5 Takeaways From an Entrepreneur's Profit + Purpose Social Business Model For once, profit is not the enemy, but rather a catalyst to drive social good

By Jared Polites

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Sustainable business models and social entrepreneurship have been gaining mass popularity around the world as at least one-third of startups now aim for social good. Prior to this shift, social entrepreneurship was often met with confusion, with blurry lines around profit and social impact. These businesses were often met by skeptics that were concerned that social elements could be a branding ploy to profit off of what appeared to be a good cause.

Consequently, in 2006 a company called TOMS revolutionized social entrepreneurship with a One For One model to provide a free pair of shoes to someone in need for every pair purchased. This model has since inspired hundreds, if not thousands of companies around the world to transparently leverage a for-profit model with social good. Perhaps for the first time, it was seen as acceptable and even encouraged to make money while doing good for the world.

One of the Founding Members of TOMS, Jake Strom, has since dedicated his professional life to investing in and consulting companies on how to incorporate social business models into their existing businesses and help new companies scale with purpose in mind. He has coined this as a Profit + Purpose model that encourages for-profit ventures that have deeply woven social benefits attached. For once, profit is not the enemy, but rather a catalyst to drive social good.

A deeper look at this focus and Jake's business philosophy yielded a handful of key takeaways that any entrepreneur can apply and or learn from when thinking of social elements.

1. Create Evangelists, not Customers

When launching a new business, part of your key branding element is your company's story and how that resonates to consumers, investors, and partners. In a fiercely competitive marketplace, your brand needs to inspire customers to become fans and evangelists. If you fail to do so, you risk getting lost in the noise.

Strom explains, "Simply put, giving is good business! When you tell a captivating story and back it up with authentic giving, you have the opportunity to speak to customers in a way that traditional brands can't. No matter what industry you're in, being remarkable will always be a competitive advantage."

2. Popular Perception Has Shifted

In the early days of TOMS, the idea that a for-profit business could do well and do good at the same time was surprising to people. TOMS and other social businesses at the time received criticism from traditional investors who argued that there was a direct conflict of interest between a for-profit company that is labeled as a social business. Companies, they argued, are only concerned with bottom-line profits and ultimately prioritize profit over purpose.

Through time, with the success of TOMS and similar companies, perception changed as the model was proven to work and millions of people showed their support. For Strom, this change was "inevitable" and sees this model as the future.

"In the same way that staying in a stranger's house once seemed weird (hello AirBnB), popular perception has shifted on mission-driven businesses. Moving forward, entrepreneurs will increasingly marry Profit + Purpose in new and innovative ways," says Strom.

3. Purpose-Driven Brands Can't Take Shortcuts

While creating a social enterprise is commendable and will help get the support of many people, the business model still needs to work. Entrepreneurs need to test and prove assumptions, gather data and feedback, and be relentless with growing and improving their business as they scale. Make sure there is an addressable problem that is being solved. In some cases, you may find that a social business model is not the right one to pursue.

Strom adds, "Keep in mind, positive intentions alone are not enough to make your purpose-driven business successful. Like all companies, purpose-driven brands need to be good businesses. That means offering high-quality products, maintaining healthy margins, and attracting customers in a cost-effective manner. The most beautiful Giving Story will not cover-up poor business fundamentals, so focus equally on Profit and Purpose.

4. Think Long-Term

It's imperative that mission-driven companies balance the demands of Profit vs. Purpose. That doesn't mean being perfect, but instead making a sincere effort to put people, planet and long-term sustainability before short-term gains.

For example, advertising discounts and promotions drive more short-term revenue than sharing giving updates. Should purpose-driven companies scale back giving and focus more on discounting? No. The goal of every company, and particularly mission-driven brands, is long-term prosperity instead of quick revenue hits. A growth-at-all-cost mindset is reckless and unsustainable.

5. There is Never a Perfect Timing

For some entrepreneurs, not having resources can actually be a blessing-in-disguise. TOMS was famously started in a cramped Venice, California apartment by a team with no experience in the footwear industry or in philanthropic giving. Entrepreneurs should not hold themselves back due to not having enough resources or knowledge.

In Strom's words, "If you have a great business idea and the passion and determination to make it happen, start with what you have. Don't wait for the stars to fully align in your favor because they likely won't. The learning process will happen within the journey."

Jared Polites

Venture Partner, 7BC

Jared Polites is a Partner at LaunchTeam, a niche marketing agency and accelerator that leverages a private network of expert partners to drive growth. He is also a venture partner at 7BC, a multi-stage VC firm. Jared writes often about entrepreneurship, decentralization, and lifestyle design. 

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