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8 Unexpected Questions from Investors

by Patrick Lai

Lions and Martyrs are entering the colosseum to do battle. The Lions are investors, hungry to invest in solid BAM/B4T businesses. They hope to make money, as well as create new opportunities for the Good News among the least reached. The Martyrs are starting new businesses in spiritually, and some cases, economically difficult locations. The Martyrs are coming to lay it all on the line, praying not to be eaten alive. They are hoping to tame a Lion or three and bring each Lion, along with their expertise and their money, into their start-up business.

If you’re raising money for your company and you want to pitch potential investors and shareholders, it’s important to plan ahead for the questions savvy investors may ask.

Naturally, the Martyrs, and anyone who is seeking capital, can expect to be asked about your financial projections, timeline, the competition, your team, marketing strategy, risks, personal experiences, how much “skin” do you have in the business, and your exit strategy. Expect experienced investors to study your business plan with a fine brush and comb. Plus, investors will also grill you on your spiritual and personal life, to learn what you are made of.

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Identifying and Maximizing BAM Success Factors Part 1

By Paul Harrington

In this new series on ‘BAM Success Factors’ we invite guest authors to share what they consider the key factors contributing to success and growth for BAM practitioners. To open up the series, Paul Harrington gives us an overview of the most important BAM success factors he has identified through research. 

BAM Success Factors Part 1: Professional and Technical Considerations

Starting a new career in a part of the world that is not your cultural home is a big undertaking for anyone. For those who wish to use their businesses as a means through which God can reach the world, the challenge can be even greater. Everyone involved in the Business as Mission movement wants to make sure that every practitioner that takes the bold step of setting up a business with Kingdom values in a new context succeeds. Thankfully, many of the keys to success for BAM practitioners are known and have been validated by scholarly research.

BAM practitioners aren’t the only group of people who live and work outside of their home countries. Many companies and governments, including the military, as well as mission agencies and non-governmental organizations (NGOs) send their employees to work around the world. While government and military techniques do not necessarily provide insight into how BAM practitioners can succeed, research done by and for private employers, NGOs, and mission agencies provides insight into the factors that lead to successful deployment of their personnel and have relevance for BAM practitioners.

Success means different things for different people. Since business as mission is a unique discipline with defined goals that might include the fourfold bottom line – achieving the financial goals of the owners of the company, social impact goals of the community in which the business works, goals to protect and enhance the environment, and spiritual impact goals – success in a business as mission enterprise can be measured.  Read more

Two Company Leaders Look Back: Financial Planning Highs and Lows

When we have a major decision to make, we often ask those around us for input. Sometimes we follow that advice and other times we don’t. Occasionally we might look back and wish we had followed the advice we received from others. Hindsight is a beautiful thing!

Drawing on the wisdom of others can be helpful and the benefit of hindsight is illuminating. With those two things in mind, we asked a couple of well established BAM leaders for their advice about financial planning. We asked them to share what has been fruitful and has enabled them to grow companies that are doing well. We also asked them to share the lessons they’ve learned the hard way and what they would do differently in hindsight.

Hospitality Company 

Company A is a Hospitality company with 125 employees, it has two owners and was established 12 years ago.

What financial planning have you done to grow your company to the place it is today?

The growth of our company over the past five years has been quite substantial. We have seen our revenue increase 475%, and our earnings grow 540%. Though our financial planning was not the driver of that growth, it was certainly the foundation. Without the steps we have learned and taken over the years, we would not have been able to facilitate the amazing growth we have seen.  Read more

Cash Flow Mishaps: Stories from BAM Practitioners

We asked BAM practitioners to share their insights about cash flow. Here are 6 mini-stories of BAMer ‘cash flow mishaps’ or near misses!

[Read Part 1: 10 Cash Flow Tips and 10 Red Flags from BAM Practitioners]

6 Cash Flow Stories

One cash flow mishap we’ve experienced is significantly underestimating cash needs to service a period of significant growth. This can happen when long lead time raw materials are needed, with up-front payment. It can also happen when financing growth requires organisational learning and capacity building, it then takes extra time to ramp up production, and the working capital cycle is longer than expected. Another real danger is when a series of smaller mishaps all happen at the same time, for instance low quality raw materials, late delivery of materials, late payment by customers for finished products. Each of these on their own are manageable, but create a serious issue when stacked together. We have been able to develop some cashflow forecasting tools using MS Excel which give us visibility on future cash needs, including graphs, which feed into weekly reporting. This has been invaluable to us. – MH, Manufacturing, Asia

 

A few years ago I led a new initiative at our company to build a software product for retail banking. I was hoping that the recurring revenue from product sales would offset the erratic cash flows that are typical of a project-based software company. A project team of eight members spent 18 months building the product and we spent another year having a sales team sell the product. For a small company like ours the outflow of funds in this experiment resulted in a major blow to our cash flow for a couple of years. What I learned from this costly mistake is that a project oriented service company is not automatically good at being a product sales company. They are two different types of organizations with different team structures and competencies. – Joseph, IT, India/USA

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10 Cash Flow Tips and 10 Red Flags from 10 BAM Practitioners

In a truly great company, profits and cash flow become like blood and water to a healthy body: They are absolutely essential for life, but they are not the very point of life” – James Collins, Good to Great

As Jim Collins so wisely said, cash may not be the ultimate point of a company, but it is like blood to the body – essential for survival.

We asked 10 BAM practitioners to share their insights about cash flow. Read below the 10 tips they shared and also 10 ‘red flags’ – the tricky situations they have encountered where cash flow can easily trip you up.

In Part 2, we share 7 short stories of ‘Cash Flow Mishaps’ – real-life cash flow challenges that BAM practitioners have encountered

As one BAMer summed up, “Cash flow is an important indicator of how a business is doing, don’t take your eye off it!”

Cash flow tips from BAM Practitioners – Do:

1. Always watch your cash flow very carefully and plan ahead at each stage.

2. When business planning, find a cash flow projection template and someone who will force you to fill it in!

3. Use forecasting tools and technologies to help you watch and manage cash flow on an ongoing basis. Read more

Numberphobic? 3 Key Ideas to Increase Chances of Business Survival

by Dawn Fotopulos

According to an Intuit survey from 2015, 87% of small business owners do their own books and 47% claim financial illiteracy. It’s not a surprise that more than half of small business start-ups never survive to see year 5 of operations; it’s remarkable that half do. If you follow start-up history out to year eight, the failure rates are in the 80+ percentage. Any thinking person would take their start-up capital and go to Las Vegas. You’d have much better odds of winning there.

What if, by learning just a few key ideas, you could double even triple your probability of small business survival? What if a one day commitment of your time could change the next twenty years of your future and the future of your household? What if what’s in this article prevents your small business from becoming a statistic? It can. Here’s how.

Every business owner needs to answer three key questions:

  • Am I making money? (Showing a profit)
  • Do I have enough money to pay the bills? (Enough cash flow)
  • Am I building wealth or destroying it? (Building net worth)

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Financial Planning: How Do I Prepare to Present to Investors?

by Mike Baer

Funding for your new business is obviously crucial – no cash, no business. So let’s think about this from an investor’s perspective. What is it that interests him or her? What does he or she want to see? What questions answered?

Here’s what I’d be asking:

  • What exactly is the product or service that you intend to sell? Don’t assume that I understand it. Make it simple for me.
  • What is the market demand for this? Is it a cool idea, a “me too,” or is there a real demand? In other words, do people really need/want your product or service?
  • Who will your competitors be? How is your idea better than and different from theirs?

This first set of questions is about your viability in the market place. Is this a real business? This second set of questions is about you. Can I count on you? Read more

Important Issues to Consider in Financial Planning

by Colleene Isaacs

Let me start by saying, I hate dealing with financials! In a perfect world, I wouldn’t have to think about or plan for the financial aspect of doing good business. Or better yet, I would have some really smart CFO-type deal with it, and be done with it. Unfortunately, as far as I know, we don’t live in that world. So just like everyone else, we have to do the financial “due diligence” (homework), necessary to do business well. There are a lot of great resources to assist as you begin your planning process, particularly when it comes to the financial matters of business. One suggestion I would make is save yourself a lot of grief, and apply a template like the “Business Model Canvas” to your planning process (see the book Business Model Generation.)  This model follows a somewhat lean startup methodology, and is a great way to visually scan and plan for all the aspects of business planning and design. 

Let’s really focus on some things you should be thinking about financially when you start the business start-up journey – a journey that is a very winding road, never a straight path!

Expect the Unexpected

A general principle is start with Plan A, but always have a back-up plan(s). You only have a limited insight into what the future will bring. You may be faced with geo-political situations, product development delays, weather, material sourcing issues, local permitting requirements and delays, transportation issues, broken equipment, etc. that you were not expecting. Any of these external elements, can severely impact planning and business execution schedules, as well as the finances required to support those activities. Just know that wherever there are opportunities for something outside your control to fail, there is a real possibility that it will.  Read more

Business Planning Part 3 Introduction: Financial and People Planning

We start a new series on The BAM Review blog this month that will focus on developing your business plan: Financial and People Planning.

In previous series we have covered Business Planning Part 1: Introduction to Business Planning and Business Planning Part 2: Product and Market. In Part 3, a new series that will take us up to the middle of December, we will focus on two essential elements in the business planning process: money and people!

Show Me the Money

Crunching the numbers and working out financial projections during the planning stage is a major part of discovering whether your business model is viable or not. Until you start to work out your costs, price points, sales forecasts, cash flow projections, break even point and so on, your business idea will remain just that, an idea. Even if you don’t need to present your plan to outside investors, you will still need to create a financial plan so that you know whether your business model can ever be profitable and how much working capital you will need to sustain it through launch. Read more

Do Economic Incentives Matter? A Nosey Economist on BAM Financing

AND THE AWARD GOES TO...

Our goal is to provide the BAM Community with the best content and resources available. We are currently highlighting various articles and resources which have stood out above the rest. Below is the “Editor’s Pick” for the spring of 2015.

Please enjoy and thanks for following!

Interview with Dr. Steve Rundle

Steve, I know you have been doing some interesting research on BAM in the last few years, can you briefly describe what you have been looking at?

As an economist, I’ve always been interested in the relationship between the structure and governance of a company and its performance. Since the 1990s, when I first started meeting people who were combining business and missions, I naturally asked lots of nosey questions about the company’s financing, revenues, profits, and so on. I was especially intrigued by the role venture capital might play in funding businesses that were not only extremely risky, but were being managed by people who, in many cases, admitted that they weren’t too concerned about profits and that in fact they would be satisfied with just breaking even. I was not surprised to discover that no venture capital firms existed in this space, at that time. Most of these businesses were either donor funded, or in some cases funded with the help of one or two “Angel Investors.”

But this raised lots of new questions about the performance of these businesses. What are the expected outcomes, and how are practitioners incentivized to achieve those outcomes? Practitioners who are affiliated with a missionary sending organization may be discouraged from being too serious about business for fear that it will distract them from their ministry goals. One way to remove that distraction is to require the practitioner to raise donor support, in which case they will not be dependent on the business for income. This might sound logical at first, until you start meeting other BAM practitioners who are entirely dependent on their businesses for their salaries who are having an incredible impact. So I wanted to look at this more carefully by comparing the outcomes of people who drew 100% of their income from donors with those who are 100% business supported. Read more

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