The Internet Cafe was a godsend for those who needed work done online while on transit. It had only been around two years since the broadband technology was made available to the world.
The Philippines was still catching up with digital technology. Not many had smartphones yet because the early prototypes were expensive and faulty. The Blackberry was the status symbol for those who could afford. Today I could get things done from my smart phone. All I need is a place with Wi-Fi service.
By 2014, mobile technology officially displaced the desktop as the primary source of online traffic. Laptops, tablets and smart phones are evolving at a high rate. They are designed to manage more work and perform a wider variety of tasks than ever before.
Then you have the growing number of apps flooding the market. From gaming to fitness to hailing a cab, you can find an app for anything you want to be done.
With all the advances in digital technology and the Internet, one would be inclined to think that an Internet Cafe business in the Philippines would go the way of the dinosaurs.
Well, think again.
In the same way that technology evolves to find ways to make life and work easier and more convenient, the Filipino entrepreneur will always find the means to make a lucrative business model even better and offer more value.
Introducing the Pisonet.
Have you heard of the Pisonet? You’re probably reading this article because:
- You’ve heard of the Pisonet and wanted to start one out.
- You haven’t heard of the Pisonet and would like to learn more from your friends at tycoon.ph.
- You haven’t heard of the Pisonet, but the term itself is quite intriguing.
If you haven’t heard of the Pisonet, you’re not alone. Most people I’ve talked to have no clue what it is all about. But having the word “Piso” as the first syllable already connotes a value-based enterprise. And you are indeed correct!
What is the Pisonet?
For some reason, my first encounter with new business ideas is always in Makati. This time I was in Makati Avenue when I received a call from an associate that I needed to scan and send a document to a potential client.
I went inside the first Internet Cafe I came across. It looked like the typical Internet shop yet strangely different. The computers resembled more like an arcade game or the slot machines in a casino.
Maybe the best way to describe how the computers looked would be an ATM with a provision for a keyboard. You can’t see the PC because it is housed in a wooden enclosure with a built-in slot.
According to the store manager, to activate the machine, you have to drop coins.
How much do these casino-like, Internet shops charge? One peso for every four minutes!
The Pisonet is the newest godsend to those who need access to a PC while on transit.
You can see more Pisonet-type Internet Cafe business in the Philippines. I’ve seen a number of them set up inside a subdivision or neighborhood. Many entrepreneurs convert the front part of their homes into a Pisonet.
But what is the difference between a Pisonet and an Internet Cafe?
Difference Between a Pisonet and an Internet Cafe
Other than their appearance, the biggest difference between a Pisonet and the traditional Internet Cafe is their price.
The Pisonet is a more customer and budget-friendly version of the Internet Cafe. It is a welcome change for office workers who only need a few minutes to accomplish tasks and students who have little means of paying for a full hour’s use of the Internet.
Before the Pisonet became popular, you would have to pay the Internet Cafe the minimum charge per hour even if you only used their facilities for 10 minutes. An Internet Cafe would charge around 30 to 60 Pesos per hour.
The Pisonet started gaining traction in 2010. You may have noticed that a few years later, some Internet Cafe outlets began lowering their minimum charge to 30 Pesos per half hour.
Still, you get more value by patronizing a Pisonet. An hour’s use of a Pisonet’s computer will only cost you 15 Pesos!
So do you want to start a Pisonet or an Internet Cafe business in the Philippines? If you do, read on! We have some valuable information that you need to know!
Preparing a Pisonet or Internet Cafe Business Plan
The first step in your pursuit of an idea is to prepare a Business Plan. Everything sounds good in theory until you subject the idea to different conditions and scenarios.
A Business Plan is not a crystal ball; it will not tell you if your venture will succeed 100%. But if becomes an important reference for making crucial business decisions. It will give you clues on whether you should pursue the idea or not.
Related: Top 10 Home-Based Business Ideas and Opportunities for 2017
If you don’t know how to make a Business Plan, outsource it to someone who does. But generally, the information you need to know are as follows:
- Does the Pisonet venture have a ready market for its services?
- How much capital do I need to put up a Pisonet?
- What is my break-even point?
- How many sales should I target every day?
- What are my risks?
A Business Plan consists of 3 types of studies:
- Market Study
- Financial Study
- Marketing Study
In this article, we will only focus on the Market and Financial study. Only when you find the Pisonet venture feasible or viable should you perform a marketing study. You should find out first if there are end users for your service and if so if you could afford to put one up.
Is There a Market for a Pisonet or Internet Cafe Business in the Philippines?
Critics of the Pisonet or Internet Cafe business will point out to the increasing use of mobile devices as the main reason why this venture will not make money.
Tell that to the average Filipino gamer.
You’ll be hard-pressed to find a Filipino without a smart phone or a tablet. Mobile devices are mass-produced, and you can buy them anywhere. Flooding the market with different types and brands of mobile devices brings their prices down. 100% sure, the gamers you see in these Pisonet shops own mobile devices.
But they still prefer the Pisonet because you can’t beat the experience of playing from a PC that is built for gaming. It is also an activity they can share with their friends.
You also have to consider the statistical fact that 95% of Internet users in the Philippines prefer pre-paid services to post-paid subscriptions. 80% avail of the lowest-tier Internet service plans or from 1 to 3 Mbps.
If you want to get work done faster or assure a drop free Skype call with a client, it would be a good idea to head off to the nearby Pisonet. Internet service providers or ISP’s offer attractive packages to entrepreneurs that will assure their customers of high-speed surfing and stable video streaming experience.
This is the reason why you will often see home-based workers or telecommuters conduct their business at Pisonets. The Philippines has one of the most expensive yet worse Internet services in the world. The Pisonet is an affordable way to run your business by taking advantage of their higher bandwidth, faster speeds and back up services.
How Much Will It Cost to Start a Pisonet Business?
Despite losing its lead to mobile devices and seeing its global sales take a plunge since 2011, the price of the personal desktop or PC continues to range on the high side.
An entry-level PC for gaming would cost 15,000 Pesos. It should have the following features:
- 5” Monitor
- AMD A4 6300 up to 3.9GHz Turbo
- 500GB/ 6GB Hard Drive
- 4GB DDR3 1600MHz Memory
- Built-in onboard HD 8370D 760MHz Graphics
- Front case mounted 12cm LED lighted fan
- Rear case mounted 8cm Black fan
- 650W power supply
- Multimedia headset with built-in microphone
- Creative SBS A60 multimedia 2.0 speakers
- A4 Tech keyboard
- A4 Tech optical mouse
- Free software installed
This type of PC can also be used to conduct office work, but you have to buy original programs for MS Windows. Some stores will include a licensed copy for 6,000 Pesos. Of course, you will also need to install original anti-virus software
All told, be prepared to spend approximately 25,000 Pesos per PC. Of course, each PC should have its own cabinet with slot and chair. Thus your total cost per PC would be:
|Cabinet with slot||3,500|
Other pieces of hardware you would need are:
- Inkjet Printer/Copier/Scanner – 7,000 Pesos
- Fax Machine – 6,000
If your Business Plan presents the Pisonet as a viable venture, you should still start out small. This way it will be easier to manage and uncover problems in your business model.
A Pisonet with 5 computers will cost you:
|Desktop x 5 units||125,000|
|Cabinet with Slot x 5 units||17,500|
|Chair x 5 pieces||7,500|
|Total Capital Expenses:||163,000|
If you plan to set up your Pisonet in your home, you will have to spend for leasehold improvements. For minor improvements, a good benchmark would be 10,000 Pesos for a square meter. You should always maximize the available area for revenue-generating activities.
Assuming 1.6 square meters per workstation, for five desktops, you would need approximately 10 square meters of space. Overall, based on a 70% allocation for revenue-generating activities, your total floor area for the Pisonet should be 15 to 20 square meters.
At 10,000 Pesos per square meter, you should budget 150,000 to 200,000 for leasehold improvements. Leasehold improvement should also factor in expansion plans. The setup should allow you to increase the number of PC stations if the business is booming.
Remember, you have to make sure your Pisonet is air-conditioned. A 20 square meter area should not require more than a 1.5 HP air condition. If your budget allows, go for an inverter type unit because it will save you in power bills. Remember, with a Pisonet; the air-conditioner will be running full-time during its period of operation.
A 1.5 split type air-conditioner will cost you around 20,000 to 25,000 excluding the cost of installation.
Related: The Real Cost of Starting a Small Business in the Philippines
If the cost of capitalizing a Pisonet is higher than you expected, do not be discouraged! In the first place, these figures are only estimates. If you have experience in construction or know someone who does, you can drastically lower leasehold improvements.
What are the Monthly Costs of Running a Pisonet?
Setting up your Pisonet from home will entail improvement costs, but in the long run, it will save you from paying rent. Of course, if you want an accurate determination of your profitability, you should incorporate an estimated figure for rent in your income statement.
Like any other business, you will incur monthly expenses when running a Pisonet. Here is an estimate summary of expenses for a Pisonet business with five computers:
The cost of Internet bandwidth in the Philippines has dropped considerably in the last five years. The figure indicated here covers 10Mbps plus the cost of a landline subscription.
How Can I Fund My Pisonet?
Funding a business can be a make or break situation. Even if your financial study shows it is a feasible idea, if there’s no capital, there is no business.
When it comes to raising capital, you have to be creative and explore a variety of options:
- Bootstrapping – This is probably the riskiest approach because you are funding your business idea with your life savings. If this were your decision, it would be best to have a full-time job to have a source of income. You will need an influx of money to support your business and your day-to-day expenses.
- Get Partners – If you have people you believe you can trust to have onboard as partners, offer them 49% equity at the most so you will still have majority control. Contributions can be in the form of equipment (PCs, workstations) or straight cash. Make sure these are people you can work with. Oftentimes, relationships get compromised because of business.
- Get Investors – Unlike partners; investors do not have to be involved in the day-to-day operations of the Pisonet unless specified in the agreement.
- Business Loan – Some banks offer small business loans to entrepreneurs. Just keep in mind, banks offer high lending rates, have strict qualifying guidelines and issue tight contracts.
- Negotiate Terms – Computers are a depreciating asset and subject to brisk wear and tear. In fact, that is one of your biggest problems as a Pisonet operator.
Kids can be unforgiving when using the PC for gaming. Instead of buying, negotiate for lease terms with PC suppliers.
There are also suppliers of PC’s that have already been built for use in a Pisonet. Some suppliers are open to lease terms. This will allow you to pay out from sales and lower your initial cash outlay.
What’s more, you can sell the units back to the supplier and get new ones at the end of the term.
Before making a decision on leasing or buying Pisonet-ready PCs from a vendor, review the specs of each unit and see if these are capable of supporting operations.
If you are not sure, ask a friend who is knowledgeable about computer hardware to review the specs, inspect and test the units being offered.
What Should Be Your Target Sales?
Given the following assumptions:
- Charge – 1 Peso per 4 minutes Internet time
- Number of PCs – 5
- Operating Hours – 8
- Work Days – 30
The maximum sale a PC can generate is 120 Pesos per day. If all five computers are working full capacity, you can make 600 Pesos per day or 18,000 per month gross sales.
At 18,000 Pesos per month, you will be able to cover your monthly costs. But it is not realistic to expect your Pisonet to be working full capacity every day. You will have peak hours and slack hours just like any other business.
How Can You Increase Sales?
10Mbps can still accommodate five more PCs. So by increasing the number of PCs, you improve your chances of earning more money without significantly adding to your monthly expenses.
But you have to keep track of your financials to make sure adding more PCs is warranted. Otherwise, you’ll be stuck with non-performing assets.
You can also sell other items in your Pisonet:
- Pre-paid cards
- Cell Phone load
- School Supplies
- Trading Cards
- Comic Books
Or offer services:
- Graphic Design for marketing collaterals and calling cards
- Computer instruction
- Photo Imaging or Retouching
The idea is to find ways to maximize the revenue-generating potential of your Pisonet. Give people more reasons to visit your Pisonet than just Internet surfing and gaming.
Related: 10 Biggest Digital Marketing Mistakes Made by Entrepreneurs
A Pisonet remains an innovative business idea that brings more value to the traditional Internet Cafe model. But given its low-cost approach, the challenge facing the entrepreneur is to maximize sales volume.
You should start out small until your learning curve begins to slope and you’ve identified the pain points of the business. It may take awhile to generate traction, but expansion should be your ultimate goal.
When your business starts to improve its profit position, give more to your customers by upgrading the computers and enhancing their experience. If you are in good standing with your supplier, you can easily get generous concessions for better computers. In a tightly-competitive industry, customer retention strategies should be held in the same regard as new customer creation.