Don't Confuse Purpose and Profitability
Why are you in business?
Are you here to make money? Or are you here to achieve a mission?
Hint: it’s a false choice.
One of the thorniest issues I see when working with companies is how to reconcile purpose with profitability.
There are many different viewpoints on this issue—but since this is my newsletter, you get to hear my personal take. ;)
It Really Does Start With Why
Simon Sinek popularized the phrase “Start with Why,” and although he’s not my go-to for business advice, he’s not wrong.
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:
1. To contribute to a greater cause, to add value
2. To create relationships based on trust
3. To make sense out of complex things
4. To find a better way of doing things
5. To do things the right way
6. To challenge the status quo with new thinking
7. To seek mastery and understanding
8. To seek clarity
9. To simplify
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.
Why Does “Why” Matter?
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.
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:
- Messaging becomes unclear
- The people are uninspired
- You spend too much time chasing distractions
And, as you can imagine, those things can significantly affect operations as well as the bottom line.
Purpose Does Not Guarantee Profits
But there’s some nuance here that must be considered.
Having purpose is imperative. But it doesn’t guarantee profitability.
Purpose and profits are different. And the idea that one will naturally flow into one another is a little too much magical thinking.
Profitability is the result of running a good company. Having the right business model, being operationally strong, watching your finances, etc.
It is possible to live your purpose—and run your profitability straight into the ground.
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.
You may not be profitable because you don’t have the right people in the right seats.
You may not be profitable because you’re being too nice.
You may not be profitable because your gross profit isn’t meeting industry standards.
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.
What if Profits Are Your Purpose?
Here’s a question I sometimes get from my more mercenary entrepreneurs: Do I really need a “why” to be profitable?
Yes. And no.
Can you grow a business to a certain size (maybe a few million dollars) without a driving purpose? Yes.
But you can’t create a company that drives itself.
You can’t create a company that inspires your team (which might lead to all sorts of other issues).
You can’t do much to differentiate yourself in the market.
And you probably won’t have much fun.
Eventually, a lack of “why” catches up to you. Without one, you’ll find it nearly impossible to scale.
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.
Customers and employees see right through it.
The bottom line? It’s a new year, and now is the perfect time to recalibrate to your company’s purpose.
Now is ALSO the perfect time to revisit your company’s profitability. The two are related, but both require individual attention.
Need help with purpose, profitability, or both? Connect with us to see how our consulting team can support you.
Happy New Year!
