Why Filipinos do not become business owners or entrepreneurs

For a majority of Filipinos, entrepreneurship does not seem to be a typical, expected path. This is not surprising, considering that in school, students are primarily taught to become employees after graduation. Students train for years to become staff workers, reporting to a supervisor, and just waiting to receive their wages or salaries every month.

Why not train students to become bosses of their own businesses instead?

Schools not training students to become entrepreneurs

Unfortunately, in the Philippines, rarely does a school equip students with necessary skills or offer adequate opportunities for them to be able to set up and run their own business.

Several academic institutions offer a degree in BS Entrepreneurship, but a lot of BS Entrep graduates still end up as employees. Nothing wrong with becoming employed, but why spend four or five years learning entrepreneurship if you won’t choose to put your course into practice?

This trend, however, does not appear limited to the Philippines alone. Even in the United Kingdom (UK), a very small 0.6% of UK graduates start a business within 6 months after graduation, according to a 2016 survey by the Higher Education Statistics Agency (HESA).

Why is this the case? Why are very few graduates making the choice to become entrepreneurs?

6 reasons why people don’t start a business

There are a lot of factors contributing to one’s decision to not start a business. It could be about the money or funding, personal skills and experiences, regulatory environment, or the fear that entrepreneurship is a daunting and volatile path and they could fail.

A 2019 survey by the Global Entrepreneurship Network (GEN) shows that the following six (6) reasons are cited as primary barriers to entrepreneurship by their respondents worldwide:

1. Insufficient access to capital
2. Inadequate skills and training
3. Weak support systems
4. Regulatory and political issues
5. Difficulty accessing markets
6. Culture and personal mindset

These reasons likely resonate among Filipinos too, which explains why very few Filipinos decide to take the plunge with regard to setting up their own businesses.

Insufficient access to capital

Twenty-nine percent (29%) of respondents cite “insufficient access to capital” as a major constraint to setting up a business. This is a valid point. It’s definitely not easy to secure money from friends, banks, or even parents to fund your business.

But alternative funding sources do exist. There are now various crowdfunding websites where people can look for supporters and potential investors simply by posting a business pitch. Angel investors and venture capitalists can also be tapped through your school network, local startup organizations, or even TV competitions.

Inadequate skills and training

Another main cause for the low rates of enterprise development is the lack of managerial skills and expertise, according to one-fifth of GEN’s survey respondents.

Business and entrepreneurial schools can help address this, but unfortunately a majority still offer curricula that is outdated or primarily theory- not practice-based. Skills, though, can be learned along the way, although it could prove to be costly for some if the business turns out to be a failure. Overall, though, experience trumps brilliance and those who succeed are the ones who take the leap.

Weak support systems

Fifteen percent (15%) of respondents also point to “weak supports systems” as a major constraint on entrepreneurship. Specifically, weak support systems refer to:

• lack of transparent coordination and cooperation at different stages of entrepreneur support resulting in a multitude of competing activities and siloed, overlapping projects;
• confusion and noise in finding the right information to help entrepreneurs, for example, what services in the business community are available for whom, what sector they serve, and for which types of startups, etc.; and
• lack of corporate engagement and support for new businesses.

Regulatory and political issues

Fourteen percent (14%) of GEN’s survey respondents also cite regulatory and political issues as hindrance to business setup and registration. This includes bureaucratic red tape, heavy tax compliance burdens, confusing and complicated regulatory requirements, and weaknesses in the overall business environment.

Fortunately, in the Philippines, the government has started streamlining business registration and issuance of permits. Thanks to the launch of the National Business One-Stop Shop (NBOSS) program in 2020, businesses can now process their licenses and registration and enlist employees to government social service agencies (such as SSS, Philhealth, PAG-IBIG, etc.) using a one-stop shop service.

We are yet to see, though, how the NBOSS will be rolled out since the service was just launched earlier this year prior to the COVID-19 pandemic.

Difficulty accessing markets

Access to markets, whether local or foreign, is certainly going to be tough for an up-and-coming business. This is why this reason was cited by 10% of respondents as one major obstacle to establishing a business.

Joining trade shows, acquiring distribution channels, and promoting products to domestic and foreign customers would cost a lot of money and require substantial investment or financial support.

Culture and personal mindset

Finally, eight percent (8%) of respondents agree that the country’s cultural system and the person’s individual mindset contribute to the decision to not start a business. In Belgium, a respondent shared, employees who leave their employment to start a business lose a lot of benefits from the social insurance system. In Ireland, it was also disclosed, that there is no social safety net or support for business owners whose business closed.

Access to capital, inadequate skills and training, weak support systems, regulatory issues, access to markets, and culture and personal mindset — these are the top 6 reasons cited by budding entrepreneurs worldwide as to why they think people in their respective countries are not motivated to start a business.

Freedom as motivator to become an entrepreneur

In the Philippines too, citizens are not exactly wired to choose entrepreneurship over employment. The security of a regular monthly salary, fear of failure, and taxing challenge of building an enterprise from scratch convince the country’s majority to forever live with an “employee mindset”.

And yet if you ask a student (or perhaps even an employed adult) if they’d like to be their own boss, the answer is almost always a resounding “Yes!”.

Most adults would say that, given a choice, they prefer to work for themselves and not for somebody else. A handful would say that they are motivated to build a business as a means to gain substantial personal wealth that could benefit themselves and their family.

The concept of “freedom” is also a solid motivator.

A lot of people want to have their own business because they desire freedom. It’s the allure of freedom to perform tasks and jobs at their own time and to enjoy life as they pursue a business that they are passionate about that encourages them to finally take the brave, first step to become an entrepreneur.

So why not make that first step in your entrepreneurship journey today?

The story of Sahar Hashemi, founder of Coffee Republic

Get inspiration from this TEDx Talks video of Sahar Hashemi, who studied law and worked as a lawyer for years before finding her passion in the coffee business.

Together with her brother, she started a coffee shop in the UK, a land of tea-drinkers, and grew the business to become a profitable empire. After various trials and adversities — including near-bankruptcy of the company and being ousted by the Board of Directors in her own company — the business she established, Coffee Republic, persisted and now has more than 300 outlets worldwide.

In this video, Sahar Hashemi talks about:

• why she initially never imagined herself to become an entrepreneur;
• the story of how she and her brother founded Coffee Republic;
• her own five (5) steps to entrepreneurship; and
• why entrepreneurship has been an “amazing journey” for her.

Inspired yet? As Sahar Hashemi explained, entrepreneurship is going to be an “absolutely incredible journey where you find things about yourself you never knew you had.”

Of course, this journey is not going to be easy. It will take a lot of skill, experience, trials, and tribulations before you can find success. It will certainly not happen overnight.

If you’re considering to take that first step in entrepreneurship, you might wonder: What does it really take to be an entrepreneur?

For an overview of what entrepreneurship is and what’s required of those who choose this path, watch this video from the “Crash Course: Entrepreneurship” YouTube channel. This first of several informative videos in the series discusses:

• who really is an entrepreneur;
• background and history of some popular businesses today; and
• reasons and motivations why some people desire to start their own business.

Robert Kiyosaki’s 4 ways to make money

Entrepreneurship is actually just one of four (4) primary ways to make money, according to personal finance guru Robert Kiyosaki.

Kiyosaki himself advocates for the “passive” ways of making money, that is, following either the Business Owner quadrant or the Investor quadrant, as explained in his Cashflow Quadrant.

To achieve financial freedom, Kiyosaki tells people to strive to belong to these two quadrants (vs. Employee and Self-Employed quadrants) because becoming a Business Owner or Investor can enable a person to achieve passive income, that is, income will no longer be directly proportional to the time and effort spent.

If you desire to be rich and you want to earn money even if you’re no longer spending any hour of work, then becoming an Entrepreneur (Business Owner) or Investor are your best options, says Kiyosaki. Read about these four (4) ways of making money in the article Cashflow Quadrants Explained.

Ultimately, it all boils down to you and your choices. It doesn’t matter whether you choose to become an employee or self-employed or investor or business owner. You are entitled to live the life you want.

Just take note that your choices today will shape who you will be in the future. Or in the words of Craig Groeschel: “The decisions you make today will determine the stories you tell tomorrow.”

What stories will you be sharing in the future?