Why Your Companys Founding Principles Matter

As an entrepreneur, you make tough decisions every day. Whatever the challenges you face, from cutting costs to entering new markets, your company's founding principles are the bedrock that will help you make good choices and gain a competitive edge.

A founding principle is a statement of what you stand for. Today, it's not enough to simply outline your values in the 'About Us' section of your website or print them in an employee manual.

Take Method founders, Adam Lowry and Eric Ryan, for example. They were frustrated with toxic cleaning supplies, so they founded Method on one principle: "people against dirty." From toxin-free, planet-friendly products to sleek design and good, clean fun, their humanifesto explains exactly what it means to be "clean."

Related: Why Eco-Conscious 'Treps Like Method View B Corp as a Badge of Honor

"Your values have to go into the DNA of the company in order for people to believe them," says Andy Smith, co-author of The Dragonfly Effect (Jossey-Bass, 2010).

Let your founding principles guide your decisions, shape your culture, and help you connect with customers. Always look for opportunities to weave your values into your company story. That commitment will strengthen your brand.

"The biggest thing that unravels values is when you don't see people living them at the company level too," Smith says. "Transparency and consistency are really fundamental."

Your efforts will pay off. Specifically, shaping your business around your founding principles will allow you to:

Differentiate yourself. Shared values give customers a reason to choose you over a competitor, in part because the experience feels more personal. "Particularly in industries where you're a commodity, opportunities for differentiation make a big difference," Smith says.

Empower employees. A company that has strong founding principles woven into its culture has a much easier time recruiting and retaining talent. "People seek it out as a great place to work," Smith says. You may even be able to pay a little less when compensation is about the culture as well as the money.

Related: How to Sell Your Startup's Long-Term Vision

Build brand loyalty. When given a choice, consumers prefer to spend their money with companies that share their values, so a business with clear, genuine values has an easier time gaining devoted customers. "That ephemeral brand loyalty is something you can secure when you do this properly," Smith says.

Pivot successfully. Core values can also help guide you through hard times or strategic choices, especially if your company is moving in a new direction. "When you pivot you have to keep one foot on the ground, so pivot on your values," Smith suggests. That common thread will help potential consumers, employees, and investors understand your evolution.

Gain partners. Just like consumers, companies often want to partner with others who share their values. "Ultimately, potential partners are just people making decisions, so they may choose based on values," Smith says. Strong guiding principles give them a reason to align with your brand.