Cost Reduction - The Cost of Doing nothing

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 30, 2016

Today marks the death of national hero.  What could mean the death of companies?   High costs and expenses.  Remember that the basic formula for business is

           Sales
          -Cost
          = Gross Profit

Thus you try your best to pour resources and key activities into sales while at the same time
 Reducing your op ex, cap ex and other expenditures.

And yet none could be worse than expenses for doing nothing.

1.  In lean system, in the acronym for waste (MUDA) TIMWOOD, several of these refer to not doing anything:

        I -  nventories -  machinery raw mat, finished goods that are lying idle in the warehouse consume a lot of space and cost of money

        W aiting  for someone to finish the job, for someone to sign check payments, sign PO

        D elay  like waiting can consume a lot of time (which is an expensive resource.  In US you pay this by the hour.  That is why in Japan, they have JIT (Kanban system) of material usage and the rapid change over of tools in production.  They reduced this from weeks to single digit number of minutes. Delay in the production line costs money

 2. Shipping companies are aware of this   That is why ships: especially the large ones:

   1. Use container to speed up loading and unloading.  They have loading and unloading plan to speed up operations, thus, last in first out in loading containers for containers to be offloaded in the next port of calls. Thus a large PANAMAX container ship must load unload in major ports like HK or Singapore in 24 hours or less.  The cost of doing nothing involve the huge depreciation of the ship (plus the interest expense on its financing), the huge labor costs of the crew, fees from the cost of port call excluding demurrage, berthing fees which accumulate on a daily basis;

  2. Thus for the next port of call, its pays that custom duties are processed before the ship actual docking at the port.  Many customs provide this advanced payment system

Thus we have to improve our own operations to counter the cost of doing nothing:

1.  POs that are left unsigned for the past six months.  The POs concern:

     repairs of equipment
     materials needed for a new business

2.  Projects like road development being unattended to by Engineers.  Some crucial steps are not being attended to.  In the meantime, although we have funds for the project, for which we pay P300,000 a quarter (P1,200,000 a year) our Engineer does not care and must be spanked or banged in the head.  Equally responsible are accounting staff and other members of general management

3.  Accomplishments of people who went on overtime must be scrutinized. Currently they are not.

Accomplishments of every one must be demanded.  Work plan and work achievements are needed. What with very expensive starting salary.  Otherwise, what we taunt as our people are our assets, means that if they are dead weight, they bring down the company with their high cost of doing
nothing

A lot of education is needed at this area of financial management operations (lean system)

Adversities in the Life of an Entrepreneur - Power and Credit Grab

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 30, 2016

Today we commemorate the nth death anniversary of who is considered the national hero - Dr. Jose Rizal. His death by firing squad is the greatest adversity a person can meet in his life.

This makes me recall the adversities in the life of a business leader/entrepreneur.  They are the major ones but there are more.

1.  A business partner tells of the sons and daughter of his siblings (whose parents his brods and sis have died) Since they are taking over the shares of his siblings, the different breed have tried to oust him out of the picture.  As of now he represents the corporation in the joint project agreement.   I said that is most unwelcome, since we formed this joint project;  the children had nothing to do with the project.  All they have now are rights of the heirs and their actions are destructive to the unity of their group.

2.  A friend who has a successful party needs business (he has a venue, chairs and tables rental, party packages) put up  burger business. He gave this to his children.   He is making suggestions on how to improve the business.  And he being senior is being set aside.

3. In the companies which I set up so that my brods and sis will not be poor just like the rest of our clan, I was ousted under  Sec. 28 of the CC,  after implementing a bequeath of the estate (equal sharing) the younger ones voted together to remove me from the company which I established. I have not gotten a single cent yet from those companies including a crematorium where I invested wholly my savings.

Thus the seminars and courses of this school on managing conflicts and family business are flourishing.   In a major food company which sells billions, the family feud is intense as I facilitated the presentations of departmental strategies.

There is a group that facilitates formation of family council at a fantastic rate of only $2,000 per day.  That is a great rate if we consider the problem and the friction that it tries to remove from the operations of the family business

The Family feud, Dallas, Falcon Crest are all about this intrigues, power grabs, conflicts in family business

Who decides the fate of your company - you the entrepreneur or the lawyer

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 28, 2016

My father is a lawyer, a notary public but was a government employee;  was an admin man and his knowledge of civil code, obligation and contracts, the admin code of the Philippines helped him a great deal in his job.

One time, there was a need for a document and I requested him as a lawyer to make one for us/the company to which he declined.

He said, decide on what you want to agree or do, write it and then, I will correct this if the agreement is in clear legalese.   If you do it the other way around, then the lawyer has decided for you what you will do in the business.

And so I thought, and then later on I read a book on entrepreneurship that you need some 10 or 11 transactions a year that you need the lawyers comment or nod on for you to be prospectively avoiding the problems.  So you need lawyers

And so I tried very hard to stick to this dictum of my late father.  He is right.  The agenda of the lawyer and the entrepreneur are very different.  His goal is to get his fees;  the entrepreneur want to succeed and not to pay the fees. or be engaged in legal battles.

Every time, the lawyer will say that your position is so weak the the worse that could happen is...

I never heard any one say that on a brighter note.... Or strength...

I do not like to hear that when there is a problem, run to the lawyer.... not a good idea.

Obstacles in consolidating a business in an industry, achieving a vision

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 25, 2016

Merry Christmas

This is the time to reflect my purpose and goal in life.

I have dream of consolidating the memorialization business under one roof:   place to inter, place to view and a to be positioned in the new wave.  Right now, I seem to be on track:  buying a memorial plan company.  Then to have mortuary agreements, jv with chapels  and lastly to buy into crematorium businesses by a supplier.  Right now, we have made down payment for two crematorium one in Laguna, one in Pangasinan.  The future of memorialization would be in the cheaper, more environmental friendly that does not use too much land needed for housing and agri, -  memorialization. That is my vision.

However, this is not without restraining forces or obstacles:   detractors, lack of resources, difficult people.

Tale for instance my acquisition of a memorial plan company.  We have paid the P5 million premium despite the govt agency still unable to approve the documents needed to sell;   we cant sell anything at all.  The seller of the company is equally difficult -  stalling the granting of authority for us to sell.  But one of the gift of Christmas is to be more patient and loving.

Despite that, I need to have the memorial plan company as a resource to consolidate many businesses:  chapel memorial service, chapel, and cremation.  I will be on my way.  I will be able to hire an accountant, and close mortuary agreements

Improvement in critical thinking and analyses by Graduate Students

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 18, 2016

I am writing this a reflection on my attendance for strama defense.

Peter Senge is right that the Fifth Discipline, shared learning and the rest of the disciplines:    Mental Models, Systemic Thinking, Shared Vision are important in strategy and successful management of enterprise or change.  Let us take mental models.

1. The use of macro data for EFE even for local business that have only local competitors-  It should be used for FMCG products and products and services that have national coverage.  The presentor for a hospital in an island that have local market in scope used only macro data as if she was in MM, like a big hospital in MM.  Some would advocate the use of B2C marketing strategy even if the business were B2B.   Use of mass and social media for a B2B company.

2.  Using irrelevant or hostile data or making wrong conclusions from the data presented.   Some would judge the the same stuff as both strength and weakness.  Say for instance, on the CFS, they would judge having more products as one of the factor for success in the business And somewhere in the paper, said that the company was progressive because of diverse products.  And the graphs and table shows indeed that the company was ahead of competitors in terms of products and services.  And yet in the internal analysis says that the company has fewer variants of the products.

3.  Failing to address the SWOT analysis.   Some students would say that the company is weak financially (low liquidity, high DE ratio, etc)   And yet after noting that, while the student would profess marketing strategy fail to address this issue. Why would you let a very weak company run a sprint or a marathon.  Are the weaknesses not to be addressed.?  We should beef our finance mentoring sirs?

Did the business school have better outcomes with new processes/procedures?

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
December 18, 2016

I have not been teaching for the last several months because of my inability to comply with the 7 days deadline for the submission of grades after the end of sem;  and rightly so.  Some erring profs were sent memo for their insubordination even those who were on foreign travels.

It is just a big disappointment too that 2 years ago in  faculty conference in Alabang, the incoming leaders were asked as to what was the elephant in the room -  (every one anticipated that the Loyola people would replace the current staff) and the managers were silent and non committal.  Today  they are doing just that - to replace the current faculty with doctorate and academicians.

I asked the current faculty, the chair of the panel which I attended (I braved the horrendous traffic just to attend to this chore, to honor the panel and the students defending their strama) said that as a whole the school is doing well but not the GSB.  Enrollment is down, the good professors have joined the rival schools.   DLS has moved to BGC;  what is the move of the school?  (Nawala strama for the grand moves/strategy to be competitive;   baka irrelevant ang mga new policies, nitty pricky or rubbed the ertswhile strength of the GSB - the professional at work profs  (whom I understand are happy with their consultancy work or businesses)

Facilitation for a food company's strategic planning for the next five years

Every generation needs a revolution - an entrepreneurial revolution

                    The facilitator together with the President
              center and the members of the family, the board
              members at the atrium of the hotel for the final
             session,  The facilitator still wears the signature I AM
             BEST  t shirt which the theme of the conference


We just concluded a strategic planning conference in a posh hotel at Camp John Hay amidst pledges and grand dreams:

The food company which is all ready amongst top 5 in the industry resolved to double its sales in five years (until 2021) via following strategy:

1.  entering Vismin market
2.  establishing a canning line of products
3.  establishing a brand management group to support sales to plan promotions and ads
4.  investment in automated plant facilities to be more efficient and save operating expenses\
5.  quality products

These are all meant to benchmark the strategies of the top food company and score higher in cpm critical success factors.  This author tried to explain very hard that being one of the top 4 being almost there, what separates them from the top are areas where they score low.  They were asked objectively if they score high in all.  And only in 4 out of 10.

I pray that my efforts and the resources expenses are resources well spent and are investments rather than expenses (became useless)   Its good that the board who joined the conference are seeing it that way.  It was explained by the new brand chief that its should be treated that way especially that the top notcher in the field has the strategy of continuously "investing  in brand equity."

Final closing session  (Day 2)

                         The story of the  carabao keeping
                              pace with the rabbit

                                   Together with the Best staff

Some stories on strategic plan - common weakness is financials

Every generation needs a revolution - an entrepreneurial revolution

Makati City
November 5, 2016

Today despite eye problem, I attended a strama defense that involved 3 MBA candidates.  The first one breezed through her presentation because she is COO, an EA to her father who heads the company.  The study was about a local company making refrigeration equipment for f and  b firms.   However, despite the planned doubling of sales, the resources needed to attain the objective were not detailed.  The additional expenses and wages were missed out.

The second one which dealt with sale of Chinese trucks, mentioned the weak financial position of the company.   (The industry and the PTM was not clear.)   However he failed to address this issue at the strategy portion.   The company has huge liability, a loan payable (which was converted from advances of parent company.)

 The third one which was about a real estate company, had all the competitive analysis and external analysis all about real estate operations ie land banking, development and selling of lots and house and lot package  However the financials pertained to a construction company, (contract income (there were no inventories, contract receivable.  The competitors had these data in their FS obtained from SEC.  The sales achievement of the company was not very clear too.

More critical thinking and fs literacy needed by  MBA candidates

Why market leaders lose out to innovators?

From Josiah Go article at Inquirer Market Pulse

From Business Inquirer

Why as Cebu Pacific wrested the market share from PAL, Asias first  airline when it had the resources to launch such service, segment the market?  Or why has The Generic Pharmacy now outnumbered Mercury Drug outlets 2:1

Some answers:

1.  Company needs to protect financials.  Many see PHP spent on innovation as potential loss rather than potential profits;  (in gestation period, the new business can experience losses:

2.  Culture of complacency Success is the greatest enemy;  it breeds complacency

3.  Limited knowledge and methodology;   lack of understanding  of business model and see anything new as innovation

4.  Arrogance and pride (Pride goeth before the fall (hubris)

5.  Lack of strategic thinking

6.  Slow response to technological changes (lack of speed)

7.  Lack of idea channel (suggestion system bottoms up communication

8.  Internal inefficiency;  not process oriented lack of quality, or even squabbles that hinders the growth

9.  Lack of marketing talent in the team

10.  Inability to be a visionary to see the big picture.  While focusing now and operational efficiency, the future, the direction of the company is forgotten

DOTR, DPWH BCDA projects can spur further economic development

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
November 3, 2016

From Inquirer

The four secretaries:  Mark Villar of DPWH, Arthur Tugade of Department of Transportation, Sec. Pernia of NEDA, and BCDA chief Dizon conducted a press con a Malacanang that highlighted the DU30 effort to ease transportation woes (decongest MM) speed up mobility throughout the nation

Some of the projects mentioned: (approved by NEDA board all ready)

DPWH

1.  Linking NLEX and SLEX - this will help decongest EDSA
2.   Viaduct in Ateneo  to ease Katipunan traffic
3.  Bridge linking Cebu and Iloilo

DOTR
1.  BRT in EDSA  (P37.8 billion project)
2.  Fast train between Clark and Manila
3.  600 km train line up to Sorsogon
4.   The Cargo train line from Clark to Subic

BCDA
1.  Development of Clark into a world class international airport by 2018
2.  Green City in Clark
3.  Corroboration with DOTr with regards to BRT and the Clark Subic cargo train project.

They said they have been keeping quiet on these projects as medium and long term solution to the traffic problem,  MM will be decongested and progress will be relocated to CL (Region 3) as  the cargo hub that connects Clark Intl Airport and Subic port will mean cargo will be flowing between Clark and Subic.  Thus Central and Northern Luzon will have their own logistic hub instead of going to Manila Port

Who is afraid of OPM/leveraging - using UOPM (Using Other Peoples Money) to the max!

Every generation needs a revolution - an entrepreneurial revolution

The advice of my late mother in business is to avoid debt as much as possible.  It is like the Dutch philosophy in business - to grow business like a tree slowly but surely.  Avoid the path of mushrooms which grow overnight and be gone the following the day.  Dont be like a meteor that burns itself out.

She even hid from me a Title to large commercial building at the heart of the town because she was afraid I will hock it to the max (despite the fact that I helped her build her little fortune by my strategies.)

Lately, I came across captains of the industry in chemicals, education, and  finance.  The strategy is all about leveraging.  Borrow borrow to grow.

1.   A school purchase I witnessed involves the hocking of the property to be bought using their own real estate holding company.  The monthly amortization for ten years will exceed the monthly cash flow of the loan.

2.  They are to pay off a personal loan of a principal.  Strategy involves transferring the TCT to the corporation, borrowing against the property P100 which is worth P200 million .  The P100 million will be used to pay off the loan which could be settled at P70 million and P30 million to start the development of the property.

3,  To clean the credit of a principal, they will do the same.

And so

Facilitating a strategic planning conference for a food processing company

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
October 6, 2016

I was invited to be a facilitator for strategic planning conference of large food processing company based in Central Luzon.  It is a two day conference and there will be 30+ participants that include the top management and stockholders and department heads.

They will do it in Baguio, and yesterday we talked about some details of the conference:  agenda, the assignments, the objectives (what is what is not) the fees etc.

Why me?  They say they know me (they were my students in Entrep at Clark:   one chief CFO and the other is chief marketing and that I am not only an academician, but also a professional (a practicing businessman and entrepreneur)  Probably I will do better than the other one.

I explained the exclusion:   I cant cover family dynamics (since this is a family owned business) execution and leadership since they are different issues all together.  Together, we may be able to come out with a plan, a strategy that will make them the Philippines best in their niche

Belated greetings to fellow teachers and professors

Every generation needs a revolution - an entrepreneurial revolution

5S Kaizen basics, organization method

Every generation needs a revolution - an entrepreneurial revolution

Learning basics of operational excellence  5S

5S: A Workplace Organization Method from Nanette Bajador

Venturing into a business that consolidates all memorialization products

Every generation needs a revolution - an entrepreneurial revolution

This educator entrepreneur ramped up, levelled up into new business of memorialization, ie memorial plan.  They are into a deal with a life plan company and there is a one year transition period to transfer the assets.

The memorial plan company consolidates the very fragmented but very big memorial business:  about P25 billion.   The memorial park occupies but mere 20% of the total market.  In 2014, the memorial park only sold P500 million worth o plots

Yesterday, we and the chairman of the seller receive the certificate to operate from OIC:


Life is a DESTINY, PLAN

Rizal Philippines
September 27, 2016

Today the Office of Insurance Commission under Commissioner Emmanuel Dooc issued the License to Operate to Destiny Financial Plans and handed the same to Chairman Arsenio Bartolome III.  It took two years for Mr. Bartolome and Mr. Saguinsin to have the license to operate renewed once more.

Destiny Financial Plan Inc. is one of the 14 remaining pre need companies  in the country today (down from 22).  There will be only two competitors in the field:   only Destiny Financial Plan and SPLP.  The latter dominates the market.

How to plan and execute a crime - the first group activity in Entrep Class

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
September 25, 2016

This post no longer teaches the subject.  But I recall with fun and laughter the activities the class had, whenever there was class presentation when the activity of presenting how to plan and commit a crime was presented.

The plans were audacious and incredible and they can only hatched in a devils workshop (meaning to say we can be creative when in a hypothetical situation without rules)    However the activity was premised more on moral and ethical grounds.   The entrepreneur in his search for wealth, may attempt something that has crossed the borderline as when De Lorean attempted to save his business by going into illegal drugs

As when a powerful govt official finds nothing wrong in asking the inmates (as alleged) to produce (as what they say in the military) millions to fund the 2016 election campaign.  Well they obeyed and produced.  Only to be double crossed.  

I know that some top PNP before took care of criminals, became their patrons for illegal drugs, hold up and kidnapping, at 5 to 95% sharing (5% for the criminals under care, 95% for the patron) and then when the press is hot, have them the culprits killed and the patron come out the hero.  The lady turned out to be the hero after 19 were removed allegedly out of competition.

But that is inhuman, to get campaign funds from the prisoners or to force prisoners to cough up campaign funds dont you think, and then use the august halls of the govt to defend them?

You first got it in my entrep class, remember that?!

To be in Forbes list of richest Filipinos - dream for the next 10 years

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
September 25, 2016


Forbes list of top 50 richest Filipinos

I just saw the list of top richest Filipinos listed in Forbes.  I realized that I forgot this as a goal while I thought.  My routine settled on grades arguing with school administrators, catching a plane, making syllabus, correcting papers.  Not exactly in line with selecting high value activities.

Being retired at 65 from teaching gave me a fresh look as to who I really want to be.  I want to be included in the list of richest Filipinos.  Say top 50.  Maybe a $1 billion.   (next 20 years)  For 10 years, I will settle for $100 million.

What will I do:

1. I will expand the Memorial Plan business make it multi billion in the next 5 years  (strive to sell 100,000 plans in next 5 years  -  that is about P3,000,000 billion worth -  good enough for $60 million

         1. put up and acquire chapels, crematorium

         2.  put and acquire more memorial parks

              Good for $30 million

2.  Develop subdivision, build and sell

3.  Expand the lending investor, acquire bank or join the rb and expand this into something else to help in #1 and #2

4.  Acquire schools

5.   Dab into the energy business


Maski wala sa worlds richest:

Moratorium for land conversion for two years

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
September 25, 2016

From DAR -draft EO for prohibition of land conversion from agricultural to non agricultural


I just learned today that there will be a two year moratorium in land conversion for two years, to protect the land awarded to farmer beneficiaries of some 4.7 million hectares that were CARPED (awarded to farmer beneficiaries)

The current secretary of DAR is Rafael Mariano the head of Kilusang Magbubukid ng Pilipinas.  a well known leftist organization; and Anak Pawis

You will recall that many of the CLT (Certificate of Land Transfer) awarded in many places of the Philippines like Sta Rosa Laguna, NE and elsewhere were sold during the time that they were not still saleable.  You will note that a celebrated farm owned by a top govt official in Batangas were CLT that were sold even though they had not expired.  Again the rich benefited from the land that the farmers got from the CARP program.  As a developer I did not take that development as an opportunity.  So I sorely missed the opportunity in Sta Rosa.  A classmate did.

Lands covered under the proposed EO are:

• all awarded lands under Republic Act 6657 (Comprehensive Agrarian Reform Program), Presidential Decree 27, and other agrarian reform laws
• agricultural lands with notices of coverage issued by DAR
• irrigated and irrigable lands
• prime agricultural lands
• privately-owned lands with farmer tenants
• agricultural lands being cultivated by farmers, individually or collectively

Is this the start of class war under Duterte?  Some called Gina Lopez decision to close mining companies as crazy.  Is the Dutertes halo beginning to unravel with anti business policies?

What do you think will happen with this moratorium?

So some hypothesis:

1.  Developers will increase their prices;  real estate will become more expensive.

2.  They will see this an opportunity to create shortage

3.  Many will buy and sell units from existing foreclosed mismanaged properties

4.  We will see more vertical developments

Opportunities abound; loss of one and new one opens

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
September 24, 2016

As we talked with the seller of the school (the founder) she looked sad that she would part with the love of her life.  Anyway, we have great opportunities ahead of us:

1.  A memorial park, cemetery in her home town in the Visayas  She is related to the mayor

2.  A cemetery in Zambales, the hometown of her husband.  Her husband is related to the mayor.

3. I also told her, I want to be in the Forbes list of those whose networth is at least $1 billion.  Having school is one of the good investments I can make. Phinma, the Montinolas, Yuchengcos are into school.   Say she runs the school academics, I set up the organization and the finances .  That would be a good combination isnt it?

I noted that she had the short end of  deal and she would still struggle to make ends meet.  Could I talk to the buyer to have consideration?

I will try.   I am just new in the organization that will buy the school, and I do not know my role

An invitation from the municipal councilor to lecture and mentor on entrepreneurship

Every generation needs a revolution - an entrepreneurial revolution

Angono, Rizal  Philippines
September 20, 2016

I was invited this morning by a new councilor of this town. He used to be the tourism officer and now chairs committee on human rights. He said the meeting was about a project.

It turned out that the project was about the subject that I used to love teaching about - entrepreneurship.

The school where he teaches history and Rizal (ESA) wants to invite more students graduating from high school.  He plans to generate interest on entrepreneurship and ESA by having lectures and mentoring on the said subject.   He got me there and said I was willing to do (pro bono as usual)  Because I wanted to leave a legacy

When do we start?  January 2017.   Just let me know

The spirit of enterprise lives - even at NBP

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
September 20, 2016

The spirit of enterprise is alive and well even at New Bilibid Prison as we listen to the tale of Herbert Colangco (later on he was adjudged Kulang by his protector) He finished only grade 6 but he has tremendous business sense (and even honor)

In order to meet his monthly quota of P3.00 main protector, and the P1.2 million to the prison director, he had to be very enterprising to meet his objectives (he was very much goal driven) he engaged in a variety of businesses/racket:

1.  Aside from drugs, he did the concert.  He got 300 case of beer when he had concert, got them them for mere P700 each case, and sold them P10,000 each case for a gross of P3 million.  He gave the P1 million allegedly to his patron, the 2 million he spent for his production crew and rental of equipment

2.  He profited from the transfer fee.  In order for inmates to move from medium security to the maximum security (where facilities are a la Las Vegas) with first class amenities -  bath room, wine room etc, he would be charged by certain personality, say P500,000 and charge them P800,000 pocketing the difference to pay for the monthly PR Payola

3.  He had a lending operations charging as much as 10% per week.  Very enterprising indeed.

4.  Hospitality business.   Through his talent manager allegedly named Reynante Diaz, he got models for P25,000 each and sold them to drug lords for P75,000 each pocketing P50,000 each cool margin for 20 models or P1 million.  At the end of the day in the usual tale of greed and deceit, the P3 million + P1.2 he gave monthly were not enough to have him removed from his enclave, and transferred to NBI and lost all his sources of revenue, hence the change of heart.

His bosses want him to  increase his quota, buy from the Chinese and later have them transferred to far away places.  Herbert did not want to have any of those dishonesty. (estafa)

What needs to be done at the school to be acquired?

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
September 18, 2016

I was tasked by a holding company to help evaluate a school that is being negotiated for sale.  All ready, a downpayment  in the form of a P12,000,000 loan good for 6 mos has been granted to remove the TCT from escrow, and pay off the SSS premiums loans, Pag ibig.

A group has been tasked for a Due Diligence. The task of the DD group are two fold:

1.  Financial verification.  Are the revenues and expenses correct?

2.  Outside of the  financial, what are the drivers of the business:

      1. Internal analysis (management, delivery of the service, morale, leadership, facilities, MVP)

     2  External analysis:   competition, key factors for success, other business opportunities

The DD result is critical for the determination of strategies to cement the deal, and ensure ROI for the investors.

The deal would be something like this:

  Total purchase price:     P50 million

  Down payment:   P12, million

  Retirement             13 million

Balance                  25 million

    Since the property worth P70 million is in the name of an individual person, this will be transferred to a holding or real estate company and borrow P30 million for 10 years at 10% interest.  The monthly amortization would be P413,000 per month  Why P30 million? So that the balance would be used in upgrading the  school.

Some initial findings:

1. The revenues of the school P2 million a month (P24 M for 2014)

2.   The expenses seem to be overstated.  The interest expense amounting to P800,000 is lodged as direct expense (wrong entry)

3.  The total monthly expense  is P1.2 million (without interest expense)  thus if we add the P400,000 to the cash outflow, there would be P400,000 left for P4.8 million income for the year.  That is P48 million for the next 10 years + owning the land and building

4.  Now if you can look at other business opportunities:  collateral business related to the school (what are they.  This is subject to the research by the DD team.  They could have been hidden from the FS or is a business within the business or is overlooked by the owners)

What would be the strategy?

Is this a good buy?

NUSTD - building a better world through Technology and Design

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
September 12, 2016

NUSTD


I saw a TV clip regarding NUSTD (National University of Singapore and Technology) start. They partnered with Massachusetts Institute of Technology. They hired a faculty of MIT to be the Dean, and had the start up faculty train in Cambridge Massachusetts to  bring the  spirit of newness, inventiveness, innovation and creativity to Singapore.

If I will be blessed with more wealth and longer healthy life, I would like to help co build, sponsor such a school

This is my idea of a GSB that focuses on design.  The days of B school is over. The time for D school has come.  Time for schools in the Philippines to wake up.

Can private and public entity think of this and establish.

 The  Iloilo Science and Technology University  has done a great job.  Its students can now design and create robots

Iloilo Science and Technology University

A business school must practice what it preaches especially that it espouses heroism and being a man for others, spirituality

Every generation needs a revolution - an entrepreneurial revolution

Officially or unofficially I am out of the teaching staff of the school, thus I could not be accused of disloyalty as I touch unpleasant things in this post. I cherish the years that I was a part of the teaching staff.  I value the friendship and the knowledge I gained from the colleagues and the encouragement of the former leaders and managers.

Lately and I am disappointed with management and leadership of that school:

1.  Despite the meetings, the current boss is far removed from the teaching staff and never really get to know them/us.  I think he thinks only he is the best and can never be wrong.  The cluster heads are not much different.

2.  Despite the presence of young blood in the management, I never saw any innovation nor any change in the school. The balding senior leaders of yore were much much better than the young dynamic(?) leaders now. From what I know despite the restructuring, enrollment was halved, and great teachers have all ready left.in droves (I included?)  Despite the strategic knowledge that in the school, the CSF are the experienced teaching staff.

3.  Despite priding itself as a school that is an expert in strategic management, it missed the strategic intent and issues and thus is now lagging behind other business schools.

4.  Despite the vaunted courses on leadership and management, only a secretary told me that my time is up since I am 65.  I did not see my cluster chair, my program director about this changing moment in my life at the school.  Where is the HR Or the Leader of the School?  I did not even get a goodbye or pat in the bank?  Too busy with the University of the Bun?  It all could end like this. Where are the men and women for others? Where is the Ignatian spirit and leadership that we are teaching?  There is a great divide between what we teach and what we practice?

Thanks to all my former students and colleagues.

Filipino entrepreneur at Silicon Valley

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 26, 2026

A Filipino entrepreneur is making waves these days.  His name is Alan Carascaso who heads a company that matches funders with start ups. (Match up Commerce?)  He was featured at CNN this morning.

His advice to tycoon wannabees:

1.  Have compelling vision (some say mesmerizing, enchanting) main value proposition
2.  Execute well

For this you need a great team, and even search for mentors to help you succeed.

Negotiating/evaluating a school for sale

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 26, 2016

I was on a meeting Tuesday afternoon with the representative of a primary and secondary (with Senior High) in a MM city.  In the meeting were:  the President of the Company, a lawyer, a banker, and two representatives of the seller

Some issues:

1. The price is P50 million.  The appraised value of the property is P70 million.  So this is a good asset buy.  However, the school does not make money.

From a net income approach valuation, the price of the school is zero.

The audited financial statement says it makes a revenue of P24 million a year, or P2 million a month (misleading because the tuition payment is quarterly).  The direct cost is P21 million a year, and GA expenses is P4 million.   We learned from additional information given that part of the monthly expenses is interest payments made to dozens of the creditors of the School Director who amassed some P74 million in private debt (as no banks would lend to a school asset - they could not foreclose)  Without the debt service, the school could be profitable earning some P12 million  a year.


2.  Manner of payment:

A thousand things could be learned from doing things yourself

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 25, 2016

This post thanks the 20 doctors who climbed their Everest writing a business plan.  Indeed while they suffered (probably) and struggled with the business model, objectives, sales estimate, writing the long details of the enterprise delivery system, and financials, they would have learned hundreds of thing just planning a business.  And even more when they build the business.

With the new deadlines of the school for grade submission, having enough time for writing the business plan is next to impossible.  That was why I declined teaching assignments before.

This class is an experiment of having the student write the bp co terminus with the end of semester.  With this strategy I have to focus on teaching writing the business plan, and scrap other items needed to be learned in entrepreneurship.

I could not stand too the idea of having pure scholastic approach to entrepreneurship  eg. having just reports and exams which are sterile means of teaching the course.

I am sure that those who established their own hospitals working on the loan with bank, constructing this, agonizing with many problems, recruiting the staff fighting the competition are the real students and graduates of this course.   Well I salute also those who are brave and determined to write the business plan

"I heard and I forgot,
I saw and remembered,
I experienced and I understand"  Old Chinese proverb.

Buying a business is like analyzing, reviewing a strama paper.

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 21, 2016.

Everything is so sudden. While I do not have the formal mandate yet that I would be an executive director of a holding company, a thick folder was sent to me to study the viability of buying a school.  (Elem to Senior High School)   There was a communication that contains a letter of intent to sell and the suggested closing is end of the month.

I reviewed the documents and found out that most of the information are for a loan transaction:  appraisal of the real property and FS (which I think looked funny)  If ever there is a valuation report, it has to be valuation of the business based on the FS?  They do not add up. Well the FS shows a school that is losing money.

If the purpose of the exercise is to buy the business, a lot more data is needed.  It is like a strama paper.   The objectives have to be defined and the strategy of how to make the school profitable, how to achieve ROI has to be defined.  A due diligence study has to be made before cogent decision can be made.

I did not realize that I am comfortable and at home in this kind of work.

These are the excerpts of my thoughts/communication to the Chairman of the Holding company:

Allow me to say some of my humble thoughts/comments on the paper which I read: 1.  The bulk of the information is for a loan transaction ie, the collateral and financials 2.  I could see a lot of discrepancy in the financial statements:   eg. the  income statement, the expenses (vs the worksheet) Have they made 100% correct representation on the data presented po Why are they selling?   Maybe they are not making money or enough However, I understand the plan is to buy the business and more information is needed to determine the viability of the business to be purchased: Internal Analysis: 1.   The main value proposition of the school, Primary Target Market 2   The competitive advantage 3.  Does the school possess the critical factors for success of the school 4.  Quality of management.  Shall the top management remain in case of sale, who shall remain, who shall resign/be retired?  Is this well managed 5.  Quality of the teaching staff/efficiency (the current ratio of staff vs students population is 1:10.  Is this an ideal ratio External analysis: 1.  Competitive analysis         of facilities      of teaching staff      of tuition fee.  Is the fee of P51,000 a reasonable tuition for a Las Pinas School (malapit na sa exclusive school fees)      enrollment 2. Why is their enrollment only 500? 3.  Where is their growth area?  Can the enrollment be increased? Strategy: Price 1.  How much is the just purchase price?   2.  Manner of payment Purpose 1.  What is the goal for the school?      Enrollment, revenue, , expenses,  Net income 2.  What is the strategy to achieve # 1. Operating the school: 1.  Who will run the school?  Shall we install a new dean (do we have a candidate now? Or shall there be a transition period until the purchase price is  completed 2. What changes must be made to make it generate cash flow for the holding company? .  My hypothesis is that:     If the enrollment can reach 1,000 ,reduce tuition to 35,000, there would be additional P11 million, and peg expenses to only say 12 to P15 m, then we can generate additional income of         P14 million for added revenues           10 million from cost reduction      the N.I can be 24 million or 40% ROI. vs purchase price of 50 million However, may I suggest that a due diligence be made. I talked to a school Dean CPA and I conclude that to properly know what to do with the acquisition and to validate this hypothesis

Charitable work or vulture investing - betting on the life of terminally ill

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 18, 2016

From Guardiian - Gambling on the life expectancy of terminally ill

Some would say that this is charitable work ie channeling idle funds for the terminally ills by discounting the life insurance.  The shorter the life expectancy the higher the discount.   The investors buy from life insurance auctioneers of the terminally ill patient.  Since life insurance is actually the reverse, the insured never get to enjoy the insurance while alive, the investors discount the life insurance and make themselves the beneficiary. The investor continues to pay the premium The insured enjoys part of the money to buy the things he needs especially for his health care, and even prepare for his interment.   The buyer gets the details down to the address of the seller and makes an assessment of the investment based on conversation of the doctor on the life expectancy of the seller.

Some say that the discount takes advantage of the difficult situation of the ill patient.  What do you think.

The buyers/investors generally make 40% returns per annum on their investment.

However there is an expected twist that those who encash their insurance live longer or even have a remission.  The seller generally when declared as terminally ill live between 6 months to 6 years.

In the US, they have firms that professionally does this called viatical settlement firms.  Insurance companies neutralized this by having a rider:   accelerated death benefits.

Lean Start up management

Every generation needs a revolution - an entrepreneurial revolution

The management of a start up is a critical thing.  This presentation covers the business model and the risk of having a start up   This is about lean start up, and business model.

Introduction to entrepreneurial management from MaRS Discovery District

Getting energized for entrepreneurship

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 16, 2016

At age 76, the veteran CEO is still energy, clear headed and very much energized.  How does he do it.  He says, he plays golf, he plays hard badminton, eats well and sleeps early. Above all he has the love of his life to energize him.  (He believes in Napoleon Hill that says something about sex.)

So one needs strong cardiovascular health and general health to carry out the rigors of entrepreneurship and wealth building.  This is an important lesson

Innovate or die

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 16, 2016

I asked the veteran businessman and CEO with whom I brainstormed today why their family business on finance and chemicals are nowhere to be found now.  He said the company and their current execs became dysfunctional.  They continued to function as if the world was not changing, being as they were before, now and tomorrow;  Being insane, ie expecting the business to grow without inputs and innovation, which according to Albert Einstein is insanity.

Innovate or die.  They failed to innovate, so the company died   While the detergent companies required more environment friendly chemicals for their detergent, their company produced what they knew how to produce.  The detergent companies stopped buying from them and hence, no sales, no cash flow, no business.

History both local and foreign is filled with stories that failed to see the waves of changes that were upon  them:    Nokia, Pocketbell, Motorola, IBM and many many more  This is one of the very few failures that I knew for not heeding:  Innovate or Die

They forgot the basic lesson of what a business:  an entity that creates and maintain customer.

The two important functions therefore are marketing and innovation.

Let us remember that

As a consultant, I will spearhead the development and marketing of real estate holdings to help the bank grow, but as if I own the properties

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 16, 2016

I am being invited to join the board of the RB that is being geared to grow into a billion in five years. (I foresee a much shorter time)

I have been given papers of two real estate holdings of the lady CEO who bought them at a bargain:

1. One is a one hundred thousand square meters with 1,000 individual titles which she bought from SPAV for only P12,800,000 (it should cost about 4 times as much)  Very easily as raw land, it can be sold retail for P200,000,000

2. The other is a 24 hectare property along the highway (with commercial potential) in a fast developing CL, Region 3 town at only P50,000,000.  It too has individual titles soon because it has development plan.  A Villar company which is located in the interior (developed) sells for P3,500 to P5,000 per sm.  It is fronting an international school and a resort.  It could be easily worth half billion pesos market value.

    In the meantime, the property can be made the paid up capital, 50% for the lady CEO as capital for the holding company.

The strip along the highway can be set aside for commercial property/rental and lease.

Action Plan:

1.  The site development plan will be given next week and we will have site inspection.

2.  The engineer will get the development plans and engineering drawings if not he will prepare a new one based on site development plan and IRR of PD 957 or BP 220;  He will prepare a BOM, specifications for bidding. for outside contractor or to save money by administration

3.  The marketing group will submit a proposal how to sell prior to development. The lady CEO will meet the marketing group who will need a budget

4. ROW and LTS will be obtained where it is needed.

Instructions/guidelines

1. Prof Jorge will be the consultant/PM but will manage it as if he was the owner;

2.  He will make sure that it will make the bank grow:

      1. DP and cash flow will be deposited with the bank

      2.  The 70% balance will be mortgaged with the bank

      3, In SMC branches may be put up

What is the proposal of the prof for compensation?

Creating opportunities and wealth from what one has

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 16, 2016

Today I brainstormed with a lady Chairman of a group of companies and former CEO of a huge financing company, chemical company that supplied all the chemical needs of the detergent FMCG in the country. She is 55, he is 73 but still very creative and innovative.

He invited me to be executive director of the group who will form a holding company:

The holding company will gather capital and invest 50%-50% in the following ventures:

            1. Bank (the rural bank which we are working on now)

            2,  Real Estate (horizontal and vertical)

            3. Schools

            4. Health Care (nursing and hospitals

            5. Energy (solar)

            6  Telecom  (e Pole)   from Enersphere  designed to solve telecom congestion, dropped calls and slow internet speed

The various groups will have their own CEO and be profit center, and funds will be raised through ordinary subscriptions and even IPO.  This calls for a hard driving CEO who will kick ass. The elderly CEO thinks I am talented enough to run this complexity and kick ass (or more mildly nudge

This will be a conglomerate approach just like MVP group (energy, telecom/utilities), Aboitiz (power and banking or San Miguel (food energy, and construction) or Phinma which is into schools, real estate and energy (divested from  cement and construction/technology

How will I be compensated, do I have time for this.?  Initially once a week and as a consultant. Or be fee based on projects.  He likes my approach as an academician businessman which is methodical, organized and scientific

 The businesses we talk about amount to:

1.  School   -   100,000,000 million

2.  Solar manufacturing -   100,000,000 million

3.  Bank                         -   100,000,000 million

4.  Real estate               -    400,000,000 million raw land value

We now have a asset for stock swap capitalization for the holding company:  200,000,000 million (conservative appraisal) consisting of 24 hectares of prime land (along the highway) near the Philippine Sports Arena.    Earlier, raising capital for holding company was problem, today, we have a solution

Wow.  Just brainstorming and manipulating the assets and applying innovation can create more wealth and opportunities for many people

Quick and clean way to get wealthier

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 16,2016

I have frequent meeting with a celebrity who became a millionaire at the age of twenty.  She was recently ambushed but survived the attempt. to kill her.  It stemmed from a case of forgery of title of property she owned.  She proved that it was estafa and  won the case.  However on the day of pronouncement of the judgement, the plaintiff who has been planning the crime all along executed the plan. The assailants sang and pinpointed the mastermind, namely the plaintiff in the case.

However there is another twist to the story.  The same person, paying somebody from DOJ filed a case of estafa against her which was widely publicized to embarrass and her. Proving that law in the Philippines is not just.

But the lesson to learn from her is that the way she grew up her wealth.  She says that every Christmas season (that means beginning end of August and September, she and 5 other wholesalers go to Bangkok where the dry goods, Christmas items are relatively cheap.  Her purchase amounts to almost a hundred million, and the traders issues her pdc for the amount of their purchase for 90 days + 20% (thats a clean 6% per month or 72% per annum)  She has been doing that for 10 years now and the traders always make good their checks.  She can double her money in two years doing that.

Now who said that those who do not have money can have more money.

MONEY BEGETS MORE MONEY IF YOU KNOW HOW TO INVEST AND MINIMIZE RISK.

Have you ever thought of that as an opportunity?  The old businesses are still the one that are safe and profitable.  High tech -- nice but risky

More opportunities come my way

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 13, 2016

I was initially saddened upon learning that 65 and above Lecturers are old and and no longer useful to the school.  However as Steven Jobs said, being out lightens your perspective  and makes opportunity much clearer to you.  that meant I will no longer be battling the traffic woes that is becoming worse everyday.

Yesterday, we started talks on me giving feedback/output on the following projects:

1.  A condo project in Makati, 30 stories tall, with total floor area of 9,000 sm and with project cost of nearly half billion;  Projected sales of about a billion.

2. A subdivision project in Central Luzon, 10 hectares with 1,000 individual titles,  Projected sales about P500 to 700 million.

What is important about these is that my experiences will help me lead, advise and set in order the projects presented to me:

1.  I advised my cousin and gave her encouragement and inspiration in her most difficulty moment.  I gave her financial support and even personnel to help her sort out her problem;

2.  Earlier, in Eagle Crest project, I did a lot  computation and even draft bp for a 400 units house and lot package for a businessman in Baguio City.  We even made website which got lots of visitors and interest.  Now the same model and template will simply be revived to generate the business. The deal and the talks fell through, but all the studies and computation can be made useful again for this new opportunity.

Business opportunity happen when the your experience/preparation meets the event that can created the opportunity.

Who cares now if they will not let seniors teach anymore.  We can make more money and be more useful in nation building

Extension granted to MBAH students submitting business plan today - the suspension of class made it moot

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 13, 2016

This author granted a 1 week extension for the submission of the business plan,  the final project for the Entrep subject, after failing to get an endorsement/nod from the program director.  She was against it, after noting her response that as a PhD student, she has to comply strictly with the deadlines.

I earlier said that I take full responsibility for the granting of the extension after noting that  the students have  difficulty with the complexity of the business plan, especially the financial. I also anticipated that challenge that was why I refused to teach the subject with the strict deadline (7 days submission of grade after end of the semester.  I will not teach  the subject without submission of the business plan.)

However this deadline has been rendered moot because  of the suspension of the class at the school today. Now that I am 65 and retireable, the offense merely formalizes my being out.  Being out of the system now.

Are the 65 and above staff and lecturers out of the school system even with the new law on age discrimation

Every generation needs a revolution - an entrepreneurial revolution

Rizal Philippines
August 13, 2016

RA 10911 lapses into law, is effective by August 16, 2016

The school suspended school today on account of incessant rains.  However, I was not informed ahead of time, and I found myself in the midst of traffic and rains when I learned of the suspension

Let us go back to the topic of this post.  About a month ago, this writer was informed by a cluster secretary (and they seem to have clout over profs)  that profs over 65 can no longer teach or join any income generating activity.   And that was a sad day for me.  I still love to teach and that was  let down.  So I refuse to join any more activities of the school.

However a new law came out that prohibits age discrimination in hiring.  Does that apply to the age of the employees as to whether they are not retireable or not?  (The bill lapsed into a law after Pres. Pnoy failed to sign this after Congress approved the bill.

Answer from the Philstar news article and we quote:

Under RA 10911, it is also unlawful for employers to lay off workers because of old age or to set an age limit in employment.  (Does this make the school policy of retiring 65 and above null and void?)

Violators face fines of P50,000 to P500,000 and imprisonment of three months to two years.