Tag Archives: basic business

Business 101: Meet Yaya Ne

Who is Yaya Ne?

Yaya and me
Yaya and I (1966)

Yaya Ne (short for Nelly) was a woman who at the age of 18, came to work for our family as a stay in Yaya, before my eldest brother was born in the early 1960’s.  She still lives with our family to this day.

Any Filipino would need no further explanation about yayas, but for the benefit of non-Filipinos, let me explain what a yaya is. A Yaya is the rough equivalent of a nanny.  They are hired to watch and care for the children. Yayas are indispensable when both parents are working and there is no other adult family member to provide care for the children while parents are at work. Both my parents worked full-time, hence we had a yaya, Yaya Ne, or simply Yaya.  Now why would any of this matter if I was going to talk about business basics, anyway? Well because Yaya is a successful business owner.

A Short Bio

Yaya was born in Tinatayan, Capiz as Nelly Hijastro in December 1942, about a year into the Philippine war with Japan.  She was the youngest of 7 children, 2 boys and 5 girls. She graduated from the 6th grade with honors,  after which she had to drop out of school for lack of funds. At a very early age her left hand was injured when she accidentally burned it in a boiling pot of water. Home remedy left the hand permanently disfigured.

Yaya helped out with the farm work which was her family’s main source of livelihood. She recalls memories of her father, after working the rice fields, would take off to peddle goods in the neighboring towns, determined to make ends meet.  Then her father died when she was seven. Life was hard, she tells me, sometimes it got very hard. She said there were times after a typhoon, there would be so little to eat and no one could help them out because everyone would all be in the same situation.  She wanted to go to school, but her mother, a widow left with 7 kids could hardly feed her brood let alone put 7 children to school. School was a luxury that Yaya would have to give up.   And the only hope she knew of ever escaping this kind of poverty was to find a job in Manila.  She longed for a better life nothing more.  Yaya was girl with a very simple dream.

In 1961, her friend from the same town wrote her to say that an employer was looking for a yaya. She jumped at the chance. She borrowed money for boat-fare and came to Manila with her elder sister. At 17 years old, she started working with her first employer where she stayed for only a few months. Then she came to work with our family. She can’t help but weep as she recalls her feelings when she finally left her home for good, to claim a better life. Although this is not what most people would aspire for these days, it was all she could ever hope for.

Her life took a rapid turn for the better.  She was trained to care for a newly born infant by a midwife.  She took this task to heart.  And for the first time she was guaranteed adequate food and a steady source of income. Not having to worry about food anymore, she spent her money on her own clothes, something she never had before. Then she started collecting household wares and used clothing to send home. She seemed to have made it her mission to remove her family from the state of poverty she grew up with. She became a bit of a folk hero back home, because she was always sending relatives stuff and lending them money to get by. She also religiously put aside money as savings which she never touched. Later this little fortune she set aside would allow her to buy property, build her house and start her business.

All throughout her life after she started working for us, she never left our family except for short vacations. She was, in fact, considered family. And in a sweet assuming way she treated us as her children; scolding, disciplining, guiding, teaching, feeding, bathing, soothing, caring and loving with a dedication of a parent. With both our parents holding full-time jobs, Yaya filled in for the much-needed and appreciated attention.  She never married.  She never seemed to aspire for marriage. It seems that she had found her calling in her work, which she did with extreme diligence and a flawless work ethic.

Why Yaya started a business

Probably like anyone else who thinks about starting a business, Yaya thought a little more money could be a really good thing. The owner of the property her family had lived on  offered to sell her the property on installment. She had been paying a small sum diligently for a while by then and the added income could allow her to pay it up faster.  Or it could have been just a stroke of insight. She had saved up some money and wanted to do something with it. At this point, if you ask her she won’t really give you any reason other than that she just wanted to try it out. And it turns out, it really was a good idea.

How Yaya Started her Business

A tiny customer
A tiny customer

Yaya asked my parents if she could start selling little things, like candy, biscuits and cigarettes.  She said she could finish her work, which was at that time to cook and clean the house.  My parents agreed to have her try it out.  From that seed business, it grew to a whole full-blown store within about a year. My Mom was not too crazy about the expansion, but the rest of the family was in consensus that we should allow it anyway with some conditions of course. She converted the back part of our house into a hole-in-the-wall store where she sells practically everything her customers might need (except for liquor which my Mom is adamant against).

The Basic Lesson in Business

  1. Find a business you can run.  Yaya knew everything she needed to know to run a backyard store. A store is a fairly simple business if you run it the simple way she did. She needed a place, she had one, the back area of our house.  She needed her stocks which can be bought at any grocery.  She had the capital. Yaya was pretty sure she had the customers.  And finally, she made the time to get this all up and running. She started small and grew it incrementally.
  2. Build your capital to start a business.  In Yaya’s case, she was a compulsive saver. So over time she had accumulated more than enough capital to start a micro business. Your income, however small, is a perfect wealth (or capital) building tool. If you follow a disciplined habit of saving a portion of any income you receive from any source (not less than 10%), you will be able to build your wealth. The critical thing here is, it has to be a habit. Put away your savings first, before you spend for anything else. Then do not use your savings for anything other than investments.
  3. Use your money to grow your money.  Although, there are countless ways to grow your money through various investment vehicles, Yaya followed a very simple formula. Buy goods at a lower price and sell them at a higher price.  This is the principle at the heart of any merchandising business. It doesn’t matter at what price you buy your merchandise, if you can sell it at a price higher than the price you bought it, you will make money. Think about it, candies bought in large packs would cost about P0.25 to P0.50 each. If she can sell them for P1 each individually, you will get back 2 to 3 times what you spent.  For every P1 you spend, you earn back P2 to P4 or 100%-300% profit. It doesn’t seem like much at that scale, but if project that peso to say, P1,000, it means you can get back P2,000 to P4,000 from the sale of candies alone. That’s up to P3,000 additional money you didn’t have before. You can scale this amount up or down as you please.  It is that simple.
  4. Harness the power of compounding. Let’s use a different product this time.  You can get a dealers price for cola at P4.33 per bottle (or P104 for a case of 24) and you can sell it at P8 each (or P192 per case).  That is an 85% margin.  These are actual current figures. So if you buy 10 cases of cola worth P1,040 and sell all 240 bottles at P8 each, you would get back a total of P1,920 (plus P48 not yet spent). If you reinvest that entire amount on the same item and sell it at  the P8 selling price, you can now buy 18 cases at P1,872 and sell them again still at P8 each. Then you will now have P3,504 (P3,456+P48).  As you keep repeating the cycle your money grows very rapidly. Please see the table below.
Cycle Quantity  Cost  Revenue  Cash Margin
Case Bottles  Cost/ Case  Cost/ Bottle  Total Cost  Rev/ Case  Rev/ Bottle  Total Revenues
1st 10 240  104.00    4.33     1,040.00   192.00    8.00     1,920.00 85%
2nd 18 432  104.00    4.33     1,872.00   192.00    8.00     3,456.00   48.00 85%
3rd 33 792  104.00    4.33     3,432.00   192.00    8.00     6,384.00   24.00 86%
4th 61 1,464  104.00    4.33     6,344.00   192.00    8.00   11,736.00   40.00 85%
5th 112 2,688  104.00    4.33   11,648.00   192.00    8.00   21,544.00   88.00 85%
6th 207 4,968  104.00    4.33   21,528.00   192.00    8.00   39,832.00   16.00 85%
7th 383 9,192  104.00    4.33   39,832.00   192.00    8.00   73,552.00         – 85%

As you can see by the 7th cycle, what started as P1,040 is now worth P73,552.00.  That is a total net profit of P72,512.  And theoretically, you could continue to increase this number indefinitely, for as long as you can continue to sell the product within its lifespan and you have enough space to store your stock.  Your money can keep growing at this rate. This is a very simplified model of the business.  It was presented in this sanitized manner only to illustrate the earning potential of the system.  You will need to tweak the system a bit to accommodate your special set of circumstances.

The calculations  presented will be true only under the following assumptions

Just to clarify the conditions that need to be present for you to realize the same profits, I have listed down the assumptions necessary to achieve the indicated earnings, as well as the possible real-life situations that might occur to invalidate the assumptions and how these situations might affect the level of earnings.

  1. One cycle starts when you buy your first batch of products and ends when you sell all the products from that batch. In a real world scenario though, you would buy your 2nd batch of products before your 1st batch runs out. So your actual  2nd batch might not be as large as the figure in the table and the earnings from your business will not look so neat.
  2. You only sell one variant of a single product. The example shows a single product to make the illustration easier to understand. But it rarely ever happens that a merchandising business will only carry one product in a single variant. Often times a business will carry numerous products in a several variants.  Margins may differ from product to product and from variant to variant depending on several factors like competitor pricing, customer demand, other value added services like credit and delivery which might drive up your cost. If you carry other products and/ or variants your average margin across all products may be higher or lower than 85%.
  3. You continue to buy the product at the same price all throughout the 7 cycles.  Most dealers will give you a better price as you increase the size of your order. So if your cost per product goes down, provided you sell at the same price, your revenue will be bigger that those shown. On the other hand, suppliers may also increase their prices for one reason or another. When they do, if you can pass on the increase to your customers, you can continue to earn at the same profits but your costs will have to be adjusted higher and your capital might afford a smaller inventory.
  4. You continue to sell at the same price all throughout the 7 cycles. As your income/ inventory grows, you might decide to drop your price, to sell your inventory faster. If you do decide to drop your price per item your revenue will be smaller per cycle. But if you can complete a cycle faster, you can realize your profits sooner and your actual earning might be larger over a given period of time.
  5. You plow back all your profits into the business.  The quickest way to expand your business/ money is to keep plowing back all your earnings into your business until you reach your target level of income. This is not realistic for some people who will need to draw some money from the business. If you withdraw a portion of your profits, your business will grow slower, but it will still grow. If you withdraw all your profits your income will stay fixed at the same level.  If you start drawing from your capital you business will shrink or disappear altogether.
  6. You will be providing your own labor. If you will be the one to personally run the business your profits will be the compensation for your labor. If you have to hire someone to handle the work of ordering, selling and any other work you might want to pass on, you will need to add an expense item which is the cost of hiring this person. This will mean less revenues and likewise a slower growth especially at the early stages of the business. It is not advisable to hire anyone until you reach a certain level of inventory or revenue. When revenues/ inventories are high enough, it can easily sustain the cost of having employees.  Take note, labor cost will eat into your profits so they need to be factored in when computing for margins.
  7. Pilferage, breakage and spoilage rate is 0%.  This is a fact of business that will always occur.  You will need to protect your stocks from pilfering (theft in unnoticeable amounts), breaking and spoiling. When your stock (or cash) is stolen, lost, broken or spoiled, you can no longer earn income from them, and that will mean lost inventory and profit. This factor will lower your income, so you will need to keep it at the barest minimum.
  8. This is simple merchandising, buy and sell products as is and all in cash transactions. Over time you might want to venture into adding value to your service like selling the drinks cold, extending credit to cash strapped customers or delivering but these will all have an added cost or risk which will drive your cost higher. You will want to consider adding them to your service at some point because it does attract additional customers and again you will have to factor in their costs when computing for your margins.  But anything that increases sales is generally a good thing.

To Sum it all Up

Yaya and the Next Generation
Yaya and the Next Generation

Yaya is still living with us to this day and she is still running her store with the help of her niece who also currently lives in our home.  She owns an 800 sq m lot with a concrete 2-story house which she had built many years ago in her home town.  Her nephew is taking care of that property.  She helped several of her nieces and nephews thru school. One of them was her full scholar thru a 5-year engineering course.  Yaya is a philanthropist at heart, who could never turn down someone in need.

She is semi-retired as our Yaya, but she still cooks and does some light cleaning on her own insistence.  On a really good day after watching an episode of the local Junior Master Chef TV show, she would surprise us with one of her special concoctions, a real treat.  She also has her regular staples that no restaurant cooking can ever match, like her Sinigang and her fried chicken, a favorite of guests who are familiar with her cooking.  She’ll be turning 70 this year.  All in all, I would say she is pretty successful, wouldn’t you?

In closing, I would like to point out, that here is a woman who barely finished her 6th grade and yet she managed to pull herself out of near starvation, helped her many relatives acquire an education which she never got herself, bought her home lot and built her house.  With sheer discipline, perseverance, patience and good old common sense, she changed her life and the lives of many others for the better.

So trust me when I say, there is no excuse for failure or a bad life.  It may start out that way or get that way at some point but trust that you will have everything you need to change it.  There is no hole so deep that you can’t climb out of it. Blaming your parents, your spouse, your children, your government, your boss, your employees or anyone else you can think of, will do nothing for you.  You take stock of what you have and what you know right now and start from there. When you make a mistake (and you will make them for sure), make it a point to learn from them or the lessons will be wasted on you.

Know what it is that you want and focus on that. Do not ever focus on things you fear or on the things you don’t want, otherwise you will spend your life fighting or running away.  Help others whenever you can, with whatever you can, and learn to enjoy giving freely.  Making the money is easy, it really is. What you do with that money is ultimately what defines the quality of your life.

Yaya the Business Woman
Yaya the Business Woman