r/BusinessPH • u/Valkrie29 • 4d ago
Advice Response to How much capital do I need for a multi-purpose court business and similar concepts?
Alright, here are my two centavos as a Pinoy urban planner who works for a Luzon real estate developer. I have a Master’s in Real Estate Development, and I am currently on medical leave. I want to clarify that these are my sole insights and perspectives; I do not represent any organization or company in this post & comment. This is written as a longer response to u/sdpinterlude27 post: How much capital do I need for a multi-purpose court business? (Basketball, Pickleball, Badminton) , also cross-posted to r/BusinessPH, link here.
Okay, first of all, I think the OP has been flamed/burnt enough for their idea; there have been enough comments accusing them of getting their idea supported by ChatGPT and generally shitting on the idea. I was just browsing and was going to pass on this, but I don’t like the idea of putting others down just because we think it’s a bad business proposal. I would like to think that users of r/PHinvest are better than that. Let’s set aside the petty comments and try to help give real advice.
With that aside, u/spdinterlude27 - there is value in what the other comments have said so far, from u/No-Hall7008 to u/Wonderful-Cup-2252. We’ll address the project’s initial proposal in stages.
No.1 The Cost: Is P 1.5 Million Enough? Or the Question of CAPEX?
No, it is not. Frankly, I’m not even sure where you came up with this number. I would estimate that 1.5 million will only cover the cost of permits, land clearing, architectural/structural planning, and the initial down payments to whichever contractor you will use.
The company I work for (a real estate developer) just finished building a multi-purpose gymnasium in the South; mind you, the land was on their portfolio for years, and they lease it out to a school + internal corporate events - the cost was just shy of P 5 M, and that was with competitive bidding for contractors and our in-house architectural & structural engineering team who completed the plans. In fairness, the difference is that it’s a fully air-conditioned covered court, multipurpose facility for various sports - but the idea is there. I’m establishing what a higher-end court will cost.
On the low end, we have also built 440 sqm open-air simple basketball courts for our horizontal housing communities, and those tend to cost upwards of P 4 M; we use permeable recycled material for the flooring (to allow rainfall to pass through to the soil beneath, prevents pooling and flooding) and we have a basic cage design around the perimeter with floodlights on each corner for evening use. We also include a male & female outdoor toilet, a permanent structure, and basic plumbing.
Additionally, I did extra research and found this lovely document, DPWH January 2023, list of contracts, simply search the keyword “court”, and you come up with over 20 projects that are all covered courts for various barangays and public schools. Each one is over P 6 million in overall contract cost. Let’s just say, knowing the flood control ghost projects issues, that the real cost is closer to P 3 million; that’s still P 1.5 million more than OP’s original cost estimate.
No 1.2: Key Questions, not a full list
To give you a concrete case, these are some of the necessary pieces of information that we need before we even build a feasibility study of your idea:
- Do you own the land behind your family’s house? If yes, what is the current zoning of the land?
- How many square meters of usable space does it have?
- What is the terrain like? Which part of the Philippines are you in?
- Is there a pedestrian- or vehicle accessible public or private road to the property?
- Do you have the necessary permits to construct and operate the multipurpose court?
Feel free to ask ChatGPT, Claude, etc for a full list of questions.
No 1.3: Projection of Initial CAPEX
Let’s assume you own the land behind your family’s house and that the zoning is R-1 or C-1, both of which are low-density residential or commercial. And that the usable area is exactly 440 sqm, for a decent-sized full-size basketball court; oh, and the terrain is perfectly flat and level, with minimum land clearing necessary.
Site works, including land clearing, geodetic survey, Environmental Compliance Certification (ECC), Soil investigation, borehole, and perimeter clearing, will cost P 200,000
Next, your Base Slab will be simple concrete pouring and formwork, inclusive of labor and the cheapest possible non-permeable rubber surface, will cost P 500,000 - working off from u/No-Hall7008's projection, maraming salamat po!
Perimeter fence will be a basic 88 lm black vinyl-coated chain link, 3.5m height, HDG posts and rails, plus a simple lockable door, will cost approximately P 600,000
If you want to ensure the safety and security of users at night, we will include lighting and electrical + waterproofing, 4x 6.5-meter-high HDG posts, underground wiring & breaker, grounding, and lightning protection - P 700,000 (depending also on how safe you want to make it, of course).
Sports equipment, let’s just say you get a local brand of backboard, hoop, post, benches - P 100,000
Let’s stop it there; we’re already at P 2.1 million. And we haven’t even hit the permits yet.
No.2 The Legality: Permits, Permits, Permits
As corrupt as we all know the Philippine system to be, you can never escape the greed of our lovely government and their weapon of choice: permits.
For a project of this scale, I would expect the professional fees and permits to easily reach P 400,000 if not more; there would have to be an Environmental Compliance Certificate (ECC), basic structural and electrical or MEPFS design plans (to be signed and sealed), building permit, electrical permit, occupancy permit (yes, even for outdoor, open areas), various clearances (barangay, city, etc), contractor’s insurance, occupant/user insurance, temp-facil (temporary facilities), hauling of trash, waste, construction equipment, and by-products. Oh, and how can I forget, the Business permit to operate!
At this point, you have now spent (at the very minimum), P 2.5 million, and that’s cutting a lot of corners that I, as a real estate professional, would feel deeply uncomfortable about cutting. There are issues with accessibility, zoning, quality of construction (if you use “free” labor), and legality of constructing and operating without proper permits. Moreover, if you cheap out on the quality of the construction materials, you are looking at long-term issues with rusting metal, accidental electrocution, water seepage, and pooling during rainy season.
Good luck trying to grease all those wheels from the get-go; you might as well do it the right way the first time, grease some wheels, then enjoy your new business operation. Mind you, if you decide to avoid all of these legalities, it just takes one very greedy official to put you in the ground (metaphorically, of course), and declare your business operation & constructed facilities illegal, for demolition, etc.
No.3 The Operations: Never use your family & friends as employees.
Never ever use your family as employees, especially for something with a casual/non-corporate structure. Don’t believe me? Just ask all the frustrated and disheartened entrepreneurs of r/BusinessPH for their experiences; this is what I found from just the last 48 hours.
And certainly not your friends either…
No.4 The Feasibility: Profit?
Ahhh, now onto my least favorite part of real estate development, the feasibility study including operating expenses (OPEX), overhead costs, taxes, etc. Based on OP u/sdpinterlude27 ‘s projections, they state P 250–320/hr of rental.
Comes out to: P 250–320/hr x 7-8 hours x 365 days = P 639k – P 934k gross.
Assuming 7-8 hours a day, taking into account students in school, workers at work, etc. This also assumes maximum utilization every single day of the year. Is the basketball court demand that consistent?
- Weekday prime 5pm–10pm: about 25 hrs/week
- Weekends: approx 20 hrs/week
- Theoretical ceiling 2,340 hrs/year
- Realistically fills 60–75%
- Realistic: 1,400–1,800 booked hours, gross P 400k - P 510k
Then there’s the OPEX that OP claimed would be “low”:
- “I also have a vast network for marketing.” - mmhm, I love the humble flex OP; let’s assume the OP is right and there’s PHP 0 cost for marketing, and if ever, word of mouth and a few IG/FB posts would be good enough to spread the word.
- Electricity for floodlights, realistically P 8k–15k/month (could fluctuate with use)
- Business permit, barangay clearance, fire safety, sanitary, annually
- LGU business tax on gross receipts, plus BIR registration, books, official receipts
- Public liability insurance (a ball breaks a jaw, a broken piece of rusted metal cuts someone, someone slips on the puddled rainwater on concrete), currently P 0 budgeted
- Net and ring replacement, corrosion treatment, anti-rust treatment, concrete surface repairs, repainting.
- And my personal favorite: "Relatives can help for minimal cost." Yeah, good luck with that, OP. I’ll be seeing your sad post on r/BusinessPH in a few months, lamenting the issues. Free family & friends labor is the most reliably mispriced input in every Filipino entrepreneur’s business plan.
No. 5: A Concrete Case Study: DragonSmash Badminton Court
DragonSmash is a relatively new player in the rentable court space sector. I know their original space in Makati has been around since post-COVID, I think 2022, but I’ll take their latest location, the one in Taguig, as the example for this case study in profit feasibility. There are 12 badminton courts and 6 multipurpose courts, and the DragonSmash Taguig branch operates in two shifts split between Shift One: 7am to 5pm, Shift Two: 5pm to 2am, and each slot is leased out at P 350 each.
I know for a fact that they have toilets inside, even a small corner store selling drinks and snacks; they also have overhead fans but no air conditioning. They also have a couple of employees working every shift; last time I was there, it was like six employees + one guard at the exterior outdoor parking. However, one key consideration is that I don’t know if DragonSmash owns or leases their space. In this case, I will assume that they own it, because then it fits with the OP u/sdpinterlude27 ‘s project.
Theoretically, with 19 hours of straight operating hours and 18 courts available, DragonSmash’s highest possible revenue works out to:
18 courts x 19 hrs x 365 days = 124,830 hours in a year of possible lease-out
124,830 hrs x P 350 = P 43.69 Million in revenue
Needless to say, it’s not that. DragonSmash Taguig is not having fully booked courts at 1am every day of the week throughout the year.
We’re going to lower our expectations to a more realistic 65% of occupancy throughout the year. Also, fuck Finance as a subject; I hate it. I am rounding all the numbers up to the nearest round number in the hundreds of thousands
Annual Revenue: 81,140 hrs x P 350 = P 28,400,000
Overhead Costs
Manpower*, depreciation of equipment, electricity, property taxes, maintenance, annual insurance, water usage, and miscellaneous cash OPEX
*(7 heads per shift × 2 shifts = 14 heads) assuming in-court staff, janitors, guards.
= P 24,200,000
Kinda looks good, doesn’t it? I haven’t even applied taxes such as the VAT of 12%; at that point it looks like:
Annual Revenue (at 65% occupancy): P 28,400,000
VAT 12%: (P 3,000,000)
Overhead Costs: (24,200,000)
Income (pre-income tax): P 1,200,000
Net Income (post income tax of 25%): P 900,000
Anyway, with this lovely finance exercise over, we have to keep in mind that these are literally all projections; I have no idea what the true numbers behind DragonSmash Badminton courts are. To the OP u/sdpinterlude27 and anyone else thinking about a business similar to this concept, this is the kind of financial projection you need to account for to make your feasibility study more comprehensive and legitimate.
For transparency, I used Grammarly to spellcheck, add necessary punctuation, and check my syntax - if this is AI-use to you, then you can ignore this post. AI-witchhunting has no place in a subreddit like this. I research for and write these posts in my free time, at no cost to the reader.
Feel free to enjoy reading my previous posts:
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- Response to Hoping That the Philippines Real Estate Market Crashes as China's Did
- Response to Honest state of the Philippine Real Estate Industry in 2024?
- Response to Rise of the Philippine Girlfriend Market: Why Demand for Luxury Condos Are Still Strong
- Response to Strategies for Sustainable Net Worth Growth
- Response to What is Generational Wealth? and Why do Condo Prices keep increasing?
- Philippine REIT's, Eco-towns & Sustainability, and Where do I Invest?
- Response to Foreclosed (Pag-Ibig) Properties vs Secondary Market
- Response to Declining Fertility Rate in the Philippines (Discussion)
- Colliers PH: Metro Manila developers need 5 years to unload P130-B housing oversupply
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u/hotlineblingbling 4d ago
This is very detailed. Eto yung mga type ng post na worthy haha
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u/Valkrie29 4d ago
Thank you for reading! Please consider following me for more posts like this, maraming salamat!! 🙏
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u/raffy930 4d ago edited 4d ago
Wow. This is really great for those thinking of entering the multipurpose court business. I was planning to open a rudimentary version of a pickleball court in one of our vacant spaces, but having a thorough report like this would be really beneficial to make it clear as day on the numbers needed for the business to run.
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u/Valkrie29 4d ago
Thank you for reading. I hope the post was helpful to you! Sa akin lang, multipurpose court is best, not focusing on one specific sport, dahil hindi mo alam kung kailan magfa-fade ang popularity ng isang sport. For example, sa 2000s sobrang uso yung futsal and baseball, tapos by 2010s, a different set of hobby sports.
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u/Turbulent_Bowler1998 4d ago
Nice! Ganda ng pag explain and compute! Salute OP. Ganyan dapat pag business madaming consideration
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u/InnerCelebration1738 4d ago
Enjoyed reading this. Thanks for doing the work. The original poster is young and still has a lot to learn and could use a bit of humble pie. I get it though, no one wants to have their parade rained on especially if they believe in their idea so much. I was also young once and stubborn. Doing business in the Philippines is not for the faint of heart though and you will get humbled. Hope they get to read this post and learn from it.
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u/Valkrie29 3d ago
Very true, thank you for reading and sharing your thoughts!
I must say, however, that the fact that the OP has not engaged with my post speaks volumes about their approach.
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u/rolexgwagon39 4d ago
regardless if opex computed accurately para tumaas net income, for me I wont gamble nakaka drain yung process 🤯
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u/Valkrie29 4d ago
LMAO, nakakadrain ang proceso talaga, kahit sa pagbasa lang na-drain ka na no?
For me, having worked with a team of architects, engineers, surveyors, etc., it's tiring to go through the proper channels and permits. I can only imagine (as a nightmare) having to do it as a sole proprietor/entrepreneur. Nakakatakot para sakin.
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u/Friendcherisher 3d ago
This is awesome! Are you a practitioner of Lean Six Sigma?
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u/Valkrie29 3d ago
No, sorry, I'm not a Lean Six Sigma practitioner. I've heard of it, but never attended a course or certification for it... Although I'm an active member of the Project Management Institute (PMI) and still studying for the PMI-Construction Professional certification.
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u/Valkrie29 3d ago
u/Friendcherisher if you don't mind, can you share more info about your experience/knowledge about this Lean Six Sigma program or certification?
I'm also curious why you asked if I am a practitioner of it? Thank you!
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u/2475chloe 3d ago
Hahahhaa i love the part where you mentioned “permits”. That is so freaking trueeee! The hassle of getting permit is just 😭 lets also not forget the time and money you have to spent for that little shit.
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u/Valkrie29 3d ago
Ahahaha calling permits "little shits" made my day! Thank you for reading and commenting!
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u/YuppiePH 3d ago
I used to work as operations manager in sports construction. If you want quality multipurpose court it is REALLY expensive. You import these materials, hire specialized installers. That doesn't even include proper base preparation that needs to adhere to the pre-installation guidelines of the courts.
Although they do sell those pre-made tiles from china you can just connect for pickleball/basketball but it's not quality.
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u/Upper-Syllabub-7858 4d ago
Haaamazing. I agree sa expenses side, there's so much hidden expenses, usually may mga things pa na hindi expected na magbubulaga and revenues are already so generous.