When I first became self-employed, I had no business purpose. It has taken me several years to find one. So, why did I become self-employed? I was attracted by the lifestyle and no longer wanted to work for someone. Could I use my days the way I chose?
I needed a business purpose because I’d never be happy simply living from day to day without purpose. What would get me out of bed in the morning and help me build new contacts?
I knew I could live off savings but I needed income and so found I had another aim for my business. As I worked on this aim, there was more to it than setting a financial target.
Three Aims
From my own experience, I saw three aims together define my business. For some the aim of their business is to make money. But money is never the reason a business exists. A business that defines its aims solely in financial terms lacks credibility. There is financial sense in defining three aims that together define your purpose.
“Profit is no more the purpose of business than breathing is the purpose of life.”
John Kay, a contemporary economist
This helps us identify two business aims:
Business Purpose
This answers the question: “Why are you in business?” This is an immense topic and it is covered in Simon Sinek’s classic work “Start with Why”.
Once you are clear about why you are in business, you can discern what is relevant. If you define your business by what you do, what you do constrains your activities. If you make computers, you can’t make mobile phones. If you aim to help people communicate, it helps you open new ways to meet that why – now you can make computers and mobile phones!
Your business is easier to understand and more attractive to your target market. Indeed, you have no hope of attaining your financial target without your business purpose. People need to know, like and trust your business if they are to buy from you.
It doesn’t matter whether you see your business purpose as more or less important than your financial purpose, you need both!
Financial Purpose
This is not solely about setting a target, so long as you understand it may take several attempts over several years to get there.
The other part of your financial purpose is how do you plan to get there? For example, a business during its early stages usually needs to maximise sales, while a business further down the road may need to maximise profit. How you understand your financial activity makes a massive difference. You approach sales and profit in different ways.
Remember John Kay. Finance is essential to your business but it is not the reason your business exists.
Lifestyle Purpose
A third dimension, often overlooked, is still important. What do you want from your business? This might include provision for yourself and your family, freedom, health …
This purpose influences the other two. Here are a few reasons:
- Direct impact upon your financial purpose. If you want to travel the world for 3 months every year, that has financial implications for your business and impacts on your business purpose.
- The demands the business makes on you. Do you really want to find time to manage staff?
- The demands your lifestyle makes on your business. Can you afford to take 2-3 hours per day out of your business for other activities?
- The exit strategy for your business. Do you have an age you ideally want to work until and what happens after that?
Some of the demands life makes are massive. Caring for children or others takes time. If your business has to work around these commitments, it will be different to what it otherwise would be.
Some people continue in full-time or part-time work as they develop their own business. At what stage do they let go of their safety net?
Clarity
Businesses are prone to failure where they lack clarity about one or more of these three. The point where the three purposes overlap is where you need to be. For example, if you have unavoidable childcare commitments, then you have less time to spend on your business. Therefore you need activities, compliant with your business purpose, which maximise income for least effort. This may mean compromising your business purpose or accepting lower financial returns.
Sometimes there are other options. Deciding what to do in changing circumstances is best when guided by your three aims. The decisions you make can be guided by these aims but you are also subject to something else.
Your worldview determines the decisions you make and if you are not aware of its important role, it can be another reason for failure.
