- Where do you go to access the Internet?
- Dorm room, own computer/laptop
- Friend or neighbor?s computer/laptop
- Internet Caf? at _________________
- School computer room at _________
- Others ________________________
- What is the type of your Internet accessibility?
- Dial-up, Prepaid cards
- Dial-up, Local ISP account
- Cable
- DSL
- I don?t know
- How much do you spend on Internet access PER WEEK?
- Less than P100
- P100 ? P200
- P200 ? P500
- More than P500
- Would you like to have unlimited access to the Internet directly in your room?
- Yes
- No
- How much are you/your guardian willing to spend for unlimited access per month?
- P500
- Others P_________
- Do you have any other comments, suggestions or reactions you would like to share regarding Internet access?
The results of her survey were promising. Out of 47 respondents, 40 were dormers, 19 had laptops, 17 had Personal Computers (PCs), 36 surfed the Internet, and almost all surfed the web regularly. More important, she discovered that they were willing to pay around 300 to 500 pesos (US$6-10) for a month’s worth of unlimited Internet access.
After the survey, she made some estimates on how much she’d have to spend for infrastructure, the monthly expenses, her estimated monthly income and when she could break even. She planned on giving Internet connectivity to users directly to their dorm rooms.
Her rough estimates were:
Gross Income Estimates:
30 users at P500 subscription plan should get around P15,000 (US$300) monthly
Estimated Expenses:
Electricity - P1,500 (US$30)
Telephone - P1,500 (US$30)
DSL Internet - P3,000 (US$60)
Room Rental - P3,500 (US$70)TOTAL: P9,500 (US$190)
Estimated Net Income : P5,500 (US$110)
Breakeven: 20 months
She would have gotten a small income stream. To break even early, she would not get any salaries from the business for at least a year and a half.
So, she put her plan into action, she invested around P100,000 (US$20,000) in the business. She bought a router, hubs, internet cables, and other hardware. She subscribed to a DSL line and hired a professional computer system administrator set up everything for her.
A year into the business, her estimates were on track. Her monthly expenses on were low enough to allow her break even sooner than expected. She’s happy. She’ll be getting a salary from the business by next month.
Leveraged on the Dorm Business
Essentially, she leveraged on her grandfather’s dorm business. By finding out what other services the market needed, she was able to tap into her own niche. She helped the dormers by getting what they wanted. Now, she has nice low-maintenance business set up.