Client Journey: A Purpose Beyond Profit

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Starting and running a business can’t just be about the money. Most businesses will make their owners a moderate – not a massive — income. In this post we look at the connection between profits and business purpose and explore ways in which you should try and marry the two concepts for overall success. 

Is it viable to own a business purely for the financial benefits?

Most businesses are small businesses, and it is a sad fact that a large proportion of businesses fail. According to the United States Bureau of Labor Statistics, 20% of small businesses fail in the first year, 50% in the first five years, and 65% within ten years. 

Business survival rates in Australia are similar, with 62% making it to year 3, and only 51% surviving 5 years or more. 

In some popular industries, the stats are even worse. For example, in hospitality, 30% fail in the first year and by the 5^th year only 25% remain in business. Hospitality businesses in Australia are going bust at twice the rate that they were a decade ago. 

The late, great Anthony Bourdain observed in Kitchen Confidential that only great passion can motivate starting such a business:

“Why would anyone who has worked hard, saved money, often been successful in other fields, want to pump their hard-earned cash down a hole that statistically, at least, will almost surely prove dry?”

Even where a business is successful, there will always be a degree of uncertainty present — who knows when the next pandemic will occur, or a cataclysmic recession? Even where a business is growing there tends to be a “honeymoon period” that eventually ends and leaves the founder wondering what’s next. 

All in all, it’s not practical for any business owner to focus only on the financial benefits of owning a business. 

What could be your purpose?

So if you need a purpose beyond just the money, what could that purpose be? Here are some different ways you could think about purpose: 

• What is your passion? As Bourdain observed, hospitality really only makes sense for those with a blinding passion for food and service. This is also very common with creative businesses (e.g., photography, film or fashion).
• What problem do you want to solve? Your purpose does not just have to be about a passion per se. Here at Sewell & Kettle, we are in this industry because we saw a problem that we wanted to fix. Far too many businesses in Australia are being wound up insolvent, with no return for creditors or the original shareholders. This hurts businesses and it hurts the Australian economy. Our purpose is simple: To minimise the occurrence of insolvency in Australia.  
• What lifestyle do you want? For many, running a small business is all about creating a work-life balance and general lifestyle that suits the founders better than employment. Setting your own hours and priorities can be highly compelling to many people. Furthermore, running a business can easily support partial retirement, where at a certain level of profitability or after a certain amount of time, the founder transitions into a part-time presence in the business. 

How to unite your purpose and operations

While there is more to the business than profit, all businesses will need to find a way to marry business purpose with the practical realities of keeping a business afloat. Here is what we suggest:

• Introduce proper cash management and record-keeping. Time and again, in Australia and overseas this comes up as one of, if not the biggest, causes of insolvency and business failure. By getting the right cash and accounting systems in place you will be in a position to identify small problems as they arise before they become massive issues. This means accounting software, regular reporting, and the right guardrails to identify concerning financial issues (such as increasingly aging receivables). Read more in How to get your accounting processes back on track. 
• Commit to work/life balance. When you own your own business, there can be a tendency to become a workaholic and put your own mental and physical health at risk. This tends to hurt the business even more in the long-run as burnout and mental health issues make it difficult for you to give the business the focus it needs. Make that commitment to look after yourself and create an accountability framework (e.g., mandatory holidays) to ensure follow-through. 
• Emphasise and disseminate company values. Incorporating company purpose into a value or mission statement, and disseminating it throughout the company can be of enormous business value. According to Deloitte, evidence shows that employees who feel their company has a strong sense of purpose are 3 times more likely to stay with the company. On an organizational level, Organizations with a strong sense of purpose outperform the market by 5-7% per year. There are various ways in which a business might better disseminate company values: Leadership modelling, training, integration into reward systems and company branding can all be important parts of this process. 

Going Beyond Profit

There is no right or wrong as to why you end up in business, rather than other vocations. But whatever motivates you, it is clear that money alone is not enough. All businesses need to find a way to combine their financial motivation and broader business purpose to optimize long-term success.