This post led our board to invest in a pre need company that is supposed to supplement our business. We dreamt of building a big company on pre need business from our existing customer. We bought a 9 numbeer company that is practically a shell company: no customers, no operations but mostly assets.
We acquired it for a low 7 numbers; however we were not able to operate it or get a license renewal because the supervising agency said there was capital deficiency. The seller being a fmr high ranking govt employee said it could be fixed. It wasnt fixed.
We renewed focus on our existing hard asset business. It was easier to sell with concrete hard asset to sell; selling paper and contracts wasnt isnt.
We saw how difficult the situation is for pre need/plan business. A promo for free interment in a lot contract that was quoted at P30,000 now costs P50,000 to implement and deliver. Thats a loss of P20,00 per contract. Fortunately for us, it could be the last.
Lets analyze what happened. The high inflation rate, and very poor returns on investment caused all of these. Investments were 3-4% pa; inflation is at 7-8% thats a difference of 100%. 4% difference in investment and inflation x 10 years = 40%. For instance the main cost component stood at P3,000; now it cost P10,000.
Are we glad that we did not pursue and illusory business. We are in concrete discrrete products to sell.
Thus we view with alacrity the giant in the industry. If such is the reality in their business, potentially somewhere in the system, even if theey have their own facility for delivery, the system has still that loss P20,000 each . And for say 100,000 contracts, the contract inventory loss could be as much as P20B - how can that be recovered...?
God still loves us andour group and he did not lead into damnation. I am led to agree with the allegation of many groups in this bueiness that the supervising govt mandate is get the remaining players
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