Advising a no go - is it a wise move in business consulting? Or should you not get paid for advising so?

Every generation needs a revolution - an entrepreneurial revolution

I had a boss, the head of finance company in the govt, who requested me to do a consultancy work for a friend.  The friend was a former local top exec in an lgu in the Visayas, now a head of a regulatory unit in the govt.   He wanted to invest 8 numbers in an ailing development bank in Southern Luzon

I accepted the engagement and requested for the financial statement

There were certain anomalies noticed:

     1.  There was a negative carry for earning assets, and expense bearing liabilities.   (The time deposits were paid + 10% more than there were earning assets.   It was therefore on continuing loss with its

asset liability structure.

    2.  Large officer expenses.  This is expected considering it had extensive branch network

   3.  There was one asset item that caught my attention:   P40 million repoa.  This I should see.

I went on a trip to the head office in Southern Luzon and met its executive who looked nonchalant and undisturbed over the situation of the bank,  I guessed, after looking at the relationship between quick assets and level of liability that they must be experiencing liquidity problems and in two months time

unless PDIC or BSP steps in a bank run is there in two months time.

This post asked to be accompanied to the 8 number repoa (it was just one item)  And found out that it was supposed to be memorial park, not even 2% developed and valued at  that such huge amount, equivalent to the proposed purchase price.  It was supposed to be an asset of the owner that was booked in the bank's books.  (The owner lived in a plush MM gated subdivision)

This post advised his boss, not to go ahead with the purchase because on day one, they would have negative, or loss with a huge non earning asset in its book.  My boss was aghast since we wouldl not be paid consultancy fee.  I said it was OK

I asked what was the purpose of the fmr mayor in the buy - out.  I learned he wanted to be given the title of the banker.   It was not to earn PHP.   What was the point of being called a banker but managing or owning a losing one

Is it ok not to be paid, if you advise so that the buyer do not get burned.?   Or should you proceed with consultancy no matter how bad the subject is so that you get paidddddddddd?

Another mistake in starting a business - no business plan

Every generation needs a revolution - an entrepreneurial revolution

I know of someone who invested a good 6 numbers in a food business:   pares in multi storey commercial condominium.  It was all go go go.  Rah rah affair.  Group prressure.    A gang cheering to go ahead

You guess it right - there was not enough traffic, not enough revenue, and the business collapsed in a matter of months.  The poor investor who borrowed most of the investment now could not even afford to pay living expenses.   

Plan think through your business carefully before going into one.

For inquiries into business plan preparation, contact 0908 - 928 7888 or gmail  profjorgeentrep@gmail.com

Multi million investment - malls (hardware shops) in the middle of nowhere

Every generation needs a revolution - an entrepreneurial revolution

It has been observed that there are at least three multi million business establishments in the Eastern province that were put up without thought for primary reason for putting up -  location, vicinity to primary target market.  While this is not necessary for on line business, this is necessary for brick and mortar business that depend on consumer foot traffic.

Apparently, the owners had gut feel, bravado on their side, and past success, and that they can never go wrong. They probably did not go into meticulous process of business planning.  There are risks in going into business, and one of them is failure.   When is the right time to build?   Would there be enough customers for your break even.

This post waited for 8 years before building a commercial building in the front vacant commercial lot in the division it has developed.   This precipitated rapid increase in real estate values and expansion of commercial area into the neighboring town

Even the head of a top fast food said that there is a possibility, their group can fail, and that their employees should be vigilant.  

The mall that is in between Jala jala and Pililla is half closed and its malls are half closed, their employees laid off, and the owners probably so sorry for their investment.

There is a grocery in poblacion of Jalajala which seems to flourish, but it is in the center of population

There were also farm lots and subdivision projects in Tanay and Pililla around the wind mill that were advertsised with Selling Prices at P5k to P7k.  They have gone quiet now