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Don't Confuse Purpose and Profitability

Eric Crews
|
1.5.2023
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Why are you in business?

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Are you here to make money? Or are you here to achieve a mission?

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Hint: it’s a false choice.

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One of the thorniest issues I see when working with companies is how to reconcile purpose with profitability.

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There are many different viewpoints on this issue—but since this is my newsletter, you get to hear my personal take. ;)

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It Really Does Start With Why

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Simon Sinek popularized the phrase “Start with Why,” and although he’s not my go-to for business advice, he’s not wrong.

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Not sure what a “why” is or if you have one? We use the model of the 9 Whys created by Gary Sanchez. Your company is probably set up to do one of the following:

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1. To contribute to a greater cause, to add value

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2. To create relationships based on trust

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3. To make sense out of complex things

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4. To find a better way of doing things

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5. To do things the right way

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6. To challenge the status quo with new thinking

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7. To seek mastery and understanding

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8. To seek clarity

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9. To simplify

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Although your “why,” often expressed as your mission, will likely have more specific language, it’s going to derive from one of these principles at its core.

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Why Does “Why” Matter?

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A company’s “why” guides decision-making, and whether you’re an employee or a customer, you can feel it. It’s the filter through which a CEO says yes or no to certain opportunities.

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If you aren’t connected to the “why” of it all, the reason you do the work you do, your company will end up off-track at its core. And when the core of the company gets off-track, it starts to lose its identity:

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  • Messaging becomes unclear
  • The people are uninspired
  • You spend too much time chasing distractions

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And, as you can imagine, those things can significantly affect operations as well as the bottom line.

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Purpose Does Not Guarantee Profits

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But there’s some nuance here that must be considered.

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Having purpose is imperative. But it doesn’t guarantee profitability.

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Purpose and profits are different. And the idea that one will naturally flow into one another is a little too much magical thinking.

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Profitability is the result of running a good company. Having the right business model, being operationally strong, watching your finances, etc.

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It is possible to live your purpose—and run your profitability straight into the ground.

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Said another way: if you’re not profitable, it’s not necessarily because you aren’t living your “why.” Don’t let purpose become an excuse.

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You may not be profitable because you don’t have the right people in the right seats.

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You may not be profitable because you’re being too nice.

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You may not be profitable because your gross profit isn’t meeting industry standards.

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Profit doesn’t come ahead of purpose. But if you don’t monitor profitability, you may find that you don’t have much leverage to live that purpose after a while.

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What if Profits Are Your Purpose?

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Here’s a question I sometimes get from my more mercenary entrepreneurs: Do I really need a “why” to be profitable?

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Yes. And no.

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Can you grow a business to a certain size (maybe a few million dollars) without a driving purpose? Yes.

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But you can’t create a company that drives itself.

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You can’t create a company that inspires your team (which might lead to all sorts of other issues).

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You can’t do much to differentiate yourself in the market.

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And you probably won’t have much fun.

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Eventually, a lack of “why” catches up to you. Without one, you’ll find it nearly impossible to scale.

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And that purpose has to be real, too. You can’t give lip service to a “why” and then make all of your decisions based on profitability alone.

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Customers and employees see right through it.

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The bottom line? It’s a new year, and now is the perfect time to recalibrate to your company’s purpose.

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Now is ALSO the perfect time to revisit your company’s profitability. The two are related, but both require individual attention.

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Need help with purpose, profitability, or both? Connect with us to see how our consulting team can support you.

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Happy New Year!

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