Momentum Podcast: 826
The Purpose of your Business
by Alex Charfen
I tend to have contrary opinions regarding successfully running a business.
One of my opinions that contradicts many is it there is one singular most crucial purpose of any business.
The most important purpose is not to make an impact, change the world, or even fulfill your promise to your customers.
There is something that is far more important.
This is not discussed enough in the entrepreneurial world, and I want to change that.
Listen to this episode and get clear on the most important outcome your business can achieve.
Full Audio Transcript
This is the Momentum podcast. There is a singular purpose of your business, and it's probably not what you think. This week I sat down with a friend of mine who has a company that is losing money and is in a place where it needs to turn around and things need to start going in the right direction. And I mentioned to him, hey, you know, this company is not your company’s not doing well. We need to figure out what you're going to do to turn this around, he said. You know, but Alex, we're making such a big impact with our customers and we have this team that we love. It's a dream team. And, you know, we're doing great things. And I said, Yeah, but this company has one singular purpose, and I'll share what I told him in just a moment. I'm Alex Charfen and this is the Momentum podcast made for Empire Builders Game Changers, trailblazers, shot takers, record breakers, world makers and creators of all kinds. Those among us who can't turn it off. And don't know why anyone would want to. We challenge complacency, destroy apathy. And we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Should we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will? We don't accept our destiny. We define it. We don't understand defeat because you only lose if you stop and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority. The few who are willing to hallucinate there could be a better future. And instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly the most important people in the world, because entrepreneurs are the only source of consistent, positive human evolution. And we always will be. There might be some people out there that disagree with me, but I've been consulting with entrepreneurs and growing businesses myself for over 30 years, and I've been inside in the financials, in the planning, in the meetings, in the organization of hundreds of companies, thousands of companies. And, you know, at one point, Katie and I had 50,000 members and one of our products. And we have seen over and over again, I've seen over and over again that entrepreneurs get confused as to what is the purpose of the business. And the purpose of a business has one purpose. Every business has one purpose. Are you ready for it? It's to make money. It's to be profitable. The purpose of a business is to make money and be profitable beyond anything else. This is above all else. When somebody says, “But Alex, making an impact”. Look, you can't make an impact if your business isn't making money. Eventually that impact is going to stop. If you're losing money, you can't continue to fund the business indefinitely. You can't continue. Even if you're raising money to fund the business, you can't go indefinitely. And we've seen so many examples of that recently in the greater market, where companies have taken on tons of funds. They haven't made money, but they've had this great promise. And then. The company collapses. And you don't have to look very far to see examples of just how many companies this has happened to. It's happened to Uber, it happened to burn scooters. It's happened to just so many different organizations that are making money because the purpose of a business is to make money. And when somebody says, we're making an impact, here's my belief. You prove what an impact you're making. Through being profitable, you prove just how important you are in the marketplace by making money on a monthly, quarterly and annual basis. You prove your value as an organization by showing that you can be profitable. And when when entrepreneurs start focusing on anything but profitability, it makes me nervous for them and it makes me nervous for their team, and it especially makes me nervous for their customers, especially if they're making an effect on their customers, because it doesn't matter how much the team loves what they're doing, it doesn't matter how much your customers love you, it doesn't matter how excited you are about the impact you're making. If you're not making money, your company is in jeopardy. And you might hear in my voice, you might hear in my tone that I'm kind of adamant about this. And the reason is because I've had this conversation with so many entrepreneurs where there's this level of confusion that, hey, what I'm really doing. And they say things like, But I'm really optimistic and I'm really excited about what we're doing. The team's really excited about what we're doing. But all of those things are immaterial if the business isn't going to be around. You can't employ a team forever if you're not making money. You can't continue to work with your customers if you're not making money. And the entrepreneurs say things to me like, Well, but we're investing in the business. If you're investing at a loss that has a termination period, that will end. And if you're investing through optimism, instead of looking at what the company really needs to grow, and you're just looking at it and saying, hey, we're going to make a bigger impact, and you're not actually saying, here's what we need so that we're a profitable organization that, again, has a termination period. It's going to stop. It's going to end, your company is going to go away. And the reason I'm so adamant about this is because I don't feel like enough coaches, I don't feel like enough consultants. Talk about the purpose of business is to make money. In fact, I've been in too many meetings and too many events and too many masterminds where people talk about the purpose of a business being something else. Where people talk about the purpose of a business is to help people, and the purpose of the business is to make an impact in the purpose of the business is to change something in the world. By the way, I believe all three of those are true right behind making money that comes first. And so if you're in a situation where your business isn't making money, you're not profitable or you're not making as much as you think you should be making or you want to make more money. Here's some of the things you can do. Number one is to reduce expenses. Make sure that every dollar you're spending in your business is a dollar that's going to something you need right now. If you're investing in the infrastructure you need in the future, if you're investing in the software you need in the future, if you're investing in the people that aren't fully utilized today that are going to be used in the future, that may be one of the reasons you're losing money right now. The best way to grow a business is to bring in the resources into that business as they're needed not so far in advance that they become operational drag on the business. Operational drag is anything that is not fully utilized, but it's being paid for. That means there's a software program that's being paid for that's not fully utilized. That means there's people that are being paid for that are not fully utilized. That means there's equipment that is being paid for. That's not fully utilized. Sometimes you have to make an investment in equipment or investment in a person or an investment in software. And, you know, you're not going to utilize it, but you have a plan to get there. That's inevitable in businesses. Sometimes we have to make that investment. But what I see far too often is in entrepreneurs use optimism. Our positive attitude, our positive outlook, our optimistic view of our business to make decisions for things that we don't need right now. And oftentimes we bring them into the business way too early. And when we're paying for something that's not fully utilized, it creates operational drag, and operational drag destroys companies. In fact, if you have a company that's doing well, if you have a company that's growing and you have you create operational drag by having any type of resource it's being paid for and not used. It can hurt everything in the business. I use one example if you have a team and everyone on the team is working hard and everyone on the team is doing what they need to do and they're all putting in a full effort and they're fully utilizing. You have one person that you've made a, quote unquote investment in and you've brought them in early where they don't have a full time job yet, where they don't have enough to do yet. But you're investing in the future and that one person is underutilized. They can destroy the productivity of an entire team. And does that sound dramatic? I hope so. I've seen it too many times. I've seen it too many times where an entrepreneur says, wow, but I feel like we're going to need this person in a few months. I feel like we're going to need this person next quarter. There's a project coming up next year where we really need to have this person in place. Let the company tell you when you need those things in place by using a buyout, by tempering your optimism with analyzing what the business needs consistently because your business needs to make money. So here's a solution besides just reducing expenses and making sure every person is fully lysed. Use a decision making framework to understand what your business needs right now. Most entrepreneurs. And when I say most, I'd say like over 90% of entrepreneurs make decisions based on how they feel, make decisions based on inconsistent feedback from their team, and make decisions based on what someone else is doing or what they saw in a mastermind or what they saw in the most recent event that they want to. They don't use a framework to consistently analyze the business, understand what it needs, prioritize those things, commit to getting them in the business and bringing them in as necessary. I've created a framework that does in fact, this is my most stolen content, and I kind of say that tongue in cheek, but I also say it pretty seriously. It's called the five core functions of business, and it's been written into tons of books out there. It's been written into other people's programs, and there's a reason it works. Once you start using this, you will see a dramatic shift in your business where it will increase profitability. It will help you make more money. It will help you meet that primary purpose of being a business and making money and the five core functions is a simple framework. I run a company called Simple Operations. I try to simplify things as much as I can because business is complicated and anybody who tells you it's going to be easy is lying to you. Run away from them. But I can help you simplify the difficulty of running a business. It's not going to be easy, but it will be easier. And the five core functions are lead generation. Every person is, every business is in the business of generating leads. The second one is lead nurture. What do you do to get that lead to a conversion of that? To get them to a sales page, to a call with a convert, to get them near your showroom floor, to get them into your building so that they will buy something. Then there's conversion, the actual act of sale. How are you doing that? Are you doing it on a webinar? Is it a 1 to 1 meeting? Is it on a sales call and then delivery? Everything that it takes to deliver your product, your service, your solution. And then the fifth of the five core functions is really three sub functions. There's retention, making sure people don't return the product, there's upsell, selling them something else, and then there's resale, reselling them over and over again. And for your business, you may focus on one or two or three of those. And so the five core functions summarize is lead generation nurture, conversion delivery, retention, reselling, upsell. Make up the fifth. If you focus here, it will dramatically change how you make decisions in your business. And if you put your investments in your business into these five core functions by looking at them on a quarterly basis, ranking where you are in each one of those five, and then making decisions to improve the business where it actually needs it, not where you feel like you need it or not, where somebody else is doing it or not. Where somebody in a mastermind told you that you might want to look. You'll start seeing your business meet that primary purpose of profitability. I've created a free report called the Five Core Functions Demystified, and you can go grab it right now if you go to predictable business systems dot com, predictable business systems dot com and you can download the five core functions and it has the decision making matrix, it has the scoring matrix, it has an in-depth explanation of each one of the five core functions. And this will help you make better decisions in your business, because here's what I want to make sure of as an entrepreneur. I never want you to lose your optimistic perspective towards the world. I never want you to lose the excitement that you have for your business. I never want you to lose that ability. You have to sit in the chair. A visionary entrepreneur that would scare 99% of the population wouldn't be able to spend just a half day making the decisions that you make. I don't want any of those things to go away. But here's what I know. If over time your business doesn't make money, if over time you are failing financially, if over time you are coming out of pocket or dipping into savings or taking loans to run your company, your optimism, your abilities as an entrepreneur, your perspective as an entrepreneur, your ability to be a visionary will all be severely challenged. And so I want you to balance your optimism. With the right analysis and data from your company and the five core functions will help you do that. So go to predictable business systems dot com. Download the five core functions decoded. It'll take you less than 10 minutes to read it. You can analyze your business right now. It'll probably take you less than 5 minutes and you will immediately see where you can invest in your company to move things forward, to grow the business, to have the resources you need right now, not tomorrow. And hit that primary purpose of growing a business, making sure you are profitable, you're going to stick around and you can continue to do what you're doing. Predictable business systems dot com. Go download the five core functions decoded. It's going to be a game changer in your business.