Business Failure Rate In Los

[jaideeguy]

In 10+ yrs here, I've seen so many [retail] businesses open for 6 months [or less] then close, Obviously for financial reasons.

Just off the top of my head, I would estimate at least 50% failure rate after 6 months.....both Thai and Falang fall victim to poor planning, lack of capital, bad location, competition etc.

Also seems that the most obvious failed businesses are eateries and having failed myself after 6 months of trying to just break even, we closed.

What would you guess 'the failure rate after 6 months' is here??

[carmine]

I think the failure rate within the first "year" in business back in the UK is in the region of 70%. i don't think the failure rate here is particularily out of line with most other places. Big difference here is there are fewer options of what to do so as in the case in tourist areas we go into an oversupply situation.

Its the "what am i going to do?"............oh yes, i'll open a bar/restaurant scenario.

[mrdeedee]

part of the reason failure rate has to be higher than west is that too many open business for the wrong reasons.

ex. to placate those darn thai girlfriends and 4 something for the lazy families to make money off of:lol: :lol: . failure rate here has got 2 be close to 100% :lol:

[jaideeguy]

Agree that 50% is a low guess. maybe 70-80% [after 6 mo] would be more realistic. I see noodle shops, karoakes, small restaurants opening and closing in a couple of months. Obvious reason for most is lack of planning, capitol and imagination.

Definately more here than in the west, as the legal registered business requirement and enforcement is so lax here. Read an article somewhere that the 'underground' economy exceeds the legal GDP and Thailand ranks # 7 in the world.

[Heng]

Basic customer satisfaction issue here... the margin between expectations and performance. Here, an awful lot of expats (even inter Thai expats like myself) EXPECT to do better in business.

All to often though that's just ego talking and the failure rates are roughly the same for business startups as anywhere else because ultimately the physics of business are the same (cash flow, margin, competition, keeping costs down, etc.), just with different variables.

[bkkjames]

Too many businesses subscribe to the build it and they will come mentality hoping by opening a retail front people will just walk in.

Very little thought given to 'actual' marketing and planning and differentiation.

Very little if any thought given to new product development.

Less would fail if they looked at two things...

1. Why would a consumer want or need to shop in your establishment?

2. Pay attention to customer service. In today's price sensitive world, people will pay a little more for a better / hassle free experience. This is important to keep in mind when your establishment charges more than a similar one next door.

[taninthai]

i wouldnt like to guess at the fail rates but the reason most fail i think is due to the price they have to pay to rent the shops etc they are asking 1.2 million a year to rent a smallish shop in our area due to it only really being a 6 month season you need to make well over 200,000 bht a month just to break even ,include set up costs to buy stock,furniture and pay staff ,water electric etc and you are on to a loser already.

[robblok]

Too many businesses subscribe to the build it and they will come mentality hoping by opening a retail front people will just walk in.

Very little thought given to 'actual' marketing and planning and differentiation.

Very little if any thought given to new product development.

Less would fail if they looked at two things...

1. Why would a consumer want or need to shop in your establishment?

2. Pay attention to customer service. In today's price sensitive world, people will pay a little more for a better / hassle free experience. This is important to keep in mind when your establishment charges more than a similar one next door.

Good remark, it would also help if they really calculated the costs well and checked if they could even reach a break even point. Also in my experience in the west as an bookkeeper tax adviser is that most companies don't turn a profit the first few years. You have to plan not to make a profit for at least a year.

[Heng]

Yes, basic cash flow problems. The expectation though is that your product or service is going to be so 'hot' that you're going to trade your way out of any cash crunches. Often these expectations are too optimistic.

[ooovaavu]

Many Thais are also looking for " the latest thing" a notable one afew years back was "Mr Bun" when people queued outside to buy it, now almost empty when I go past them.

A good example is "Bonjour" this place is always busy selling a product around 10 baht buy the hundreds of thousands.

Copycatting is also a big thing then undercutting.

[slapout]

Those of us who have had successful businesses here or abroad probably had experience in the business we chose. I am amazed at the people who will open a shop/business and then start looking for why it is not making them wealthy quickly. I watched a McDonald open in Chiang Mai a few years ago. They had people on the proposed area for several weeks counting foot/pedestrian traffic, prior to making a commitment. Most businessmen, besides the personal experience would know the potential market for a chosen area, competition, and that they could expect a time lag from opening to breaking even, much less making a profit.

If someone did a survey of the failed businesses and the owners lack of experience, in that business, you would probably find a correlation approaching 100%. Here, people both farang and Thai seem to forget the fundamental rules of number of competitors for potential customers.

[Richb2004v2]

The failure rates are possibly comparable to those in the west. I think the difference may be that it is so easy to start a business here that it just seems to be that so many fail. I agree that there must be little market research or often even any thought given to the viability of a business here. How many coffee shops does one country need!

[robblok]

Those of us who have had successful businesses here or abroad probably had experience in the business we chose. I am amazed at the people who will open a shop/business and then start looking for why it is not making them wealthy quickly. I watched a McDonald open in Chiang Mai a few years ago. They had people on the proposed area for several weeks counting foot/pedestrian traffic, prior to making a commitment. Most businessmen, besides the personal experience would know the potential market for a chosen area, competition, and that they could expect a time lag from opening to breaking even, much less making a profit.

If someone did a survey of the failed businesses and the owners lack of experience, in that business, you would probably find a correlation approaching 100%. Here, people both farang and Thai seem to forget the fundamental rules of number of competitors for potential customers.

Good point many people never had a business and then start one form out of the blue because its so easy here. That would account for higher rates of failing businesses.

[dumball]

Thinking and foresight are very important to the success of buisiness , but this needs to be directed at prospective customers , the overall cost of set-up is about the only thing many are concerned with , but in fact this is by far the easiest segment to be considered . Location , location is of maximum importance, followed by the vagrancies of current and future competition , then the cost of total overheads including your own living costs , not forgetting the charges to have product delivered because that could be the 'Straw' . The cost of suitable store space has been mentioned as a factor to failure , so do you realy need such a fancy store front ? What you stock and how you present it , what knowlege do you bring to enable you to sell your products , are you a chearfull person who can present yourself well to possible clients , no smile , I move on .

I could go on but I would be accussed of writing a book as appossed to passing a comment

[TheWalkingMan]

Rental Costs - Some of the rental costs doom the next punter.

Hotel/Guesthouse - Place needed a refurbish and the monthly rental amount wanted would require overnight room rates of more than 2k baht to, hopefully, stay afloat. When explained to the landowner that this rate would be impossible to get in this area, the reply was take it or leave it.

Beer Bar Complex - In Pattaya, I saw a new beer bar complex which wanted 1m baht per year in rent per bar. Even the bar at the back of the complex was 1m baht per year. Only a sucker would rent that complex as it was at the dull end of the street. Some bozo opened a restaurant, not visible from the street, at the back of the complex. I think he lasted 6 or 8 months.

Lack of creativity

Everyone wants to open the same type of places... A bar is a bar is a bar. A massage shop is a massage shop is a massage shop. Why would a customer visit your place when there are 100 places offering the same product?

Some people actually believe that having the same type of business as other people is a good idea.

Walking on the Avenue

The Avenue Shopping Mall is a very good example of an idea gone bad which probably cost people a lot of money. An open air mall in a touristy, hot climate area, on the wrong side of the road, with shops that are not offering anything unique. How could they ever believe that could get enough customers to stay open?

TheWalkingMan

[jaideeguy]

Another failure factor [for the falang business owners] is that lots of us come here with dreams and fantasies [and the Thais are not that realistic either].....but most businesses here start as unrealistic dreams that are easy because the start up and labor are cheap....so you think it will be easy and cheap....but reality strikes with high rents and managing [unskilled] Thais to do things in our very different ways.

Thai businesses fail simply from lack of planning and immagination. Even after our small restaurant business failed my wife still wants to open a noodle shop.....in an area where rice farmers pay 10-20 thb for a bowl of noodles. Most are satisfied with a 100thb a day profit from a whole day's work.

Reminds me of children opening a lemonade shop.....business [for the average Thai] is a social thing so that they can yack with their friends and think they are making money.

[welsh1]

Thai businesses fail simply from lack of planning and immagination. Even after our small restaurant business failed my wife still wants to open a noodle shop.....in an area where rice farmers pay 10-20 thb for a bowl of noodles. Most are satisfied with a 100thb a day profit from a whole day's work.

Reminds me of children opening a lemonade shop.....business [for the average Thai] is a social thing so that they can yack with their friends and think they are making money.

Good on her ...yes true there are lots of people who run these little food stalls selling noodles or just a simple thai meal for 20-25 baht and like you say they are happy making small money,,

But most of them dont know how to take care of or how to manage money no matter how big or small the amounts are..

But the motorbike gangs i see driving all around issan they seem to do ok .. collecting money from all these various stall holders who at some point have borrowed money from them .!!

[Kilgore Trout]

The failure rates are possibly comparable to those in the west. I think the difference may be that it is so easy to start a business here that it just seems to be that so many fail. I agree that there must be little market research or often even any thought given to the viability of a business here. How many coffee shops does one country need!

and how many of those so called coffee shops think they can get 12 oz of juice from one shot of espresso....who buys it?

[Peterbigeyes]

But most of them dont know how to take care of or how to manage money no matter how big or small the amounts are..

I stand by this

[Richb2004v2]

At the other end of the spectrum I think some businesses manage to stay open even thought they do a terrible service simply because Thais never complain or return goods. We've used one or two shops where everything we've bought has been totally useless, yet still the shop operates.

[mrdeedee]

Another failure factor [for the falang business owners] is that lots of us come here with dreams and fantasies [and the Thais are not that realistic either].....but most businesses here start as unrealistic dreams that are easy because the start up and labor are cheap....so you think it will be easy and cheap....but reality strikes with high rents and managing [unskilled] Thais to do things in our very different ways.

Thai businesses fail simply from lack of planning and immagination. Even after our small restaurant business failed my wife still wants to open a noodle shop.....in an area where rice farmers pay 10-20 thb for a bowl of noodles. Most are satisfied with a 100thb a day profit from a whole day's work.

Reminds me of children opening a lemonade shop.....business [for the average Thai] is a social thing so that they can yack with their friends and think they are making money.

im starting to like you sir!

you tell it like it is. i hav no idea about thai business but have gut feelings on how many do..............just by watching. even a small noodle cart needs a minimum of 2 people to make it work, not counting the big strong dudes who need to be paid just to set thing s up and take them away at the end of the day.

[wolf5370]

You'd be surprised how much money the little low cost Thai places make. I own a small cafe which is out of town and cater for mostly Thais and local expats (and foreign visitors that attend a local Muay Thai school). Average dish price is around 30baht. Open from 6am until 9pm (ish - later if people are still in the place). Rent is just 3k a month (its got 4 walls, a ceiling, and a kitchen - I put in tables and hairs, did it up a bit (mostly cleaning and painting) added a TV and sterio, uprated he kitchen a bit with a decent extractor and new burner. Bought some cheap upright fans. Rewired the place completely. Earnings before wages, but after shopping and rent, is around 30k a month. No down season as locals need to eat all year around. Location is good - major road - and frequented by TukTuk and Songtaew drivers.

The key is giving what the customer actually wants - which is good food at affordable prics and friendly staff - the rest is expensive window dressing. I changed several initial ideas - I got a drinks license for th place (cafe not bar) but soon decided it was possibly a waste as soft drinks go much quicker than beer or whisky (by the bottle - same prices a 7-1 plus about 10 baht - I get hem from Macros by the crate so this is still a good margin, Thais will not spend 100B on a bottle of beer they can get for 44 from 7-11, but will pay 55 for it to save walking). Iced water is free - initially we sold bottles, but they didn't sell weel, so now I bought a water cooler and get cheap ater delivered instead. Initially I expected it to be open at 10 close at midnight, but mornings are better and people around us eat by 9pm and sit at home and drink - so no point staying open later.

There are things I could do to lift it - and I may perhaps - like evening events perhaps, but to tell the truth it suits me fine. I have some plans to add some extras to the menu, for the students we get (college and school) - but I'll wait until the chef is back from Finand later this month - maybe add it for Christmas.

I did not come into this blind - though I was in IT in the old life, for over 2 decades, I also had a stint as a restaurant owner and manager (Thai and Chinese fare) in the UK - and have run several IT companies too, so I can do accounts and knew almost what to expect - but even so, one has to keep a close eye at first (and continue too), because the locations can work (even quite poor ones) as long as the business is catering to the local need - and can flexible enough to bend and flow with those changing needs. The world seems to change between different loalities here much more drastically than it did in the UK - 5 KM into town and it would need a whole different model.

[mrdeedee]

You'd be surprised how much money the little low cost Thai places make. I own a small cafe which is out of town and cater for mostly Thais and local expats (and foreign visitors that attend a local Muay Thai school). Average dish price is around 30baht. Open from 6am until 9pm (ish - later if people are still in the place). Rent is just 3k a month (its got 4 walls, a ceiling, and a kitchen - I put in tables and hairs, did it up a bit (mostly cleaning and painting) added a TV and sterio, uprated he kitchen a bit with a decent extractor and new burner. Bought some cheap upright fans. Rewired the place completely. Earnings before wages, but after shopping and rent, is around 30k a month. No down season as locals need to eat all year around. Location is good - major road - and frequented by TukTuk and Songtaew drivers.

The key is giving what the customer actually wants - which is good food at affordable prics and friendly staff - the rest is expensive window dressing. I changed several initial ideas - I got a drinks license for th place (cafe not bar) but soon decided it was possibly a waste as soft drinks go much quicker than beer or whisky (by the bottle - same prices a 7-1 plus about 10 baht - I get hem from Macros by the crate so this is still a good margin, Thais will not spend 100B on a bottle of beer they can get for 44 from 7-11, but will pay 55 for it to save walking). Iced water is free - initially we sold bottles, but they didn't sell weel, so now I bought a water cooler and get cheap ater delivered instead. Initially I expected it to be open at 10 close at midnight, but mornings are better and people around us eat by 9pm and sit at home and drink - so no point staying open later.

There are things I could do to lift it - and I may perhaps - like evening events perhaps, but to tell the truth it suits me fine. I have some plans to add some extras to the menu, for the students we get (college and school) - but I'll wait until the chef is back from Finand later this month - maybe add it for Christmas.

I did not come into this blind - though I was in IT in the old life, for over 2 decades, I also had a stint as a restaurant owner and manager (Thai and Chinese fare) in the UK - and have run several IT companies too, so I can do accounts and knew almost what to expect - but even so, one has to keep a close eye at first (and continue too), because the locations can work (even quite poor ones) as long as the business is catering to the local need - and can flexible enough to bend and flow with those changing needs. The world seems to change between different loalities here much more drastically than it did in the UK - 5 KM into town and it would need a whole different model.

30 k be4 wages does not sound like a lot sir.

and you need to let us know what your initial investment was.open 15 hours a day you open not to mention prep and end of day closing.

not trying to rain on you parade but you seem to make about what one would expect you to make, and you one of the lucky ones.

[wolf5370]

You'd be surprised how much money the little low cost Thai places make. I own a small cafe which is out of town and cater for mostly Thais and local expats (and foreign visitors that attend a local Muay Thai school). Average dish price is around 30baht. Open from 6am until 9pm (ish - later if people are still in the place). Rent is just 3k a month (its got 4 walls, a ceiling, and a kitchen - I put in tables and hairs, did it up a bit (mostly cleaning and painting) added a TV and sterio, uprated he kitchen a bit with a decent extractor and new burner. Bought some cheap upright fans. Rewired the place completely. Earnings before wages, but after shopping and rent, is around 30k a month. No down season as locals need to eat all year around. Location is good - major road - and frequented by TukTuk and Songtaew drivers.

The key is giving what the customer actually wants - which is good food at affordable prics and friendly staff - the rest is expensive window dressing. I changed several initial ideas - I got a drinks license for th place (cafe not bar) but soon decided it was possibly a waste as soft drinks go much quicker than beer or whisky (by the bottle - same prices a 7-1 plus about 10 baht - I get hem from Macros by the crate so this is still a good margin, Thais will not spend 100B on a bottle of beer they can get for 44 from 7-11, but will pay 55 for it to save walking). Iced water is free - initially we sold bottles, but they didn't sell weel, so now I bought a water cooler and get cheap ater delivered instead. Initially I expected it to be open at 10 close at midnight, but mornings are better and people around us eat by 9pm and sit at home and drink - so no point staying open later.

There are things I could do to lift it - and I may perhaps - like evening events perhaps, but to tell the truth it suits me fine. I have some plans to add some extras to the menu, for the students we get (college and school) - but I'll wait until the chef is back from Finand later this month - maybe add it for Christmas.

I did not come into this blind - though I was in IT in the old life, for over 2 decades, I also had a stint as a restaurant owner and manager (Thai and Chinese fare) in the UK - and have run several IT companies too, so I can do accounts and knew almost what to expect - but even so, one has to keep a close eye at first (and continue too), because the locations can work (even quite poor ones) as long as the business is catering to the local need - and can flexible enough to bend and flow with those changing needs. The world seems to change between different loalities here much more drastically than it did in the UK - 5 KM into town and it would need a whole different model.

30 k be4 wages does not sound like a lot sir.

and you need to let us know what your initial investment was.open 15 hours a day you open not to mention prep and end of day closing.

not trying to rain on you parade but you seem to make about what one would expect you to make, and you one of the lucky ones.

I wasn't touting it as a wonder-businesses - I was replying to the earlier posts that implied that low cost places (like food stalls and Thai cafes) make no money - and for a Thai 30k is a good income. I don't use the income - I earn my personal money elsewhere - I initially set it up for my MIL, but is now my Mrs domain (as so really just an extra bonus for us). So, wages are minumal (about 500 a week as one server is all that is required and not all the time or every day - cook can often do the lot). Initial investment including lease and contents and doing it up (basic as I said) was around 180k. Prep and closing tend to happen while the place is open and throughout the day - its a cafe, not a restaurant, there is limited prep work - and closing is cleaning up and collecting the receipts etc. Shoping also happen during the open day or is delivered. ...an yes it is what I expected it to make, but not what a lot of people tend to think it would make. It is steady trade with no real highs and lows (weekends are quieter than weekdays). It is very sociable (both with cistomers and neighbouring shop keepers) so 15 hour days is not difficult - normal day is busy morning, lunchtime and late afternoon - the rest is easy enough to watch TV, chat or put on a DVD.

Edit: Maybe I should say that the Mrs does not work there - the way it works is that we own the business and her sister cooks and manages - the money is split 50/50. So, mrs earns around 15k a month for doing nothing - as a return on the investment if you like (ROI). Her sister is very happy with 15k a month, free meals and a free pace to live too - she has also now got engaged to the neighbours son!

Edited September 7, 2010 by wolf5370

[mrdeedee]

what you not understanding is that as a business yr venture is not as good as you imply.

the sis basically has a job. to judge how a business is doing one cannot count the wages the owner makes by working as profit.

ive eaten at places like you have and doubt id do often if it was staffed by one owner who does everything and one helper. the servvice just wouldnt be there:lol:

Edited September 7, 2010 by mrdeedee

[robblok]

what you not understanding is that as a business yr venture is not as good as you imply.

the sis basically has a job. to judge how a business is doing one cannot count the wages the owner makes by working as profit.

ive eaten at places like you have and doubt id do often if it was staffed by one owner who does everything and one helper. the servvice just wouldnt be there:lol:

Depends how you look at it he is right that this is good money for a Thai. For a foreigner i would say its not so good. But if he could get someone to work for it for 15.000 (fair money for a thai in a restaurant). Then he still has 15k profit. That makes a 100% ROI (return on investment) I don't think this is bad at all. It is not mega money for a foreigner but most Thais would be happy. If he could copy this success and make 10 more of these shops and put people in there and make 150K a month then you would think its a lot of money. Its just small scale now.

[mrdeedee]

the number the guy gives is good for roi as you put it.

i just dont believe his numbers..

he says 30k be4 wages.

he says only sis and a helper run the place.420 hours a month of work for sis -she does everything so she has to be there all the time.@15k a month the sis makes about a dollar an hour.

he also says cook is returning from finland. this sounds like an additional employee:lol: .

who knows. just doesnt sound right:lol:

[kenallday]

I have plans to open a Beer Bar in Pattaya for a hobby - I can get one for only $5000 and some rent of around $500 per month - I am told I will earn about $2000 per month profit and also can get money from girls working in the bar who go with punters for money - I should also get some free action I suppose from being the boss - better than a soppy noodle stall

[robblok]

the number the guy gives is good for roi as you put it.

i just dont believe his numbers..

he says 30k be4 wages.

he says only sis and a helper run the place.420 hours a month of work for sis -she does everything so she has to be there all the time.@15k a month the sis makes about a dollar an hour.

he also says cook is returning from finland. this sounds like an additional employee:lol: .

who knows. just doesnt sound right:lol:

Do you know the minimum wage in Thailand is a lil over 6k and Thais work long hours for that. So it all depends how much he really would spend on wages. I would say it could be 18.000 or 20.000 then its still a good ROI be it small scale. But if someone makes 1.000.000 on his condo a year but invested 10.000.000. Then pure profit it would be higher but with a lower ROI. while 180.000 (30-20 x12) would give him a roi of 66%. So pure profit isnt everything (if he could duplicate his success and expand). This certainly is not enough to live of but then again the investment was not that high either.

[robblok]

I have plans to open a Beer Bar in Pattaya for a hobby - I can get one for only $5000 and some rent of around $500 per month - I am told I will earn about $2000 per month profit and also can get money from girls working in the bar who go with punters for money - I should also get some free action I suppose from being the boss - better than a soppy noodle stall

I hope your not serious... one business that fails the most is a bar. But hey its your life your money.