Purpose AND Profit.

I believe we can be wildly profitable AND create massive impact. We are allowed to want lots of money, build personal wealth AND also be very generous and mission driven.

If you're a business owner that feels guilty for wanting more money. If there is a part of you that is afraid that people will think you are greedy or unethical. This episode is for you.

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Go with your first gut response answer and complete the following sentences. People who want lots of money are businesses that focus on profit are. Your answer to these two questions reveal a lot about what you believe about money. More importantly, they reveal what you believe about money and business. Now, if you are a business owner, lock in, my friend. In 2017, researchers published a series of studies in the Journal of Personality and Social Psychology looking at how people perceive profit. And what they found was fascinating. People tend to assume that the more profit a company makes, the more social harm it creates. Even when they have zero evidence that the company has actually done anything harmful. So think about that for a second. We don't necessarily look at what the company actually did. Instead, we look at how much money it made, and then we make a moral judgment based on that amount. Researchers called this the profit equals harm belief. And it gets even more interesting. Simply telling people that a company intended to make a profit caused them to view that company more negatively. Nothing bad actually had to happen. People just assumed that workers would probably be exploited, customers would probably be ripped off, and the environment would probably be harmed simply because the company wanted to make money. Now, once you have a belief like this, your brain becomes very good at proving it to you. This is confirmation bias in very simple terms. You notice the evidence that supports what you already believe. So if you believe rich people are greedy, every story about a greedy billionaire becomes another piece of evidence. You see it and you think, exactly, proves my point. At the same time, your brain pays more attention to negative information than positive information. And this is called negativity bias. So the rich person behaving badly will stick in your memory, and the wealthy business owner paying great salaries, supporting their community, or even giving away millions doesn't even make it on your radar. And the more proof your brain has that wanting or making lots of money is bad, the belief quickly becomes fact. And the challenge with this is that it will be very difficult for you to create a profitable business if part of you believes it's bad, unethical, or greedy to do so. I often hear business owners say things like, I'm not in it for the money. We choose purpose over profit, or we just want to make an impact. My question is always, why does it have to be one or the other? Why does it have to be either making money or making an impact? Why does it have to be purpose or profit? Why can't it be both? I would actually argue that it is going to be very difficult, if not impossible, for you to make the impact you want to make if you don't have the profit to support that impact. And if you believe that wanting profit somehow makes you less ethical, that belief will have a very real effect on the decisions you make inside of your business. When we look at profit, all it really is is the money left over after you've paid all of your expenses. Profit simply means that your business brought in more money than it spent, which is not a bad thing. Think about what happens when your business runs at a loss. It means you don't have enough money coming in to cover the money going out. And you and I both know that this isn't something you can keep doing forever. Even shooting for break-even means that you just have enough money to pay everything. Hopefully, when you say everything, you are including a decent salary for yourself. Because if you aren't, then you might technically be covering the business expenses, but you are still working for free. Breaking even is an important milestone worth celebrating. And it also isn't a place you want to stay forever because it isn't actually sustainable. In order for your business to grow and thrive, it needs to be profitable. I was reading Craig Crabtree's book, Simple Numbers, and in it he talks about a 10% pre-tax profit as the new break-even. And it makes sense, right? If a business is spending as much as it makes, it's the equivalent of living paycheck to paycheck. It makes the business very vulnerable. You're basically one bad month away from trouble. One big client can leave, a piece of equipment can break, an unexpected expense can appear, or you can get hit with a tax bill you weren't prepared for. And suddenly there isn't enough money, which means something that would have been or could have been a minor inconvenience if there was more cash in the bank is now an actual disaster. Profit gives your business breathing room. We have all heard the instruction from the flight attendant that in an emergency you need to put your own oxygen mask on first. The same principle applies to your business. If your business cannot breathe financially, eventually you won't be able to breathe either. And the impact you want it to make through your business won't happen because the business itself cannot survive. Profit allows you to save money for slower months. It gives you the ability to get through the inevitable downturns that every business will face at some point. Profit allows you to invest in better systems, hire people, train those people, and pay them well. It allows you to improve your product or service. It allows you to make a mistake without that one mistake destroying the entire business. It allows you to make decisions from a place of power rather than desperation. And yes, profit allows you, the owner, to benefit financially from building the business. Now we need to go a layer deeper here and talk about you, the owner, because this is where I see a lot of people getting particularly weird about money. 90% of the owners I work with in my private coaching practice are playing an active role in their business. They either work in the business or they play a major role in keeping the business running. And whether you play an active role or not, this also applies even if you aren't operating the business day to day. You are still the founder or owner. You have taken on risk to start and run this business. You sign the contract, you invest your own money and time into making it work. You are the one that lies awake at 2 o'clock in the morning wondering how you are going to make payroll. And yet, for some reason, when the business finally makes a decent profit, you actually feel guilty about taking some of it. Why? Your business is an investment. If you invest your money into the Satrix top 40 or the SP 500, you expect a return, don't you? Also, at some point in your life, you are probably not going to want to work anymore. Even if you love what you do now, there will eventually come a point where you want the option to work less or stop working completely. That means your business needs to create enough excess money for you to build wealth outside of it. Your retirement plan cannot be, I hope I can be working forever or I hope I can just sell this business. Your business needs to pay you now and it also needs to help you to take care of your future self. That is one of the reasons profit matters so much. A profitable business gives you options. You can build cash reserves, invest money, pay down dates, contribute towards your retirement, and build assets outside of your business. You can take time off without panicking about what is happening in your bank account. You can be generous and you can help other people. And of course, it's true that there are companies out there that put profit before people. Companies that exploit workers, damage the environment, and deceive their customers. There are people who will do horrible things for money. But there is an important distinction to make here. It's not the money doing these things, it's the person behind the money making the decisions that is the problem. Think about a hammer. You can use a hammer to build a house, and you can use exactly the same hammer to destroy the house. The hammer itself isn't good or bad. What matters is the person holding it and what they choose to do with it. I think we need to start looking at money in the same way. It's simply a tool. It doesn't make you a villain. Even though the rich, bad billionaire does make for a good story. Almost every villain in all the movies we love is often rich. Think Lex Luther or Harry Osborne. Meanwhile, the superhero is usually the orphan or the underdog who suddenly discovers some unexpected superpower and uses it to fight evil. And if you're thinking, wait a minute, but Batman is rich and he's also a good guy, yes, he is. And he also doesn't actually have any superpowers. His money is basically what gives him the ability to build the technology, fund the gadgets, and create everything he needs to fight evil. So if Batman isn't helping me prove my point that money itself is not the problem, then I honestly don't know what will. When we label money or profit itself as bad, we create a strange situation where we start believing that good people shouldn't want too much of it. Now I really want you to think about where this belief leads us. If good people shouldn't want money, who does that leave to accumulate it? Now there are businesses that show us what becomes possible when profit and purpose exist together. And Patagonia is one of the ultimate examples of that. In September 2022, its billionaire founder Yvon Schwiner did something completely unprecedented by transferring 100% of the company's stock to ensure its future profits go directly towards saving the planet. He set up a unique structure where a voting trust protects the company's core values while a non-profit called the Hold Fast Collective receives all the money left over after running and growing the business. This means roughly $100 million in annual profits now flows straight into funding climate action and protecting biodiversity. If you are a good person, I want you to make good profits. I want you to build a strong business with a team of people who are paid well, taken care of, and proud to build with you. I want you to pay yourself well, build personal wealth so that your future does not depend on you working forever or being a financial burden on anyone else. I want you to have enough to support your family, to change your family's financial tree, to give generously and to fund the causes you care about. Purpose needs resources. Impact needs resources. And even the most mission-driven organization cannot keep surviving if it is financially unhealthy. Sister Irene Krauss, who led a nonprofit Catholic healthcare system, said it based, and this is what I will leave you with for today's episode. No margin, no mission. Share this episode with your business bastie. I'll see you again next week.