When Cecilio Pedro entered the hardware business in 1975, he was fresh out of college and eager to become an entrepreneur. But within a few years, he realized that operating in a highly competitive retail market was not necessarily the best way to build a successful business.
Customers demanded lengthy credit terms, competition was intense, and retailers faced constant pressure to keep their businesses operating.
Rather than continue competing under those conditions, Pedro decided to pursue a different opportunity. He moved into manufacturing, despite having limited experience in the industry and relatively little capital to invest.
“I was in the retail business,” Pedro recalled in an interview with Financial Adviser PH. “I entered the hardware business in 1975, right after I graduated from Ateneo. After one week of bakasyon, we immediately started a small business in Alonzo, selling hardware products.”
His decision to enter business immediately after graduation reflected his willingness to pursue entrepreneurship at a young age. However, his early experience also exposed him to the realities of operating in a competitive industry.
By 1978, just three years after entering hardware retail, Pedro had begun considering alternatives.
“Then, in 1978, three years later, kasi very competitive ang retail business, a friend of mine, whose father was a very good friend of my dad, suggested that we look for a factory so we would not have to stay in this rat race, in the import business where everybody had mahaba ang credit and everybody was gumagawa ng kalokohan just to survive.”
The problem was not simply the number of competitors. The industry’s business practices also created financial pressures that made it difficult for retailers to operate profitably.
Customers often demanded credit terms of 120 to 150 days, which meant that businesses had to wait four to five months before collecting payment for products they had already sold.
For entrepreneurs, this creates an important distinction between generating sales and generating cash.
A business may report increasing revenues, but if customers take several months to pay, the company must still find money to purchase inventory, pay employees, and cover operating expenses.
The longer the collection period, the greater the amount of working capital that may be tied up in receivables.
For a growing business, this can become particularly challenging because higher sales may require additional financing before the corresponding cash is collected.
Pedro recognized that remaining in such an environment could limit his opportunities, regardless of how hard he worked.
His experience illustrates why entrepreneurs must evaluate not only the demand for their products but also the financial characteristics of the industries in which they operate.
An industry may offer substantial sales opportunities while still producing unattractive returns because of intense competition, low margins, or difficult payment arrangements.
Rather than accept these conditions as unavoidable, Pedro began exploring other industries.
A family friend suggested manufacturing as an alternative to the hardware business.
“There were a few industries we looked into, and one of them was collapsible tubes. This friend of mine said, dito na lang tayo. I said, oh sige, because our target customers were Colgate and Unilever.”
The idea appealed to Pedro because manufacturing offered a different type of customer relationship.
Instead of selling products to numerous retail customers who demanded extended credit, he could concentrate on supplying established companies with more predictable purchasing arrangements.
“At least malaki sila, and there was no credit problem, unlike in the hardware business where mahaba ang credit terms, 120 days, 150 days.”
The distinction was important because the quality of a company’s customers can influence its financial stability.
A business that sells to customers with reliable payment practices may experience fewer collection problems than one that depends on buyers who regularly delay payments.
However, customer concentration also creates risks. A manufacturer that depends heavily on a small number of large customers may become vulnerable if one of them reduces orders or changes suppliers.
For entrepreneurs, the objective is therefore not simply to find larger customers, but to establish relationships that offer an attractive balance between sales opportunities, payment reliability, and business risk.
Pedro’s decision to enter manufacturing also represented a fundamental change in how he intended to compete.
In hardware retail, he was operating in a market where many businesses could offer similar imported products.
Manufacturing, by contrast, required investment in production capabilities and technical expertise. Although it involved greater operational complexity, it also offered an opportunity to develop capabilities that could distinguish the business from ordinary traders.
This shows an important principle in business strategy: entrepreneurs do not always have to compete harder within an existing market. Sometimes, they can improve their prospects by changing the activities their businesses perform.
Moving from trading to manufacturing can give a company greater control over production, product specifications, and operational processes.
However, it also introduces new risks, including equipment costs, maintenance requirements, production inefficiencies, and the need for specialized knowledge.
For Pedro, the decision required capital.
He approached his father and borrowed ₱50,000 to help finance the new venture.
“I borrowed from my Dad, at that time P50,000. Wala nang project study yon. I was already in business eh, I was in hardware business, so I was borrowing money to do the tube business.”
His admission that he did not prepare a formal project study reflects the informal manner in which some entrepreneurial ventures begin.
Rather than follow a structured investment evaluation process, Pedro relied on his existing business experience and the opportunity identified by his friend.
For entrepreneurs, this approach highlights both the value and limitations of experience-based decision-making.
Practical knowledge can help business owners recognize opportunities and make decisions quickly. However, experience does not eliminate the need to evaluate potential costs, demand, financing requirements, and operational risks.
A business may look attractive because it offers better customer relationships, but the investment must still generate sufficient returns to justify the capital committed.
Pedro also faced the challenge of acquiring the equipment needed to establish a manufacturing operation.
Instead of purchasing expensive new machinery, he and his partners traveled to Japan to look for used equipment.
“We went to Japan and looked for old equipment from Sanwa, which was a toothpaste company. At that time, they were disposing of their tube equipment kasi palit na sila, they wanted to shift to plastics.”
The Japanese company was replacing its existing equipment as it moved toward plastic packaging.
For Pedro, this created an opportunity to acquire machinery that might otherwise have been beyond the financial reach of a young entrepreneur.
“We bought very old equipment, I think it was from 1953, kaedad ko eh. We bought everything mano-mano, and then we started making tubes.”
The decision shows how entrepreneurs can reduce their initial capital requirements by purchasing secondhand assets.
Used equipment may allow a business to begin operations at a fraction of the cost of a new production line.
However, lower acquisition costs do not necessarily mean lower operating costs.
Older machinery may require more maintenance, consume more resources, or operate less efficiently than modern equipment.
The economic advantage depends on the total cost of ownership, including repairs, productivity, and the useful life of the equipment.
For a new business with limited capital, however, acquiring secondhand machinery can provide an opportunity to enter an industry that would otherwise require substantial investment.
Pedro understood that the venture involved considerable uncertainty.
He was entering a new industry, committing borrowed funds, and investing in equipment without the benefit of extensive manufacturing experience.
Yet he was willing to accept the risks because he believed the new business offered better opportunities than remaining in hardware retail.
“It was risky. Katuwaan lang yan eh. May negosyo naman kami dati, yung hardware, pero ginastusan din naman namin. We spent money, invested money, and looked for a place.”
Pedro was only in his mid-20s when he made the decision, and he recalled the excitement of starting a new venture with his partners.
“At that time, all of us were still unmarried. I was just 24 years old. We were very young and happy to go into business.”
His experience illustrates how entrepreneurs sometimes make their most important strategic decisions early in their careers, before they have accumulated extensive financial resources or industry experience.
The willingness to take risks can create opportunities, but successful entrepreneurship also requires an understanding of the risks being accepted.
In Pedro’s case, the decision to enter manufacturing was motivated by a specific business problem. He wanted to move away from an industry characterized by intense competition and lengthy credit terms toward one where he believed he could establish more dependable commercial relationships.
The broader lesson is that entrepreneurs should periodically reassess the economics of their businesses rather than assume that continued effort will eventually produce better results.
When an industry consistently requires excessive working capital or offers limited opportunities for differentiation, business owners may need to reconsider how and where they compete.
For Pedro, the answer was to leave the retail rat race and invest in manufacturing.
It was a decision that would eventually form part of the entrepreneurial journey behind Hapee toothpaste, one of the Philippines’ homegrown consumer brands.
