How Many Businesses Fail

Because of The Purpose?

How Many Businesses Fail Because of The Purpose

How many businesses fail because of the business purpose?

Rarely is a holistic review of a business completed when a business has failed or begins to have problems and the findings recorded publically. This makes it difficult to know just how many businesses fail because of an issue with the business’s purpose. But given the importance of the purpose, it’s reasonable to assume that it could at the very least be a significant contributing factor.

A Business’s Purpose Is Its Foundation

A business’s foundation starts with its purpose. The purpose of a business is very much like its DNA from which everything else evolves. Encapsulated within the purpose is the very reason the founder created the business. A business’s purpose comes together as a result of combining key ingredients together.

The purpose, values, and goals of the founder.
Products/services that the business will provide to solve the needs/requirements of their ideal clients
Resources available to the business from which the business will fulfill the needs/requirements of their ideal clients

Just as in baking, when critical ingredients are not included or care is not taken to ensure all of the ingredients come together to form a smooth mix, it leads to a poor baking result. The same also holds true when formulating the business purpose. Care and attention are required to ensure a great result. Unlike baking, it takes much longer to see how well a business purpose fulfills the needs of each stakeholder.

The Purpose Engages The Team

Increasingly those who are involved in working for a business are looking for more than just a steady income. Being a part of something which is making a meaningful difference is increasingly becoming important. The business purpose is that focal point that the team is able to rally behind. Such a purpose provides each individual with something that provides personal meaning and a level of fulfillment as a result of their contribution.

Not only is a business purpose good for engaging the team it is also good for the business too. A Harvard Business School Study found that 52% of businesses with a well-articulated and engaging business purpose had 10% greater growth than the 48% of businesses that didn’t.

So if an aligned engaging purpose can improve team engagement and lead to increased business growth then it follows that a misaligned purpose would have the opposite effect. What could cause a misaligned business purpose?

Misaligned Purpose

A number of possible reasons exist that lead to a business’ purpose being misaligned. One reason is that one or more of the founders’ own purposes, values, and goals are not adequately reflected in the business purpose. This may not be noticeable at first however over time the founder’s level of interest and/or work output within the business can start to wane. A business founder’s input within the business is pivotal, it has a major impact on business performance.

The business’s current resources – skills, experience, equipment, materials etc may not be adequately fulfilling the needs of the ideal client identified within the business’s purpose.

Perhaps most tellingly of all is if the purpose does not address the needs of clients, even those clients who have been identified as not ideal clients.

Purpose Fulfilled or Changed

Nothing in life is ever static or at least remains stationary for very long. Over time the founder’s purpose which was the very reason for starting the business may have been fulfilled or their purpose may have changed significantly. Because a founder influences business performance both directly and indirectly it should never be underestimated just how it impacts the business. A founder’s influence ripples out percolating its way through all aspects of the business.

Is your business’s purpose fulfilling it’s intended objectives?

If you’re interested in transforming your business and are not quite sure where to start?