Purpose is one of the key factors that drive our investment decisions since we believe it is key to building a future-proof company.
Many entrepreneurs enter a space because they want to have a positive impact on the world. They are on a mission. They see a problem; they find a way to solve it. Today purpose and profit are delicately intertwined, you cannot have one without the other. Unfortunately, many entrepreneurs underestimate the relevance of purpose which negatively influences their chance of building a successful company. Allow me to explain why purpose is so important when building a company.
Purpose keeps you going
By following the path of entrepreneurship, you’ll get to live the life of your dreams once success comes your way. But, before success comes your way you will experience many ups and downs.
Inspiration is never enough to keep you going when things get hard or when you lose momentum and feel like giving up. You must have something that is going to motivate you to push passed the obstacles and challenges when they arise. Anybody can start, but not everyone will finish what they set out to do.
The most successful people succeed because they are clear on their purpose. A strong purpose will help you keep your head in the game even when you feel like you can’t go on any further and it will unleash a fearless determination to win that you may not have realized you had.
Purpose acts as a North Star
All companies tend to pivot several times before they become successful. Twitter started as a company where people could subscribe to podcasts. HP started as a company creating a slew of electrical testing products.
If pivoting is essential, then you need a pivotal point: your purpose.
When you are clear on your own and your business’s purpose it’s easier to make decisions and assess opportunities. This could range from the new employees to the partners you collaborate with, to the clients that you are trying to attract.
Early-stage companies simply cannot explore every opportunity that presents itself. Having that compass to guide you means that you have liberty to experiment, and through doing so find out what “dead avenues” to cut quickly and where to focus on. Focusing on a few core areas increases the chance of success.
Purpose attracts and motivates employees
What employee is really drawn in and emotionally engaged by spreadsheets, data and KPIs? Time and time again over the last decade, we see research that suggests money is not the main motivator for many people. What really engages and motivates people is a story, a mission, and a purpose. Purpose trumps motivation.
Having a strong company purpose “” and clearly communicating that to your employees “” creates a shared philosophy and culture. Everyone has a part to play in that culture and makes an impact in their individual and unique way. We become an impactful part of something bigger than ourselves.
A consultancy firm surveyed 2,000 LinkedIn employees and found 41 percent could be categorized as “purpose-oriented”. Purpose-oriented employees are 54 percent more likely to stay at a company for five-plus years and 30 percent more likely to be high performers.
Since your company needs to compete in the war on talent, low staff turnover and productive/motivated employees are essential.
Purpose attracts customers
Think of Tesla, Nike, Etsy or Apple. What do all these companies share? Apart from being hugely successful, they all share a strong purpose. They all have a narrative that is used to great effect in their marketing and branding. They all have created an emotional connection with their audience.
Given all the challenges the world is facing today, people instinctively want to be a part of companies that promise to change things for the better and have a positive impact on them and the world around them. Unfortunately, many companies are falling short. In the Deloitte Millennial Survey 2020, barely half of the millennials felt that business was a force for good.
That, of course, means that there is a real opportunity for businesses to appeal to this younger, purpose-driven generation by actively showing their commitment to purpose. Doing so gives companies who do it well a competitive edge. Furthermore, data shows that customers are more loyal to purpose-driven companies.
Conclusion
Entrepreneurs need to stop seeing purpose as a “soft” concept or try to greenwash their company. The company’s purpose needs to be entrenched into the culture and processes of the company. Taking the effort to do this is a long-term play but substantially increases the chances of building a successful company. That’s why we partner with the best and brightest entrepreneurs who are clear on their own and their company’s purpose.