“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.’Luke 14:28-29 NIV
I am sitting in a board room. We are here to get advice from a business leader who had grown his family bakery business from a corner store, into a huge enterprise he sold for hundreds of millions of dollars.
We were here because we had started what we thought was an amazing BAM project. We had built a small bakery right in a South African township. We had created jobs. We were producing bread that was the main food commodity for the community.
There’s so much symbolism in bread for Christians isn’t there? We felt like we were offering physical bread for sale, but offering the bread of life for free. How good is that?
In addition to this, by selling bread in the community we were developing relationships very quickly. Our sales people were being invited into the lives of our customers, going to funerals with them and ministering to their wider community. It seemed like a slam dunk BAM project.
So what could be wrong?
The problem was we were losing money almost every month.
We had tried everything–sourced the cheapest ingredients as possible. Tried different products. Our labour costs were already very small. We just couldn’t sustain profitability and we knew that if we didn’t solve that, we would have to close.
That’s why I was in the boardroom. I needed some expert help in understanding how to improve this business.
The bread-expert had asked us to provide him with our Profit/Loss statement and General Ledger accounts for him. In he walked, sat down, took one look at the documents and said, “Here’s your problem.”
We leaned over with interest. “Yes?” I asked eagerly.
“Your costs are way too high.” he said. “Look, your costs are 75% of your selling price. That’s not sustainable. At most your costs should be [I don’t remember the exact number but let’s say he said] 25%.”
“You either need to lower your costs, or raise your prices.”
It was in that moment I knew we needed to close the business.
I knew we couldn’t lower the costs–we had tried. Even if we could lower it somehow, there was no way we could lower it to the percentages he was advising.
I also knew we couldn’t raise the prices. We believed our bread was better than the competition, but in an impoverished township, the number one concern of customers was price. We could raise prices, but no one would buy it.
What we have since realised, was that it was never a competitive business opportunity. Whilst it was true that it was the biggest food product consumed in this community, other large companies (such as supermarkets) were likely selling at around cost, or as a loss-leader to get people to come to them for their wider shopping needs. Furthermore, they had economies of scale to allow them to produce bread much cheaper than we could.
This experience taught us what I believe is the number one thing to know when planning a BAM project. And I have since helped other BAM projects become very successful by applying this lesson learned. So what was it?
The Most Important Thing
The most important thing you can do to plan a BAM project is, before you spend a penny, do the work to write an accurate business plan.
I know this sounds trivial or obvious, but in my experience, it almost never happens in BAM circles. Why?
Perhaps it is because we believe God is in it. Perhaps we believe if we feel God’s behind it, it is sure to succeed no matter what the business plan may say. There definitely seems to be a tendency for Christians who want to start their first BAM project to have a ‘If I built it they will come’ attitude to our projects.
Wisdom, and scripture, would have another perspective. It’s called counting the cost.
We could have avoided all the expense, misspent work, and disappointment of building a business that was sure to fail if we had only taken the trouble to research the costs involved.
We could have researched the cost of the bread ingredients, worked out our production costs, and then compared them to the going market price to work out the margins. Had we done that, it would have been easy to see that this was not a viable business.
Having learnt this painful lesson, it’s the biggest piece of advice I give people seeking to start their first BAM project. Do the research, do the maths, and work out if you have a fighting chance to make a profit before you begin.
What ministry people often overlook is that in a business, everything goes away if you can’t make profit. It didn’t matter that we were making amazing inroads into the township community and were providing much needed jobs. Unless we were going to raise money to fund a money-losing bakery–which wasn’t a possibility–the business would have to close and all those great ministry results would go away. And that is exactly what happened.
What Success Looks Like
In the 2000s I used to be approached almost weekly by a young-bright-leader who was convinced they’d come up with an amazing BAM idea that no one else had thought of: a Christian coffee shop.
They had all sorts of dreams of ethically sourced coffee, paying their employees huge wages, setting up artists to work in the shop, and waves of people coming to Christ just by showing up and buying coffee.
I applaud the idealism. All groundbreaking ministries need a healthy dose of idealism to power them through the tough starts. However, maybe it’s because I’m not a coffee drinker. Or maybe I was sceptical after the bakery business failure. The fact was, I was not keen on anyone starting a Christian coffee shop.
Not only had I seen them fail, I just couldn’t see how the maths would ever work out. How can anyone create a coffee shop that could compete with the major brands and hope to be sustainable when they wanted to add all these extra costs to the business that the major brands didn’t have?
I even used to joke that because this was such a popular idea, I should start a business that sold all these idealistic rookie BAMers a ‘coffee shop in a box’.
Then, after a few months, I would sell them a ‘recovery’ plan for their failing business. Then eventually I would sell them a ‘liquidation’ plan. ‘Now that is a winning business’, I would joke.
I thought this was pretty funny, but I soon learned that God had an even bigger laugh in store for me.
Paul was referred to me by a friend. He was a youth pastor with a business degree, and he wanted to start a coffee shop. He had asked to meet me to talk about it.
Sceptical as I was, I still met with him. I often enjoy helping people with the zeal to start a new project. In my mind I was going to help him by stopping him making a big mistake.
Paul was impressive. He told me the whole story about why he felt led to begin this project, and I felt the strange feeling that God really was in this idea.
Eventually, Paul asked if I would join the founding board of this pie-in-the-sky coffee shop. I told him I’d pray about it.
When I asked the Lord about it, I had this sense that God wanted me just to be honest with Paul about what I felt. So I told Paul, “I’m happy to serve on your board, but I need to let you know, I don’t think this is going to work. Are you sure you want me to be on the board if that’s the case?”
To Paul’s great credit, he answered, “That’s exactly why I want you on the board. I want you to ask the hard questions.”
And so I did.
Each board meeting, I would hammer Paul. Had he visited the existing coffee shops in the surrounding area and count how many coffees they sold a day? Had he worked out the costs of each product? Had he worked out the labour costs, the location costs, etc.
Out went Paul and did all that was asked of him, compiling data as he went.
Eventually we came to the big meeting where the board was going to decide whether or not we should take on the lease Paul wanted. This was serious as the lease seemed very expensive to me, and I thought there was no way a coffee business could sustain it.
As we poured over the maths of the business plan, the decision became clear. Paul pointed out for the business to break even, they would have to sell 80 coffees a day. The average coffee shop in that area sold over 200 coffees a day. This was a no-brainer: They signed the lease.
It turns out that Paul’s coffee shop, named Kahaila, on a weekend sells over a 1000 cups of coffee a day. Under Paul’s leadership the coffee shop has thrived and has an annual revenue of several hundred thousand pounds. Paul has opened further coffee shops and started several new BAM projects using the funds Kahaila generates.
God had the last laugh at me–with Him, even a Christian coffee shop can be successful.
The moral of the story is that if you’re new to BAM, and learning what you need to do in order to start a successful BAM project, there are some does and don’ts.
Do let idealism inspire you. Allow God to help you see things that other’s can’t see.
Don’t let the idealism run the project. Do the work to make sure you’re channelling your idealism through wisdom.
Do the research to gather the necessary data to put a business plan together that can help you make an informed decision.
Don’t start the project in blind faith expecting God to magically make you money for no other reason than you think He wants you to do it. God has given us tools to help us use wisdom to bring His plans to fruition.
Do recruit some people experienced in the industry and business to help you know what you’re looking for when doing your research and calculations.
Don’t spend a penny to start the project until you’ve done the research, compiled the data, done the calculations, written the business plan, and had some outside help to validate your findings.
Do start great BAM projects! The world needs more of them.
If you’re able to follow these guidelines, your project has a much greater chance of being successful–which will take you on an adventure beyond probably anything you can imagine.
May God get the glory.