Watching Your Numbers: How to Be Realistic About Your Financials

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Dear BAM Mentor,

I am aware of the tendency to be a bit idealistic when working through the Financials section of a Business Plan. As I start thinking about the numbers, what are the hard questions I need to ask myself – or invite others to ask?

~ Crunching the Numbers

Dear Crunching,

The financial section of a business plan – this is where the rubber hits the road! Unless the BAMer pays attention to the finances, the business will not be around for very long, and any missional impact will be cut short. 

Whether you are a business person looking to raise capital for a growing business, or a new entrepreneur looking for start-up funds, you will need to to work on your figures. You can be as enthusiastic as you like about all the potential opportunities and impacts, but unless this enthusiasm translates into numbers, based on some valid assumptions, you will be walking on very thin ice.

Over the last 10 years I have been constantly astounded by the lack of financial acumen in the BAM movement. One major challenge I’ve found in working with BAMers is getting a valid set of financial statements. This lack of acumen isn’t necessarily intentional in many cases but it certainly is prevalent. I think this is largely down to two reasons:

1. Some eventual BAMers go in very naive about business and aren’t taught how or why they need to look after finances. I had one missionary tell me that if he couldn’t get a missionary visa then he would simply start a business, his attitude was, “What could be easier?” Ignorance is bliss, but not for long!

2. Other BAMers are flying by the seat of their pants. Being a pilot myself I know that, indeed, valuable information is transmitted through the pilot’s seat. If, for example, there is suddenly less pressure on your bottom you know that you are nosing over or have entered a downdraft. Some BAMers do have an innate sense for business. They can feel when things are right or wrong. They follow rules of thumb. Often this can work very well, but just as often flying by the seat of your pants can lead to disaster. One BAMer I spoke to had no idea what the margins were on their products. I asked another if they were going to be profitable for the year and they responded, “I think so, we’ll see when the books are done.” Yet another admitted to making up the numbers on their financial statements, explaining, “You asked me for numbers and I gave you numbers.” Sigh.

What I try to explain in all my contact with BAMers is why they need to pay close attention to the financial statements, in addition to other measures and goals. Running a business without proper financial controls is like driving a car down the freeway blindfolded. You don’t know where you’re going but you’re getting there really quickly! Soon, a curve will come along and you’ll no longer be in business.  

Assuming you have confidence in the data in your financial statements (get a real accountant to prepare the statements and there will be fewer errors in them) the following issues have to be addressed by the BAMer or the person looking over the company’s finances:


Make sure you know the margins on all of your products. One BAMer I advised did not know that one service they offered had zero margin – in fact the more they offered it, the more money they lost! Their response was one of surprise but they kept on providing the service in order to meet their ministry goals. It’s fine to do this but you must know what your overall company margin is. Proper margins are required to cover all company expenses: wages, utilities, rent, promotional materials, etc..

Cash Flow

Make sure you have a really good handle on your cash flow.  Many profitable businesses have failed because they tried to grow too quickly and ran out of cash for supplies and wages. Even more businesses have failed due to lack of courage on the CEOs part to charge proper prices for their products and services. This results in not enough money coming in to pay for all of the above mentioned expenses. 

In addition, do not let someone else look after the cash flow and have appropriate checks and balances for anyone handling cash. In some cultures for example it is virtually impossible for a national to look after company cash and not be pressured by family to “assist” them by dipping into it. Similarly, I have seen multiple instances where a company partner treated the company cash as their own.

Balance Sheet

The Balance Sheet holds many clues as to how a business is doing. Look at the inventory levels during the year. Inventories rise and fall due to business cycles. Is there enough inventory for the coming season? Is there inventory that should have been sold but is still in the warehouse? Find out why. Compare changes in the Balance Sheets from one time to another and understand why the changes are happening and if they look proper.


Make realistic estimates of overheads, these are activities that absorb cash but don’t generate cash. Are your overheads realistic? For example, I have seen situations where the owner expected to make the same salary in their local situation as they did back in their native country and this was sinking the company. 


Put all costs and revenues together in a Profit and Loss Statement (P&L). Look at what the trends are from one month to another. Are you making sound financial decisions? At the end of the year, your company should be making at least 5% to 10% profit on sales. If  you sell $100,000 worth of goods or services then you should have $5,000 to $10,000 profit left over a the end of the year. If this isn’t happening then the company is in for trouble.

by Garry


Read another Response on this topic:

From Mike Baer:

There always seem to be two extremes when it comes to the issue of financials in business planning. The first is what I term “magical thinking” and says, essentially, “Since I believe that God is leading in this business it is sure to succeed. Why waste time on financial plans?” The second and opposite says, “My business plan needs to look like something for a Harvard MBA project so I will be perfect on the numbers.” Both, as most extremes, are wrong.

I can fill volumes with stories of businesses that God “led” people to start that failed miserably. I can also point to businesses that either failed or failed to start in spite of incredibly deep and thorough financial analysis. However, I think we can resolve this dilemma based on some words that Jesus spoke related to discipleship: [Read More…]

is a retired businessman who has been mentoring small businesses for the last 20 years. He has been involved in cross cultural business activities for the last 10 years and has visited 20 countries during that time. Garry and his wife are doing small business training and funding in a restricted access country in Asia.  Having started, grown and sold his own business he understands the trials, potential pitfalls and necessary success factors of day to day business activities. He continues to learn and share about the cross cultural aspects of business and especially the need to learn about and manage expectations in the local cultural context.

Garry is a regular Mentor on our panel. Meet the ‘Ask a BAM Mentor’ panel of mentors

Submit a Question to the mentors panel via the Contact page, select ‘Ask a BAM Mentor – submit question’ as the subject.


Join us for our Business Planning Part 3 series on The BAM Review Blog, looking at financial planning and people planning. Have your say on social media on this topic by following us on Twitter or Facebook.


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