The best businesses are not just about making money. It is necessary to make money to stay in business, but it is not sufficient for the business to be worth your time. That is why the strongest businesses, in my opinion, are the ones that have a purpose beyond making money. The work is more interesting for everyone involved if there is meaning for the customers, for the employees, for a certain community, or whatever it may be. Why spend your time on something that has a single payoff (money) when you can have multiple payoffs (money and meaning) from the same investment of time and money?
And, by the way, I have found that the businesses that strive to have a more meaningful purpose also can get the best financial returns.
I put together my investment fund, Greybull Stewardship, so that unique businesses have a unique alternative for financing that will allow them to maintain their strategy. Taking investment capital from an outsider means that a business owner has to incorporate the investor’s dreams, visions, constraints, and realities. By selling to traditional private equity, that means another quick, disruptive sale of the company in 3-5 years (that may be the ideal plan for some businesses, which is totally fine). By selling to a strategic acquirer, that means morphing the acquired company into the objectives of the acquirer. Greybull Stewardship allows current management and owners to continue with their unique strategy because my fund structure allows greater alignment with the current owners and fewer outside constraints.
Related Topic: Book Conscious Capitalism by John Mackey, the CEO of Whole Foods
I found recent comments by Mackey to be a helpful addition to this discussion. Mackey explained in a podcast from the Harvard Business Review that a business person should improve his ability to answer the question, “What do you do?” Ideally, the answer should not be simply to “make money.” It should be something with a meaningful purpose as a doctor says, “heal people” in addition to making a living. As he writes, “all businesses operate in a broader system thick with interdependencies. Being a conscious capitalist means that you don’t ignore those interdependencies by taking a narrow view of the impact you make. You remain aware of the whole system. . . . But here’s what you would not be signing on for: the overthrow of capitalism. . . . Capitalism is the greatest system of social cooperation and source of prosperity ever devised — and we can make it even better.”
Related posts and links:
- Investment Strategy & Structure is the #1 Thing Founders Should Watch in Raising Capital — [March 24, 2013, masonmyers.com]
- BCG Study: Superior Investment Returns From Family Business — [February 20, 2013, masonmyers.com]
- Why Business Is a Force for Good (inc.com)
- Five Take-Aways From Whole Foods CEO John Mackey’s Surprising New Book (forbes.com)