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Lessons from the Edge: Investing in BAM Companies

Insights from a BAM Practitioner

Peter has lived and worked in a professional and business capacity for over 30 years throughout Asia, Europe, the Middle East, South and North America and is a pioneer in the business as mission movement. He currently consults on business as mission all over the world and is the CEO of a global investment fund for BAM enterprise in the Arab world and Asia.

Financial capital is only one of many kinds of patient capital needed by business as mission companies 
There are seven forms of capital which need to be strategically integrated into a BAM business over a long, patient, persistent timeline in order to achieve the sweet spot of optimal impact. These seven forms of capital: human, intellectual, financial, social, spiritual, infrastructural and natural capital, all need to be strategically integrated in a balance that will be variable for your context. If you are not paying attention to all of these forms of capital, you risk being knocked off the sweet spot and your impact will be diminished.

Return on investment from BAM companies is possible
Although not easy, it is possible to invest with modest expectations of financial return into even the most difficult environments and, risk of loss notwithstanding, see a full return of capital and a modest return on investment. One challenge is finding companies that are investor-ready and able to meet the rigorous standards necessary. However we have found that relationships, based on integrity and trust within the Christian community, bring remarkable risk-reducing benefits. Company owners generally are admirably open and honest in their applications and conduct of their business affairs, and often make significant personal sacrifices in order to serve Christ, and to honor the loan obligations of their companies.

Competent mentoring can make a vital difference for BAM companies
There is a compelling value proposition for BAM companies and their investors in receiving competent, wholistic mentoring. The mentoring provided has been vital in building relationships of trust with the companies, which then facilitates growth and even greater acceptance of advice. Responsiveness to experienced input has enabled companies to grow and develop into better-managed and effective models of Christ-honoring business. Mentoring has been instrumental in early recognition of looming problems, with timely solutions protecting against financial and other loss.

Bootstrapping your Business vs Seeking Outside Investment

What would you say were the most important things to prepare or think about as I approach a BAM investor? What are some typical pitfalls or mistakes I could avoid?

Before you walk down the road of approaching an outside investor, why not consider the possibility of self-funding – also known as “bootstrapping” – your company? If you decide to bootstrap, you may be surprised at how differently you approach your business, as well as the funding process. Bootstrapping can create a healthy foundation from which to begin your business, and can provide invaluable lessons to entrepreneurs. Lessons learned from bootstrapping can include:

  • Tests your business plan – A bootstrapped business that can bring a product or service to market, develop a customer base, and create a revenue flow will help you identify the strengths and weaknesses in your plan. You now have the solid proof you need to affirm your ideas and build on them. You will have determined if the market needs or wants your product, what the market is willing to pay for your product or service, and what will be required to put the business on a path to profitability. In addition, you will have a better sense of true costs, not just cost of goods, but hidden costs that are usually not considered or may not be known when a plan is developed. Bootstrapping will also force you to consider how the product or service is being developed, and it may cause you to re-consider aspects of product development as being unnecessary for product or service launch.
  • Provides incentive for a low burn rate – Limited financial resources will greatly influence the decisions required to operate your business, while at the same time maximizing efficiencies. This may include hiring employees that can function in more than one role, outsourcing certain roles until you can afford to bring them in-house, minimizing overhead like office space (know anyone with a spare garage?), as well as using a creative approach to marketing.
  • Skills and values development – Self-funding can be a useful mechanism in helping you gauge your true passion and commitment to your business. It will help you develop a higher level of accountability as well as resourcefulness, resilience and courage. It will most certainly test your risk aversion.

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Approaches to Business as Mission Funding

Excerpt from the recently published BAM Global Think Tank report on Business as Mission Funding.

The word ‘funding’ refers to the spectrum of financial resources required for a business venture through the normal life-cycle phases of every business: start-up, growth, maturity, and decline. It includes a range of monetary sources, each with attributes unique to each stage of growth. Funding takes on many shapes and sizes, from self-funding to crowdfunding, microcredit to bank loans, and seed funding to venture capital.

Broadly speaking, the subject of funding includes sources, structure, application and management of monies in all areas of the business. In the context of business as mission, perceptions and actions relative to both the business and the capital should be informed by Biblical principles.

In a broader context, funding is distinguished as being financial capital – such as debt or equity – alongside other forms of capital input, such as intellectual, human, social, spiritual, infra-structural and natural.

BAM funding models

Traditional sources of business as mission funding parallel those in typical business funding. In the majority of cases, profitability is the key issue that drives capital to those companies most likely to achieve viability. For most investors, profitability is a non-negotiable measure of success. Read more

How to Prepare for Investors

What would you say were the most important things to prepare or think about as I approach a BAM investor? What are some typical pitfalls or mistakes I could avoid?

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

Ask a BAM Mentor: Financing a BAM Company

Twice a month, our panel of mentors answer your practical business questions. Send us your questions!

Dear BAM Mentor,

What would you say were the most important things to prepare or think about as I approach a BAM investor? What are some typical pitfalls or mistakes I could avoid?

Getting Prepared

Dear Getting Prepared,

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? 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? The next set of questions is about you. Can I count on you? What is your background? Why are you particularly qualified to launch a business like this one? Do you have a specific knowledge base or experience that would give me confidence that you can actually pull this off? Who do you have around you? What is your track record? Who will vouch for your character? Your commitment to Christ?

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Corruption Cheat Sheet

BAM Cheat Sheet Corruption

Click image to open PDF, save or print.

 With thanks to Larry Sharp and Dwight Nordstrom.

25 Years of Business in China: Interview on Tackling Corruption

Interview with Dwight Nordstrom

Dwight, you have been in business for 25 years in China, and not just any business, you’ve been involved in manufacturing in big industries, like chemicals and telecommunications, regularly importing supplies and exporting products. How big has the issue of corruption been?

Well let me just start by saying: This is real! This is not hypothetical stuff, it’s a big issue for us. I would say I have to deal with about 25 cases a year of substantial corruption-related situations. To put that in perspective with other common issues faced by businesses, in last 20 years, across our operations of about 5000 people in Asia, I have had zero illegal drug issues, a couple of alcohol related issues, I have had two sexual harassment issues of a serious nature to deal with, but the major issue by a long way is corruption which I have had to deal with at least twice a month. Corruption is a big issue.

Can you give us an example where you’ve had to deal with someone trying to bribe you?

We’ve had situations where we’ve lost business over refusing to pay a bribe. We had a speciality chemical and the representative in a wholly-owned German company asked for a 5% kickback, with 1% going into a personal account. That was a million dollar plus account per year and I don’t even know now six years later if we’ve ever recovered the value of the account. Read more

Lessons from the Edge: Dealing with Bribery in China

Insights from a BAM Practitioner

Dwight Nordstrom is a veteran of doing business in Asia for almost 30 years. He is on a continuing journey of learning how to deal with bribery and corruption as he leads Pacific Resources International, to expand manufacturing operations in China.

Don’t make blanket statements about bribery and corruption. 
This issue is simple, yet complex! It is good practice to talk about individual cases versus making unilateral statements. Brainstorm with others. Ask, What does this mean in this context?  Is there a different way we could do this? Is there a way we could still win this business? 

Have a zero tolerance approach in your top leadership. 
Within your own company leaders – especially in your purchasing and financial operations – you have got to have a zero tolerance for bribes. Have good frameworks in place to train, implement and evaluate that zero tolerance approach.

Be incredibly selective about what industry and type of business you get into. 
There are a lot of businesses I wouldn’t touch because it is such a corrupt industry. Select the type of industry very carefully since that will determine how much corruption you will face. Build your competency in an industry that is less corrupt before taking on business in more corrupt sectors.

 

Ask a BAM Mentor: Dealing with Corruption

Twice a month, our panel of mentors answer your practical business questions. Send us your questions!

Dear BAM Mentor,

My customs broker tells me I have to give a gift to the customs officials to get our materials out of customs. He said it’s standard, no big deal. I asked the pastor at our local church and he said it would be terrible to pay a bribe like that – it’s illegal and gives a very bad lesson to others.  I’m new in the business and to importing here, and our business may fold if I can’t get this out soon. Is this a time to die for my principles or should I go with “when in Rome, do as the Romans do”?

~ Contemplating Corruption

Dear Contemplating Corruption,

Over which principle are you considering ‘dying’?  Is it God’s call to honesty? Or is it obedience to the local church and, if so, is the church correct?  I suspect that untangling the issues will help.

It sounds like you live in one of the many countries where written law differs from applied law. That’s how speed laws work in the UK, incidentally – they are applied, but not strictly. Most western country laws against foreign bribery make an explicit exclusion for “expediting payment”, which morally can be classified as extortion by the official who is withholding your legal rights until he or she gets their bribe. That’s fundamentally different from bribing an official to get something for which you don’t have the right. Paying an extortionist is generally a bad idea, but it’s on a different moral level than bribery. I wouldn’t die over an extortionists demand. Read more

Lessons from the Edge: Inspired by Quality Coffee

Insights from a BAM Practitioner

‘Ben’ has spent a decade and more of his life in the specialty coffee industry. He has an unwavering passion for quality in coffee that has grown into a pursuit of quality in all aspects of his life – in business, in mission, and in relationships.

The quality of relationships in the company matter as much as the quality of the product.
In a sense, the quality of care for one another in the company is an equally desired product of the business. Let reconciliation have a major role in the company culture. Concepts we teach, like forgiveness, kindness and so on, become real and implanted in a persons character, in the context of relationships. This is where the real meaning of those company values comes alive.

Intentionally embody the mission in all aspects of the business.
I have realized that my mission is not to bring people into the church, but to help them to see Jesus. When Jesus’ values are synonymous with the company values, corporate life together becomes a training ground for life in the gospel. Business is a place where the values that Jesus embodies are taught and lived out through daily business life together.

Do business with excellence and ask God to show you all that he has intended for it. 
It is important to take business seriously and see it as something to be honored and stewarded as a gift from God, to be used for his purposes. It is important to invest my utmost into it and hope for the most from it. God designed business to create wealth and so I need to have a healthy view of money and wealth. To hope for success and growth is good!

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