There's no question that profits are important to any startup or business. Yet the more time I spend in the startup world, the more I realize that profits shouldn't be our sole focus. I'm learning that profits seem to be more of a bi-product of focusing on your company's purpose or mission. Identifying the impact you want to have on the world will ultimately lead to profits and sustainable success.
The reality is that eight out of ten entrepreneurs who start a business will fail within the first year. Plenty of business leaders spend their time analyzing the entrepreneurs that beat the odds in an attempt to discern the secrets of success. Their findings may surprise you.
You don't need to study all that data though. Just look at some of the best businesses around. Airbnb, Nike and Patagonia are all examples of businesses that put their purpose first. Think about your favorite brands. Why do you continue to support them? Is it because they turn profit, or because you resonate with their mission?
The Perks of Choosing a Purpose
Focusing on the purpose of your business and what product or service you're aiming to provide will help you more easily gain the support of customers, investors and employees. It helps you develop a stronger brand and a better work environment, turning customers into brand evangelists and employees into ambassadors of the cause. Focus on purpose over profits, and you'll enjoy these three tangible benefits for your startup.
1. You'll get more out of--and more likely get into--accelerators and incubators.
Incubators and accelerators are a valuable resource for startups. I advise startups at incubators and accelerators across the country and have seen firsthand the value those programs provide to entrepreneurs. Research findings indicate that such programs can significantly improve the chances these fledgling endeavors have of becoming successful. What's especially telling is that studies indicate that prior entrepreneurial experience doesn't change the positive impacts of an accelerator program.
So, how do you get accepted into an accelerator or involved in an incubator? You may think the most potentially profitable ideas are the first applications accepted, but that's not always the case. For example, Ameren Accelerator prioritizes money and resources toward impact-driven startups in the energy technology realm rather than entrepreneurs with a strictly business focus. As the program's leaders review applications for membership in its second annual cohort, energy startups focused on making a positive impact are the most likely to make the cut. There's a long list of incubators across the country that likewise show a preference for impact-driven business ventures. That list includes Village Capital, The Global Social Benefit Institute, and Halcyon Incubator.
2. Your brand's purpose will differentiate you from the competition.
In almost every industry, consumers are inundated with options. Many businesses sell similar products, and some are virtually identical. Focusing on impact or purpose is a great way to help your business stand out from the crowd, and it allows you to offer a unique selling proposition your customers will find compelling.
When your business is able to solve your customers' pain points, they'll spread the news to everyone with a similar issue. Despite an abundance of big data and digital marketing efforts touting their high ROIs, word of mouth remains the strongest form of marketing. When customers hear recommendations from people they trust, they listen and then act on them. Focusing on impacting the lives of your customers rather than your profit margins is one of the best ways to build a brand.
Here's an example. The battery industry is well established, and every consumer eventually has a need for batteries. Duracell, however, sets itself apart from its competitors through its PowerForward program, which helps communities recover from natural disasters by providing internet access, charging phones, and offering free batteries during power outages. Adweek applauded Duracell's "Island Without Power" ad talking about Puerto Rico's struggles in the aftermath of Hurricane Maria, saying, "'Island Without Power' is an example of a brand doing activism right in the wake of political upheaval and natural disaster in a year when many brands got it very wrong."
3. Your employees will be happier and more productive.
Having a business that focuses on impact instead of profit can contribute to a much better environment at work. Work culture is so important to your business that it can actually make your employees more productive, even when financial incentives aren't enough to do the same. Almost three-quarters of American employees feel their job is more fulfilling when it enables them to positively impact their communities.
Consider CVS Health's Project Health program, in which pharmacy employees provide free health screenings to disadvantaged and underserved patient populations. The program goes hand-in-hand with the company's goal of helping improve access to affordable care, and it contributed to CVS Health being named to the Civic 50, a list of the nation's 50 most community-centric businesses.
CVS Health's investments in corporate social responsibility are a prime example of how an emphasis on purpose can lead to tangible business benefits, including more fulfilled, more productive employees and a significant brand boost.
None of this is to say that profits aren't important. At the end of the day, they are very important--as any failed entrepreneur can tell you. Fortunately, studies indicate that the choice between purpose and profits is a false one.
Joint research by Harvard Business Review Analytics and EY's Beacon Institute shows that companies focusing on purpose to drive performance see higher profitability. These findings echo those of the 1994 classic "Built to Last," in which Jim Collins and Jerry Porras reveal that over a more than 60-year period, purpose-guided companies earned six times more for their shareholders than their narrowly profit-focused competitors.
So, take your cue from these visionary companies. If you can keep the purpose of your business at the forefront as you begin your undertaking, profits are likely to follow.