What kind of income can you expect from a tourist-driven SME in Chiang Mai?

[ianf]

Number of successful foreigner run eatery in cm .......... Three.

And one of them is a front for money laundering.

Number of failures ........ Thousands.

More than three.

There are failures in all types of business around the world. As I said in my previous post there are quite a few successful farang-run eateries here in Chiang Mai. The failures are usually because people rely on Thai wives who have no idea, or they go into it with no knowledge of catering or they have no business plan or they have unrealistic expectations. It's the same everywhere. If the original poster has a good business plan, a good offering, chooses the right location and knows what he is doing then he has every chance of success. I would say that would also be true if he were to open in Paris, Buenos Aires or Coventry. Really MaeJo, best to stick to riding the MTB rather than to disparage people with such negativity. I'll go for a ride with you some time!

[Gsxrnz]

The question is far too broad. The OP should do some reading and develop a budget - plenty of aids on the net to help you.

But I know of a business I've done some advising to. Small bar with four rental rooms. Turns over 20k a day average in the three months of high season, 5k per day in 9 months of low season. Five thousand a day is about break-even. In high season, accommodation accounts for half the turnover.

The bar has a strong local following and strong support from high season return visitors.

Profit for the year is in the region of 400k, and generates about 300k cash to the owner. It doesn't break the almost international golden rule for a small business in returning 10%-15% of turnover as profit.

As a way to make a living, it ain't gonna happen, but with a ROI of 30%, it's a pretty good investment.

[bangmai]

Am I missing something or are you stating that half of the 20K would be from the four rooms, per day, which would be 2500 per night. I can get a bungalow on the beach at Hua Hin for 800 per night. 250 per night would be more likely.

[Mousehound]

I have started up and run businesses for years in many countries. I have always made enough to live on. But I worked in retail and marketing for ten years first and then started small business and grew them to sell.

1) Keep overheads low. Don't sign a lease - rent a space in some other business if you can. Have an alternative source of income. Keep your investment small until you perfect what you are doing. Work at steady gains. Don't go into debt. Don't mortgage your house. If you have worked for the government for years and suddenly feel the urge to go into business forget it - they all fail. As do farmers in my opinion (Unless you are catering to the government or farming sectors).

2) Rather than ask what you can earn ask : How much do I need to break even and how much profit do I expect or want to make by such and such a time. Factor in a salary cost for your time and effort.

3. Don't believe anything if someone is trying to sell a business. At least work in that business for three months to see if things are kosher. Have an exit strategy - remember don't get into debt and in my opinion keep well clear of shopping centres.

4). Only get into something if you have specialist knowledge and preferably really are enthusiastic about what it is you chose to do.

5). If you are not a competent book keeper then you need to get that down first. I have a accounting qualifications but still rely on tax specialists. Set budgets and stick to them.

6). Ensure you set up a business correctly - it should be watertight to fit your requirements. You need a good accounting firm you trust for this. beware of anything that is too good to be true and seems far too cheap to resist.

7). Research like business' day in and day out. Know everything about what you are about to do and have a good marketing plan as well as a good financial one.

Be prepared to work 365 days a year and 18hrs a day if that what it takes. Realise that many families have fallen apart as a result of being in business. Some have also been held together by a business. If you don't have someone with real people skills and a flair for retailing you will find things hard going. Most small businesses run with a personality on the front desk so to speak.

A good operator is one that knows the business, runs a tight ship, is enthusiastic, understands budgeting, fills a need, provides good value and has that illusive something called charisma - that attracts and retains good staff and keeps customers returning.

I had some great and generous teachers/mentors over the years. Mostly New York Jewish and later HK Chinese. I never made it big but made a good living. Even with that background I would be cautious. In every country I have been in, nine out of ten business fail in the first eighteen months. But the urge to create something is primeval. Sometimes you just have to do it.

[WinnieTheKhwai]

I think you'd also do well to not focus exclusively on tourists. (And if you do, make sure you cater to as many kinds of tourist as possible)

The holy grail really is to be successful with all groups: Thais (first and foremost), tourists and expats.

Places that manage this: Riverside. Duke's. And ermm.. likely a handful more.

[Bananaman]

I did say any helpful advice would be appreciated and for those who offered it, I say thank you. For those who felt the need to make snide comments or attempts to belittle me or my enquiry, please desist - it's neither affable nor constructive.

I apologised at the outset for the vagueness of my question. I don't have a business plan, nor do I have my heart set on opening a tourist restaurant. Yes, I'm mildly interested in the possibility of running a food-based business in CM with Mrs B, but at this stage it's little more than that and my question was merely intended as a starting point for what would be a much more in-depth catalog of research before any financial commitment was made.

Cheers again for the helpful responses.

Edited February 1, 2016 by seedy
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[fey]

time to re-think the plan, my friend.

your "chasing the sale" if you need to make a profit here at all. that means your risking present capital for expected future profits. even the best companies can't estimate this well.

don't start anything until your finances are in order, your self-sufficient without having to make a profit.

Edited January 30, 2016 by fey

[flyDelight]

The past decades it became more important to go for a mobile business, like the cocktail and coffee buses. Go where the people are because they won't come to you you just feeding a fat landlord. Mobile businesses have good chances, need more start capital but no need to rent.

Don't listen to the grumpy expats on TV just make a good plan and start selling, I would focus on locals.

[ianf]

Your business is doomed to failure. You wouldn't be asking this question here if you knew how to run a tourist-facing business or had the experience in that industry. It also means you have no business plan and have done no market research at all. The best businesses make money because they're run by talented, experienced people with serious passion for their craft. You lack the passion too... or again you wouldn't be asking this question. Save your money and do something else.

Unbelievable insults.

[TheSiemReaper]

Your business is doomed to failure. You wouldn't be asking this question here if you knew how to run a tourist-facing business or had the experience in that industry. It also means you have no business plan and have done no market research at all. The best businesses make money because they're run by talented, experienced people with serious passion for their craft. You lack the passion too... or again you wouldn't be asking this question. Save your money and do something else.

Unbelievable insults.

I suggest you look up the word "insult". An accurate assessment of someone's incompetence is not an insult.

[Shiver]

I don't know how many people are familiar with "Nutty Park" in Udon, but I'd bet that these days the entire soi of customers would only fill 2 bars out of the...what 20+ units? Well over supplied.

Edited February 2, 2016 by Shiver

[mascarabertha]

I live around the corner from L'Opera, a French bakery at the end of Sridonchai Rd, run by a French guy and his wife, there are always people in there and they make great food. I don't think he's making millions of baht but off season and high season he'd definitely be covering his costs.

That said there are soo many failing businesses in CM it's insane. So many of the same same type places that struggle to attract anyone at all. When I lived at the Chiang Mai Gate I walked around the SE corner of the moat (in the old city) day and night and there are business over 3 years that I've never seen one person in no matter what time of day or night, high or low season.

Think the food at L'Opera is overpriced for what it is. Suspect it would mainly attract falangs, not Thais.

The big problem with any business in CM is if it shows any sign of success the landlords hike the rent. So the people running the business either shut up shop, or move elsewhere. Very intelligent.

The problem with failing businesses in CM is YOU. When you say "overpriced for what it is" what does that mean ? The products are authentic and superior quality and ingredients. The prices are not only reasonable, they are cheap.

[DaddyWarbucks]

Bananaman,

Don't do it.

Some people opened successful small restaurants here in the past few years. A good example is Nic's in Hang Dong who offered play space for kids and decent food. Little Italy on the same road is also going in the right direction with excellent Italian Food cooked by his Thai wife. These restaurants attract local expats as welll as Thais and so there is a possibility of developing a business. Another great example, again in the same road is Swiss Origin. Starting from scratch Alan baked bread and croissants, offering light lunches and snacks. Open from 7am until 6pm every day he attracts some Thais and many local expats. The ne'er sayers here tend to be dismissive, but like anywhere in the world, if you have a great idea, a good business plan and a realistic attitude, then you can make a go of it. My only word of caution is to ensure that your Thai partner understands the nature of Thai bureaucracy.

Your last sentence is an important point that hasn't been discussed enough in this thread.

[bangmai]

So he is open 77 hours per week....ad two hours per day for prep...91 hours.....and the four Thai employees needed for his WP?....

My neighborhood specializes in farang boyfriends putting their GFs in busines, coffee shops, dress shops, crepes...all seem to go downhill from opening. They last about four months. The most recent was charging about 45 for coffee....had about 8 customers per day...40 meters away, longtime established coffee shop with cheap rent...25 thb for coffee....300 customers per day...high volume, low cost seems to be the best model...

great chefs fail all the time.

[sushyoshi]

After reading the comments on this topic I thought I would share some of my experiences.

I recently opened a small business (farang coffee shop and restaurant) which, at the time I thought it would be a great investment idea. This is my first buiness but I do own some great skills in cooking and bakery which I thought it would make my business a success.

After a huge investment on buying a place, furniture (chairs, tables, decoration) and equipment (coffee machine, cutlery...) I told myself that now the money would start to come in.......

I was wrong!

First obstacle was getting the business registered. Since my coffee shop is visibly a farang place, the government officers didn't mind paying us several visits enlightening us of the several permissions we have forgot to acquire with them. So, once in a while the come asking for penalty fees.

Second obstacle: Electricity use. Ok, I got all the shiny high performance equipment in my coffee shop, inverter AC and refrigerators, LED bulbs. I was sure my electricity bill was going to be the least of our problems.

I was wrong!

Electricity averaging from 3,000 to 4,000 thb/ mnth and we arent even using the AC these cold days. Coffee machine and cake cold show display are the main spenders here.

Now for the numbers:

In a good day, I can make 1,000 thb gross. If I take from that the cost of ingredients for food and coffee I get around 600B. From that I need to take out some baht for electricity/gas/water.

Since I already own my place I would estimate that the maximum profit I get per month on this business is less than 5,000/month. This is without high use of AC.

Is it worth? Simple answer: No.

[bangmai]

A true confession, and helpful post. The fact that you make an electric bill in the vicinity of 100 USD per month, sound like it could be breaking you, speaks volumes. You said you bought it? But does your company own the land, or your wife? I think Overstand is hanging in there, with excellent reviews, but his rent has to be high, and he spends a lot on ingredients....time will tell. You may want to check out his business, and maybe share ideas....it may come down to the foot traffic, which comes with high rent. Good luck. You would be making 500-700 thb per hour in the US, with a decent delivery job...seems like it would frequently be better to bust your arse for 4 months in the US, then come here and not even think about working for 8 months.

[sushyoshi]

bangmai:

My wife is the owner of the place. If I could land a job doing something else I would.

Even having an engineering degree and having worked as an engineer in the oilfield business for 4 years is proving not enough to land a job these days. I am not an US citizen so my main obstacle is to get an employer to sponsor a work visa.

If I had a job offer that could pay for my wife and my living expenses I would not look back and would close my business.

[Rancid]

@Sushiyoshi, you might be better off just trying to rent the restaurant as a fully setup property. As a going concern you will have problems selling as not pulling in the money, but assuming your location is reasonable it would be an easy entry for someone to try their luck. The right person might get it moving enough to support themselves and you can just collect some rent.

[totally thaied up]

It depends on what you do.

My partner has now been in business for just over 4 years and she makes enough to keep me and her family happy.

It was a $5,000 investment by me and the rest was just her talent at her job and a lot of hard work. You need to find a niche group of things that many people cannot not do well and capitalize on this. Thais are not afraid to spend money on quality work at a good price. Word of mouth here among Thais is huge and brings in about 70% of her business.

My partner was a 5 star chef and she told me outright she could not make the money we are making now from cooking or owning a farang style coffee shop without a very high turn over and the problems going with it all (from staff to logistics). Her idea is that time is free and people will pay for experience.

Having that niche business and have a skill set that no one else has can make you very comfortable here. Even the shop next door to us is booming due to the fact the girl there has talent (hairdressing) in what she does. She has customers from 8am to 9pm every day and is never free for a moment and making good coin.

We have had our problems too from massive rent increases (like 3 fold) when the people saw we were doing good. We just moved and this time stitched up a contract for 5 years (we plan to buy our own Town House in 5 years time when I have my retirement visa). Our customers followed and in fact, doing better now then before.

My partner went around for almost 12 months looking at others doing the business she wanted to do and did a pretty in-depth accounting of what she was up against in competition. She then had additional overseas training completed so she did her home work and so far it is working well.

I really think, if you start up a food business or coffee shop with out doing a lot of research of your target audience, at best your just going to struggle. Most of the very popular places we eat would earn good money but most have been in business for well over 15 years and just target Thais. I have seen enough farang businesses go ass up over the fact the target audience was wrong, prices were wrong and food in 95% of cases was terrible and I think mostly is was due to the fact they did not understand what they were doing.

I have many friends in the bar industry and during high-season, 150-170,000 per month is earned but from this, at least 60% goes back out in outlay, staff and many other things. When low season comes in, they have to eat into these profits to make ends meet. Anyone at the end of day making 10% by years end after all done and dusted, is doing well. Pretty much says it how it is that business is hard here.

[sushyoshi]

Totally thaied up:

I think a niche business isn't enough. What I have learned so far is that location is the most important aspect of this kind of business.

Also I have to disagree with your opinion about Thais dont mind spending money on quality at good price. Unfortunately, from my own experience, I see that Thais are too afraid to spend money on something different of what they are used to. Also popularity of the place is everything. The more people in the shop, the more they will come after.

Me and my wife built and design a beautiful comfortable place, with good coffee, great unique food, at a decent price. Some days we dont have customers.

[totally thaied up]

Totally thaied up:

I think a niche business isn't enough. What I have learned so far is that location is the most important aspect of this kind of business.

Also I have to disagree with your opinion about Thais dont mind spending money on quality at good price. Unfortunately, from my own experience, I see that Thais are too afraid to spend money on something different of what they are used to. Also popularity of the place is everything. The more people in the shop, the more they will come after.

Me and my wife built and design a beautiful comfortable place, with good coffee, great unique food, at a decent price. Some days we dont have customers.

Thais are funny in so many ways but one thing we have found is that they are faithful return customers that come back (and have been coming back now year in and year out) if you have something they like and they will pay for the service. The last time we were quiet was during the cold snap. No one came out for two days and it is the first time in many years that we did not have customers for a day. After the cold snap, she could not keep up with work for 4 days.

Location is hard to say. I know coffee shops out in the middle of nowhere that have full seating every day from start to finish and really, these shops are a fair drive away from the city. We had one shop in the middle of Loi Kroh in a very good location and we have moved half-way across the city to a relatively unknown area but our customers followed her and now in fact, we have a much larger customer base just from those now in this location.

Yes you are right in a way about popularity of a place; I know one coffee shop that is going well but the coffee is not much better then dishwater but because others do not know better, they just go and follow the crowd. Thais will spend money. Have seen that with my own eyes IF they think are getting value within their own mindset.

Regarding your shop, are you marketing the location and using Facebook to its best ability. We get about 250 local hits a week on our website and a campaign on Facebook for a few months resulted in good things for us. Promotions are a good hit as well. We offer a free cappuccino or bottle water with out services or give out brochures for additional things. Our clients love this.

There is a large nomad movement here as well and you could just start to target them with internet services or just a chilled work space for them. Finding a signature dish here can just change a business over night. A few years ago I saw a pork and rice vendor go through the roof when they made a very tasty crispy pork and too this day, the place is packed with Thais eating. Some places here are making good coin on just one dish.

Like my partner says, even though she is a 5 star trained chef and is a brilliant cook, she would not go into food or coffee here as it is so hit and miss as she tells me you cannot be certain if it is going to work.

I wish you the best.

[MaeJoMTB]

Me and my wife built and design a beautiful comfortable place, with good coffee, great unique food, at a decent price. Some days we dont have customers.

That's because your Coffee shop charges 75bht/cup

Thais (and me) expect to pay 30bht/cup (and another 30bht for the large choc au pain fresh out of their oven).

Around 100 customers a day, and nearly all buy food as well.

And this coffee shop @45bht/cup, can your place match up to this setting?

Despite the perfect riverside setting, almost no customers because they want .......... 45bht/cup.

Edited February 11, 2016 by MaeJoMTB

[MESmith]

Me and my wife built and design a beautiful comfortable place, with good coffee, great unique food, at a decent price. Some days we dont have customers.

That's because your Coffee shop charges 75bht/cup when Thais (and me) expect to pay 30-35bht/cup.

+1

[TheSiemReaper]

The Thais I know don't seem too fussed paying more than 30 Baht for a cup of coffee. When I go to Starbucks or to the artisan coffee shop round the corner - I am often the only farang in the place, all the other customers (who have drinks in their hands) are Thai.

When I visit the more expensive bars in Nimman - it's Thais who are sat there with 300 Baht beers while the farang are pretty much invisible and so on...

Not every Thai person lives on a tiny budget and not every Thai is afraid of trying something new. The key is to learn to reach out to those Thais and be in the right space (location is vital) to do so.

[MaeJoMTB]

When I visit the more expensive bars in Nimman - it's Thais who are sat there with 300 Baht beers while the farang are pretty much invisible and so on...

Coffee shops are open during the day,

When Thais who can afford 300bht beers are working.

Do you see the error in your business plan?

Now the wealthy Bangkok Thais visiting CM on holiday, who have time to drink coffee in the day, would go somewhere like Sala Cafe in Mae Rim.

Spectacular mountain views, manicured classic Thai gardens, coffee 65bht, food 65bht.

I pay 65bht for a coffee there, and buy lunch, but not every day.

Edited February 11, 2016 by MaeJoMTB

[totally thaied up]

Me and my wife built and design a beautiful comfortable place, with good coffee, great unique food, at a decent price. Some days we dont have customers.

That's because your Coffee shop charges 75bht/cup

Thais (and me) expect to pay 30bht/cup (and another 30bht for the large choc au pain fresh out of their oven).

12695219_10153898849458749_1107384379_o.jpg

Around 100 customers a day, and nearly all buy food as well.

And this coffee shop @45bht/cup, can your place match up to this setting?

coffee.jpg

Despite the perfect riverside setting, almost no customers because they want .......... 45bht/cup.

coffee shop.JPG

No, 100 customers a day for the food side (not the Bakery side) is about 50 too many a day and generally only peaks at breakfast time. I live only about 300 meters away from this place and ride past it every day at least 10 times and maybe a time 7-8 years ago, it was doing much better then today. The Bakery seems to be a bit busier then the shop. During peak of high season, it gets a rush of more farangs. The 30 baht coffee I cannot drink and most my friends whom have been there agree it is not good.

50 baht seems to be the sweet spot for coffee and you can go just around the corner to Akhma for that. You get what you pay for at 30 baht and so far to my taste, it has not been much at all and I mostly avoid cheap places like the plague. Some farang might think cheap is best when it comes to coffee but I certainly don't. If I don't see fresh beans and at least a name branded coffee machine or steam press, I just walk-a-way.

[MaeJoMTB]

^^

I was sitting there for 45 minutes around mid-day today.

2 of us expats, 2 Thai ladies from the hairdressers across the way, 4 foreigners (looked like backpackers).

All of us had food and drinks ....... so at least 8x in that 45 minute time.

I had the last choc-au-pain too, how many trays of them do they make 3? 4?

Can't stand Akha Ama myself, used to be 25bht, then after a report in a BK magazine doubled to 50bht. I didn't return.

Didn't like the rats running around the tables either, there were plenty of them.

But it's great we all like different places and different tastes in our coffee.

Otherwise we would all be in the same place and it would be packed out.

The problem being the post I was replying to, charges 75bht for coffee, and has nothing that any of us want.

It's a marketing and pricing disaster.

Which is pretty much the same for any foreigner with no previous experience trying to start a business in Thailand.

Not helped by a possibly skimming Thai 'partner', which is so often the case, or not, also with no business experience.

Edited February 11, 2016 by MaeJoMTB

[bangmai]

After reading this, I got motivated to visit my local coffee shop. Prices start at 25 thb per cup, cream is 5 thb. I could barely find a seat. 3+ employees, and about 50 customers....about 80% CMU students. Coffee is made to order, in a machine, and is very good, imo. They are on a main road, with heavy foot traffic, and it appears that their biggest concern would be the great condo building reaper, as that land is worth 200K per wah, but it is another example of a Thai business having a sweetheart deal with rent, that won't last forever. I think the concept of catering to the "Digital Nomads" is mostly based on urban myth, as most of them have visa trouble, and will be a lot more short lived than even the students. The older ones will sit there for hours and you are likely losing money off them. Providing a work-space to these people? You would make more picking up aluminum cans, and have fewer toilets to clean. Those are the places that are failing. Some of these places are charging airport prices, and I wouldn't pay 80 thb at the airport, either. Krispy Kream Doughnut Shops resorted to 25 cents, 8thb, 16 oz. cups of their famous coffee in its Phoenix stores a few years ago, during their hot/low season. Anything to get people in. Even if they had free labor and electric, they were still losing money on that.....eventually, many of the franchises shut down. A world away, but a metro area 4 times bigger than CM. In another month, tourist numbers will be cut in half, high temps will be up 10c...and you're going to attempt to sell high end coffee to the stragglers? People, who only drink coffee aren't even really welcome at Diners and bars, even though the free refills ended long ago....and you are trying to build a business around them?

Edited February 11, 2016 by bangmai

[totally thaied up]

Mae Jo, It use to be good several years ago but the food has since declined and the coffee is much like dish water. Shame they do not lift the levels an give that place a make-over as it has potential. I have lived here now close on 10 years in this area and once this place use to be much busier then today.

I do not go to Akhma anymore; has been ruined by Nomads and it is a shame. I go to have coffee and the experience of having coffee, not to look a farangs coding on laptops.

[MaeJoMTB]

^^

I used to live at Emporium 5 years back, I agree the whole area has gone downhill since then.

Santhitham Plaza used to rock at nights, then the police started regular raids.

And the current economic climate has removed much of the students spending power.

Sad for the locals, the CM economy ain't what it used to be.