By Ed McLaughlin and Wyn Lydecker
A profit-centered startup often suffers the mistaken identity of self-centered ambition. The truth is, when entrepreneurs diligently plan for profit, they can reach beyond themselves and support socially noble causes in their own backyards, their country, and around the world.
A startup centered on social impact instead of profit has an ironic twist. Instead of achieving the well-intentioned mission to create a business for positive social change, the only impact may be a venture gone broke.
Only a profitable business has the means to financially contribute to the community, provide jobs, fund 401Ks, create a revenue stream to help employees pay for health care, share in worldwide causes to eradicate poverty, and the list goes on. Indeed, Benefit Corporations – businesses with the designation and obligation to serve two bottom lines, profit and social – often list as their social impact the creation of jobs in areas of low employment and low income. Only a company with a profitable business model can meet such a mission.
Profit First – Then Make Your Impact
The best of both worlds is when a profitable business strives for social impact. Venture Capitalist, Nancy Pfund, strategizes to invest in companies that do both. “We always start with the first bottom line,” Ms. Pfund said. “If a company is not successful, there can be no impact.” (New York Times Article, “Venture Capital Firm Invests in Start-ups With a Social Mission,” by Sarah Max, October, 2014)
Nancy Pfund’s venture capital firm, aptly named “DBL Investors,” stands for Double Bottom Line. DBL Investors prioritize profit as the first bottom line, which enables the second bottom line, social impact.
According to Sarah Max’s article, this deliberate intention to invest in businesses with a clear social purpose has placed DBL investors in a rare niche and Ms. Pfund “has quietly built a reputation as the go-to venture capitalist for companies looking to make a social impact.”
Clarifying Profit As A Purpose
One of our Purpose is Profit website readers commented on our **“Ten Commandments of Startup Profit.” He said that instead of profit, the purpose of a business may be “creating a rare value by addressing a pain point or responding to a real need…For some entrepreneurs, the purpose is creation.”
We agree that any successful business has to alleviate a pain point and that most entrepreneurs are people with the inspiration to come up with a creative solution to a real need. At the same time, a creative solution can only make a difference if it is in the context of a business model designed for making money. Otherwise the solution cannot be manufactured and sold. The business cannot survive without a plan that is centered around generating profit from the get-go. It’s the thriving business that enables people to provide for their families and ultimately give back to society. This is profit with a positive social impact.
Our responsive reader summed his comments by saying, “However, I agree that profit is very important and without surplus, organizations would not be able to remain a going concern to continue providing value to their markets.”
Thanks to our engaged reader, we are inspired to write more on this topic. We are grateful for readers like him because when conversations begin, clarity can ensue.
More To Come
Look for more blogs about profitable businesses who are using their bottoms line to make a difference!
**If you missed my offer to download “The Ten Commandments of Startup Profit!” you can email me at firstname.lastname@example.org, and I will send it to you.
Ed McLaughlin is currently co-writing the book “The Purpose Is Profit: Secrets of a Successful Entrepreneur from Startup to Exit” with Wyn Lydecker and Paul McLaughlin.
Copyright © 2014 by Ed McLaughlin All rights reserved.