What is the purpose of a business?
Purpose and value
If you are a registered company then you probably know this straight away, right? Purpose is likely to have been written into your Objectives in your Memorandum and Articles of Association. So, can you confidently recite them to your employees today? Not many people could. I mean, those were likely written years ago and unlikely to be read again unless there was a recent change of governance.
So, now after looking at them (kudos to you if you do know them), have they reignited that passion when you first set up or joined your company? Do your objectives reflect your true ‘purpose’? Probably not.
Whether you manage a registered company or not, as a business owner you are more than likely to know your purpose: to offer ‘value’ (through products and/or services) to customers, who pay for the ‘value’ with cash or equivalents (we’ll stick with calling this money). As a minimum, the money received should match the costs of operating the business. Any money in excess (profit) may be used to provide financial benefits for the owner(s); to provide financial benefits to employees (such as a business and performance related bonus scheme or other financial benefit); to reinvest in the business; and/or to be used for philanthropy. How profit is divided will be a decision made by the owner(s).
Value is always that which is designed by a business and perceived by the customer. It is where the business has the greatest opportunity to make a difference. Value is strongly linked to the real purpose of a business, and many fail if theirs is not a valid offer that the customer wants or needs and is willing to pay for. You can significantly add to your value by having a strong purpose and at this moment in time, with many businesses likely to fall victim to significant cashflow issues due to the devastating impact of COVID-19, reviewing and renewing your purpose has never been so important.
The contemporary concept of purpose (which goes beyond making profit for an individual or a small number of stakeholders) has become increasingly recognised over the last decade. Although we have seen a major growth over the last five years, the initial spike of interest in purpose was in 2008. It came as a direct response to the recession, when many organisations were forced to reject legacy business thinking and adopt new models.
Growth of purpose-driven businesses
Since 2008, the growth of purpose-led businesses has become directly linked to a new understanding of the economy and increased questioning of economic models based on continued growth. Growth is not, or should not at least, be part of your purpose and yet it is a performance indicator both internally and externally. Just think about those questionnaires or application forms you must write to state that your company is growing. If you are not ‘growing’, your ‘dying’, according to many business gurus. I’m sorry, but that does not fit comfortably with me. You can grow exponentially and increase your profits but are you adding value in equal amount to your customers? Should you care?
Purpose-led businesses have the advantage of offering something of greater value than to one customer and the stakeholders within a business. They have a superpower that benefits society (people) and the environment (planet) as well as providing an economic return (profit). In our return to a new normal, you have now, more than ever before, the undeniable opportunity to create greater value. Do this correctly and for the right reasons and your purpose as a business will be so clear and appealing, that it would be hard for anyone to justify not becoming your customer. All you must do now, is create that value. Find your purpose today!