Internet Cafe Business in the Philippines

 

In my post, How To Start Your Own Internet Cafe Business, I get a lot of questions. I’m happy to help and answer whenever I can. Consider it as a free consultancy =)

Anyways, I recently got a tough question from Aileen Suerte. She asks if it’s better to buy an already-built cafe rather than starting on her own.

Although I already sent her some notes (c/o the comments section), I’m gonna republish her question here and have more detailed analysis. Hopefully, Aileen (and many others like her) can make a sound decision.

On May 2, 2009 Aileen wrote:

halu… we’re planning to start an internet cafe business. we already made a budget plan of establishing a new one, but starting only with 10 computers. now, we learned that there’s this existing internet cafe business for sale. the business is in a very good location. it existed for more than 4 years already. we observed that the business is doing good. the reason for the sale is the owner is leaving. it had 23 computers in good condition. which do you think is practical? establishing a new one or buying an existing one? they cost almost the same – 300-350K. thank you in advance for the advice.

GM Tristan’s Answer

Yup. A tough one alright. Here are some notes to help you, Aileen.

  1. Location – this is a very important Key Factor for Success (of in the marketing world, KFS). Location can make or break your business. If the existing cafe’s location is sound, you’ve got one less problem to worry about. Things to consider; is it near a school? Is foot traffic heavy? Do an ocular yourself. Since I can’t see where it is, you’ll be the best judge of that. I guess you have to ask yourself; which location is better? Yours or the existing cafe?
  2. Computers - Now, since the cafe is already 4 years, chances are, the PCs there will be old. Would you prefer old PCs over the new ones that you’ll buy? Will the units be adequate enough to run the latest games and applications. What about the cost of acquisition? Factor in the depreciation cost too. You should know what the FMV (Fair Market Value) of the units should you, in turn, want to resell them. Now, if you’re going to buy 10 brand new ones, that’s good. But this is a perfect segue into the next topic.
  3. Operating Cost – Aileen, let’s do some basic “number crunching” to see if it will be feasible. Okay… say you operate 12 hours a day. 10am to 10pm. And let’s target 50% occupancy rate… that means that your PCs are rented by customers half of the time. Let’s also assume that you charge P20/hour. With those info, let’s go compute
    • YOUR 10 PCs: P20 x 5 hours per day = P100 per PC per day. P100 x 10 PCs = P1,000 per day (or P30,000 monthly)
    • THE EXISTING CAFE of 23 PCs: P20 x 5 hours per day = P100 per PC/day/ P100 x 23 PCs = P2,300/day (or P69,000 monthly). That’s more than 100% increase over the 10 computers!
    • Once you have the gross, subtract the following regular expenses
      • Rental
      • Electricity (more for the 23 PCs)
      • DSL fee
      • Taxes
      • Salary (if you have a “bantay”)
      • Others
    • You should then be able to see which set-up is more profitable
  4. Customers - buying the existing cafe will also mean buying the user-base. If the cafe already has a load of “suki” customers, then it’s akin to discovering a gold vein. Ask the owner or observe for a few days.

In the end, it all boils down to making a sound business decision. You’re the one that’s going to do it, Aileen. Whatever you choose, it should be able to cover the costs and I hope that you have an expansion plan.

It seems that going after the existing one looks more promising since it has more PCs. The simple logic here being, more PCs = more customers. If you can get a loan and upgrade the PCs (even if it’s just a couple every month), then that will be a great goal.

Maybe the other readers will have some ideas to help you too. Best of luck in your business, Aileen!

Glad to be of service.

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  • Hitsugaya Toushirou

    Let’s add more to that info, better if the internet cafe has other services (mga pakulo) like printing, typing job, cd/dvd burning, computer repair and installation.

  • http://gmtristan.com GM T

    That’s a great suggestion! thanks for the comment

  • http://newmedia.com.ph New Media Philippines

    Loved the post Mon! :)

  • http://gmtristan.com GM T

    Thank you.

  • http://technogra.ph Rico

    From my experience as a part-owner of an internet cafe before, the biggest profit actually comes from your value-added services (the printing, burning, etc.)

  • http://gmtristan.com GM T

    Do you mean “margin” or “gross profit”? There’s a difference. If you say ‘biggest profit’, this MAY mean that it puts more money in your cash register than the actual rPC rentals.

    Don’t forget that selling top-up cards (for gaming… of course, I will plug the Level Up cards) is also a good source of alternative income.

    Thanks for the comment.

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  • http://www.MasterListBuilder.net/app/?Clk=3004961 Riza

    Great business,Thus providing a good source to your reader. Probably give better insight for building their own business.

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  • Sandmanfilam

    Correct me if I’m wrong, but I believe your math is off.

    10 PCs running 12 hours per day at 50% occupancy totals to P36,000 per month.

    5 [PCs] * 12 [hours] * 20 [pesos] = P1,200/day

    1,200 [pesos] * 30 [days] = P36,000/month

  • sharmin

    hi! im interested in opening an internet cafe, can you give an idea on how much is it going to cost me if i start w/ just 5PCs…?

  • tony belen

    thank you for the advise,for ten pc how much it will cost

  • mike

    good day sir;

    I am interested in gaming cards(level up) as my cutomers frequently ask me if i have any in stock.. can you recommend a retailer here in baguio? as the shop where i buy does not give me a discount even when i get in volume.. or is there a contact person i can get in touch with? thanks

  • Laura

    Hi, I am from Australia, and would love to start an internet cafe at the mall.

    Please does anyone have any information to start out.

    Thanks

  • Michael Stanley

    Dear Sir,
    I have come from New Zealand to Baguio and i am interested in building or buying a internet cafe i would like to come and meet you and talk to you is that ok can i come and see you.
    Kind Regards
    Mike

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  • annabel starling

    hi there!
    I’m just wondering if you could help me out, my business is internet cafe w/ 21 units all LCD flat screen, for the first year the income was brilliant unfortunately the business has slow down since some of the schools in the area has moved and my rent is costing me coz I’m not making any money for what it used to be so now I’m thinking of moving the shop to a good location,where is more money coming in, but i have someone offering to buy it off me but I dare to let go my computers coz Ive spend nearly A million on this one including set it up the whole place to make it looks profesional and all my lighting is very unique also the combination colors of the design so I’m gonna be disappointed if they will only offer me 600,000 for it. Please help me out on this one..should I let it go for that amount only or continue the business but diffirent location????

  • altheawiccan

    never say die anabel…i also have my own internet shop right now…before the success there is lots of trials you need to be faced…be strong…try to seek for an help..research…try talk to your friends and other people ask for a comment and suggestion…as a business woman its really hard for us to just let go our own bus. ryt…its not just a thing its an investment..so don’t just give up….there’s always an answer in every prob.
    think an unique idea have some discounts and promo’s…

    p.s
    always pray…ask lord for an help..

  • http://www.morbie.com/ Jonie@Send Load Philippines

    I like the structure of the posts. Basic and straight to the point. I bet you are able to even do better. Write a lengthy article and show us what you are able to do. I have no doubt you’ll create even better information. I have subscribed to a lot of blogs but this one is really a keeper!

  • http://www.nowhow.com tuya

    Hi I would like to know if it is okay to barrow a money from a BANK to set up internet cafe…Do you think 80,000 is enough? Or need morethan that? How much would that be.

  • Jeffrey Cougar

    Sir Gm,
    Good Day. Like others I’m also planning to start an internet cafe. All things you have said in starting was carefully studied and for finalization.
    Could you suggest to me what specification of a computer should I get from a gaming computer and for non gaming computer.
    looking forward for your response.

    Thank You.

  • Gee

    hi!
    Can anyone please tell me how much is the tax taken out every month/trimester/or annually if I open up an internet cafe business in the philippines?

  • hazel honra

    hi everyone this is hazel from QUICK ADS i would like to offer FREE installation of QUICK ADS- Online Advertisment to those who already owned internet cafe’s, this will help you earn EXTRA INCOME for your computer shop. if you have any question feel free to contact me at 0927-2300509 and 0933-4306414,

    thank you…

  • hazel honra

    hi sir GM this is hazel of quick ads, i just want to ask for your help if you have any contacts of owners of different internet cafe’s you know, so that i can offer them free installation of QUICK ADS..

    thank you… hoping for your response..

  • http://www.waterfilterfaq.com Francesca Webb

    General blogging has been the topic of my blog. it is good to blog about anything.:’:

  • joseph

    hello…i’m buying an existing netcafe…pls advice what are the required documents…

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