Purpose, joy and Verafin’s $2.75 billion exit

Last week’s news of St. John’s, NL-based Verafin’s sale to Nasdaq for $2.75 billion has many business owners in Atlantic Canada saying Wow! – myself included. In fact, when I shared a link to an article about the sale on my Facebook page, that’s the only word I added to the post: Wow. It’s all I could think to say at that moment. 

After I heard about the deal I headed to Google to find some more information about Verafin and its founders. I came across an article in Entrevestor from 2014 in which Verafin co-founder and CEO Jamie King spoke about the culture of the company. A quote from that article: 

“King stressed […] that Verafin is perpetuating its winning formula by developing a corporate culture that stresses six facets: purpose, value, growth, reward, freedom, and joy.”

I was struck by this sentence because, of the six facets listed, four of them feature prominently in my business—and in the work I do with small business owners.

Value and freedom are two of my business’ five core values. Value, in the context of my business, means a commitment to over-deliver to clients so that they get at least 10x value from my services. And freedom, for me, signifies that being a business owner is a means to enjoy time freedom and financial freedom (and resisting at all costs becoming a slave to one’s business).

Purpose is the first P in the 4P model I use in my work with small business owners. It’s the first P because, to me, that’s where it all starts in business. If you don’t know the purpose of your business—why it exists, what it is trying to accomplish, and how the world will be different because of your business—then it becomes very hard to do any meaningful planning (the second P) whatsoever. (To quote Yogi Berra, if you don’t know where you’re going, you might wind up someplace else.) That purpose is the first of the six facets in Verafin’s corporate culture makes me think that King views the importance of purpose in a similar manner.

Joy is the last of the four, and is the one that most jumped off the page when I read the article. Joy (or enjoyment) is one component of the triple bottom line concept that I work on with small business owners. (The other components are profit and impact.) Joy is often forgotten as a measure of success in business, ending up as casualty to the endless pursuit of profit and growth.

So to see that Verafin, a company that went from start up to $2.75 BILLION in just 17 years (Wow!), focused on joy throughout its now famous corporate journey, was very inspiring. It makes me more confident than ever that the profit-impact-enjoyment triple bottom line is the right approach to help entrepreneurs build a business and a life that works. 

Now whenever anyone suggests to me that joy in business is a nice-to-have, but not a core component, I can respond with one word.

No, not Wow.

Verafin.

Give some PDA to your IPOs (it’s not what you think!)

Disclaimer: If you’re looking for an article about public displays of affection for initial public offerings you’ve come to the wrong place!

This article is about one of the great irritants of the business world: issues, problems, and opportunities (IPOs) that go unresolved for weeks, months, and years. 

We’ve all experienced it. Talking about the same issue, problem, or opportunity meeting after meeting after meeting and never deciding what to do about it. We sit around the table (or at least, we used to) and talk about, around, and up and down all the IPOs in our business but rarely come to a decision about what to do about them. We LOVE to kick the can down the road.

And on the rare occasions that we actually make a plan to deal with an IPO, we rarely execute on the plan. At the next meeting, we talk about why the plan didn’t work, or why we didn’t have time to get to it, or some other way of further kicking the can down the road.

Sound familiar?

If not, then you’re the exception to the rule and no need to read on. But in my experience, there are very few exceptions to this rule.

So how DO you deal with the IPOs in your business?

Simple…you give them some PDA.

First you Prioritize them. Then you Discuss them. Then you Address them. 

At your weekly leadership team meeting, the majority (at least two-thirds) of the agenda should be allocated to giving some PDA to your IPOs. 

Let’s look at each element of the PDA concept:

Prioritize

Right now your business has a laundry list of IPOs that need to be dealt with. You can’t deal with them all at once. You need to tackle them in order of priority (not in the order that they surfaced in your business). 

How do you do this? First, you need to keep a central running list of IPOs in your business. A parking lot of sorts, so that you don’t lose track of them. Any time an issue, problem, or opportunity comes up in your business that can’t or shouldn’t be addressed same-day, it gets added to the running IPO list. 

At your weekly leadership team meeting, you take a scan through your IPO list and decide as a group which are the top three priorities. Ask yourself, which of the IPOs on the list, if addressed, are most likely to move your business forward or, conversely, most likely to remove a bottleneck in your business? Those are your top priority IPOs.

Discuss

Once you’ve prioritized your IPOs, the next step is to discuss them. This involves making sure you have clearly identified the IPO at hand. What are its essential components? If it’s an issue or a problem you are discussing, what is its root cause? You don’t want to spend time dealing with a symptom of a problem that will be sure to resurface. The goal is to solve the problem once and for all, and to do that you need to deal with it at the root cause level.

A good technique to do this is “The Five Whys” which, according to Eric Ries in The Lean Startup, was first developed at Toyota several decades ago. As the title of the technique suggests, you get to the root of the problem by asking Why? five times. By doing so, you might discover that the actual problem is not what you first thought. Maybe what you thought was a people problem is really a process problem. Maybe what you thought was a process problem is really a planning problem. The Five Whys will help you find out.

For a deep dive on The Five Whys process, you can check out Ries’ article on the topic

Address

Once you’ve discussed your highest priority IPO from all angles, and have figured out the root cause if it’s a problem or issue, the next step is to address it. By addressing it, I mean that you MAKE A DECISION on what to do about it. Something big. Something small. Maybe even nothing at all. Whatever the decision is, someone is tasked with carrying out the decision, and it becomes either an action item to be reported on at the next weekly meeting or, if a bigger solution is required, it becomes a quarterly building block for the assigned person. The IPO then comes off your IPO list, and you can move on to the next highest priority IPO. 

The process of giving some PDA to your IPOs will take some getting used to, and may feel a little clunky at first. It will take practice for your team to hone its PDA skills, but the effort will be more than worth it in the end. Imagine only talking about an issue, problem, or opportunity once, and dealing with it efficiently, so that it doesn’t keep cropping up and derailing every one of your team meetings. And imagine systematically knocking IPOs off your list every single week. How much further ahead will your business be as a result?

The Foundation and the Flywheel (Or, the two things that lead to more profit, impact, and joy in your business)

I have written about how the three most important measures of small business success are profit, impact and joy. In my view, truly successful businesses are those that are:

  • Profitable– they consistently generate the profit required to support the business’ desired growth and impact.
  • Impactful– they make a difference in the world, by improving the lives of customers, employees, and communities.
  • Enjoyable– they bring joy to the business owner(s) and, ideally, to all stakeholders of the business.

I call these “Whole PIE” businesses, and I love my work helping small business owners turn the frustrations of wheel-spinning, misalignment, and inefficiency into the joys of running a Whole PIE business. 

How do we do that? 

By working together with the owner(s) to build two things into the business: The Foundation and the Flywheel.

The Foundation

We start by shoring up the Foundation of the business, which consists of clarifying and aligning the 4Ps of the business:

  • Purpose 
  • Planning
  • People
  • Process  

Through a structured, step-by-step process using foundational business concepts and an array of practical tools, we clarify why the business exists, where it is trying to go, and the roadmap to get there. Then we make sure the business has the right people in the right seats, and defined processes for each core function of the business.  Lastly, we vet the 4Ps to make sure they are all pointed in the same direction and free of any damaging misalignments that inhibit success.

Pretty much every small business has at least some cracks in its Foundation, but often it is tough to see them—much less fill them—from within the business. Going through the process of clarifying and aligning the 4Ps helps to fill those cracks, shoring up the Foundation and getting the business ready for the next step: the Flywheel.

The Flywheel 

The Flywheel is a metaphor borrowed from Jim Collins in his seminal business book Good to Great. Collins discovered that the great businesses he studied all achieved success not in one fell swoop or due to a single dramatic event, but rather through consistent effort and persistence that creates its own momentum over time. 

In my experience, building the Flywheel in a small business is a process that involves four things:

  • Holding team members accountable
  • Identifying and regularly monitoring key data
  • A set weekly meeting cadence and structure
  • An effective method for solving problems

More often than not, the reason most small businesses fail to achieve their objectives isn’t because they have the wrong strategy; it’s because they fail to diligently execute on that strategy.  

And the reason they fail to diligently execute on the strategy is because, left to their own devices, it’s almost impossible for a business owner to stay focused and disciplined enough to do it.

There are so many demands on a business owner’s time and attention that very few have the bandwidth or resources to lead and monitor executing on the plan. That’s why a structured system of accountability—the Flywheel—is so important for small business success.

When you put a clear, aligned Foundation together with a robust, relentless Flywheel, the inevitable result is more clarity, focus, efficiency, transparency, and accountability in the business, which in turn allows business owners to generate more profit, create more impact, and experience more enjoyment in their business. 

Are contradictions leading to destruction in your business?

Years ago I tagged along with my wife Shelley to a business/personal development conference in the mountains of Colorado. I was skeptical at first about taking five days away from my work to attend, but Shelley had been to this conference a couple of years before and pleaded with me to join her for her return trip. 

It turned out to be a transformational experience for me and, quite frankly, it positively changed my outlook on many aspects of the world around me. In this article I’d like to share one of the takeaways from the conference that I think is valuable for all business owners to consider:

Contradictions lead to destruction.

Let me explain.

On the first night of the conference, about 9:30 or so, a guy named Patrick Gentempo began a presentation called “The Five Branches of Philosophy.” I thought to myself, Good God, what have I gotten myself into? Which way to the bar?? But at Shelley’s insistence, I hung in there.

Gentempo is a doctor of chiropractic and an accomplished entrepreneur (and more recently, a best-selling author) and he credits the practical application of philosophy for much of his success in business and in life. His presentation ran a good 3-4 hours, and to my great surprise given the time and the altitude, I was absolutely riveted to his words from start to finish.

The presentation introduced me to some of the ideas of Ayn Rand, the mid-20th Century novelist and philosopher, and author of The Fountainhead and Atlas Shrugged. Gentempo shared with the audience Rand’s idea that we all have a philosophy in life—our views and ideas and premises about the world around us—but most of us don’t consciously choose what it is. Rather, most of us adopt our philosophy by default. And because of that, we have contradictions in our philosophy that undermine our pursuit of success in business and in life. 

According to Rand, “contradiction leads to destruction, and the amount of destruction is level to the amount of the contradiction.” It sounds vague and a tad sinister on the surface, but when you dig a little deeper there is immense practical meaning in this statement for all of us, including business owners.

The idea is that if we have contradictions in our philosophy, the opposing forces inherent in those contradictions will inevitably lead to failure or heartbreak or frustration or any other way to describe the opposite of achieving the results that you want. 

For example, many people adopt the belief at a young age that “money is the root of all evil” or some other similar premise that suggests that making money or having money is a bad thing, the cause of shame, and must be the result of wronging or taking advantage of people along the way. It’s amazing how deep-rooted (although often subconscious) this belief is in our society. 

At the same time, most of us spend our entire adult lives trying to make more money. See the contradiction there? Often, the result is that people will undermine or sabotage their earning potential because somewhere deep in their belief system making money is spiritually or morally corrupt. 

Business owners and entrepreneurs are less prone to this particular contradiction because most understand that earning money in business is evidence that they are providing value to their customers, meaning that they are making their customers’ lives better in some way. Indeed, Rand’s work stands for the idea that the dollar sign is a sign of virtue rather than vice.

However, many business owners struggle mightily with the belief (again, often subconscious) that business success must come at the expense of personal success. In other words, many business owners hold the premise that self-sacrifice (in terms of health, happiness, fulfillment, relationships, etc.) is necessary to achieve business success. So when the business owner says she wants to get healthy and/or spend more time nurturing personal relationships while at the same time driving the business forward, destruction in one or more of these areas will be the inevitable result as long as that limiting belief or philosophy is present. 

In order to remove the destruction, one needs to identify and remove the contradiction. If you replace the self-sacrifice belief with a more empowering belief that a business can grow and be profitable AND that it can co-exist with a successful personal life filled with health and happiness, then you give yourself a fighting chance to achieve that. Is it easy? No, far from it. But it’s possible, as long as there aren’t any destructive contradictions about this in your philosophy.

In my work with business owners, whenever we come across an issue that keeps popping up we look to uncover misalignments in the purpose, planning, people, and process components of the business, and also to contradictions in the mindset and philosophy of the owner.  Getting to the root of the problem—and not simply addressing its symptoms—is essential when it comes time to course correct the trajectory of a business’ unsatisfactory performance.

Lessons from The Lean Startup

I recently finished reading Eric Ries’ book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.

Although I am a little late to the game on this book (it was first published in 2011) and the title is almost as long as the title of the book I wrote years ago during my first entrepreneurial venture trying to sell wellness to lawyers (Lawyer Wellness Is NOT An Oxymoron: Why Tomorrow’s Top Lawyers Must Embrace Wellness Today-And What You Need To Do To Be One Of Them – good lord, what was I thinking with THAT title???), Ries’ book provided some valuable lessons I can apply to my newest venture. Here are a few of them:

  1. “If you build a product nobody wants, it doesn’t matter if it’s on time and on budget.” The Lean Startup model is about using the scientific method to build a sustainable business around a new set of products or services. It stresses the importance of “validated learning”: constantly experimenting to test your assumptions and hypotheses about your product/service and your market. There’s no greater waste of time and money than creating a product that nobody wants.
  2. Test early and often. The book teaches us to use the Build-Measure-Learn (BML) feedback loop. Build your minimum viable product (with emphasis on minimum), use experiments, surveys, and “getting outside the building” techniques to talk to your customers so that you can measure what they like and what they don’t, and then learn from those results in order to improve your product. Then you do it all again by incrementally improving your product (build), testing it with your market (measure), and taking stock of the results (learn).
  3. Small batches. In order to use BML most effectively, don’t wait too long to test. Test with a small batch of your product to make sure you’re on the right track so that you don’t build a big batch that turns out to be useless or that doesn’t resonate with customers like you hoped it would.
  4. Innovation accounting. This was probably the most innovative (and likely challenging to implement) lesson from the book. Lean startups need to get away from traditional accounting metrics that measure progress, and towards metrics that measure how much you have learned through your validated learning process. A startup that has some early revenue but that isn’t learning much about their product-market fit isn’t as valuable (or as sustainable) as one without revenue but that is learning rapidly from their customers how to improve their product for longer-term success.
  5. The three growth engines. Your startup not only needs to have a value hypothesis (why your customers will buy from you), but also a growth hypothesis (how your business will grow). Ries explains that the three types of growth engines are paid (e.g. the monthly subscription model), viral (e.g. built in to the sign up process is a referral system via social media), and sticky (e.g. once you sign up or buy the product, it’s more painful to switch to a competitor than to stick around.)
  6. The 5 Whys. This is a strategy that helps owners and leadership teams get to the root of problems that sprout up in the business. The theory is that it takes asking the question Why? five times before you can understand what’s really causing the problems you see at the surface of your business. For example, what appears to be a cash flow problem could really be a problem with the internal process for accounts receivable, or what appears to be a people problem could really be an issue with the onboarding process for new hires. Asking the 5 Whys and getting to the root of the problem can help solve nagging problems once and for all.
  7. We’re all startups. The author argues throughout the book that The Lean Startup method can and should be applied whenever a new product or service is being developed, whether that’s in an actual startup or in an established business that develops new sources of revenue. So don’t be fooled by the title; there are lessons in this book for all entrepreneurs and members of their leadership teams.

Here’s a great, simple tool for hiring and evaluating your people

In this article I’ll share a great tool that helps simplify the process of hiring the right people for the right seats in your business, and of evaluating them consistently to make sure they continue to be the right people in the right seats.

I have helped several businesses improve their HR function over the years. Most of these businesses had processes for hiring and performance management that were either non-existent or over-the-top. The trick is to strike the right balance between these two extremes. This tool will help you do that.

The tool comes from the business book Traction. (I have written about another Traction tool here.) It is called the People Analyzer and it looks like this:

To use it properly, you need to have clearly defined core values for your business as well as a simple but clear list of responsibilities for each role in the business (i.e. the top 4 things that each role is accountable for in the business).  

In the first five column headings (slanted, at the top) of the People Analyzer, insert the core values of your business. As part of the interview process, you want to share with applicants as much detail about your core values as possible. Allow the applicant to consider if they resonate with those core values. Ask them questions that allow you to assess if they are going to be a fit with the values and culture of your business. You will probably be able to see it in their demeanor in this portion of the interview. This lets you know if an applicant is the right person for your team. For each core value, put in a plus (+), a minus (-), or a plus/minus (+/-) if neutral or you can’t assess. 

The second part of the interview is assessing if the person “Gets it, Wants it, and has the Capacity to do it” – aka “GWC”. This is a Traction concept that allows you to assess if the job will be the right seat for the applicant. 

Get it” refers to understanding the roles, responsibilities, and accountabilities of the job. Not everyone does. A good interview technique is to talk about the ugly parts of the job – every job has them. You want to make sure the applicant gets that the role won’t be all cupcakes and rainbows. 

Want it” means just what it says: does the applicant actually want the job, or is this just a  placeholder or stopover on the way to something else? You want to get a sense that the applicant really wants the job, despite all the ugly parts of it. 

Capacity to do it”, means a few things:

  1. Skillset to fulfill the role. This is where traditional interview processes spend the majority of their time. It’s very important, obviously, but it should be only one part of the process. Depending on the role, you’ll need the applicant to already have all the skills required for the job, or you’ll simply need them to have the capacity to learn the skills. In other words, “hiring for the soul, training for the role” might be most appropriate in some cases.
  2. Work ethic. A skilled employee with little work ethic will fail the capacity test. You need to get comfortable that the applicant will be willing to put in the work required to fulfill the role. Granted, this is tougher to do in an interview than in a performance review, but try to get a sense of it as much as you can.
  3. Life factors.  An applicant may have the skills (or capacity to learn) and the work ethic, but may not have the capacity for the role due to life circumstances. Perhaps the role needs 50 hours per week, but they only have capacity for 35. Perhaps it needs some nights, or travel, or heavy lifting, or some other factor that the applicant cannot meet due to other obligations or constraints – family, health, other jobs, etc.

To assess the GWC of an applicant, write Get it, Want it, Capacity to do it in the final three column headings. In each column, write a Yes or No. 

The final part of the People Analyzer is called The Bar. The Bar is the baseline that applicants must meet in order to be considered for an offer. You can set The Bar where you like, but it should be mostly +’s and Yes’s.  Anyone who falls below The Bar is disqualified from becoming a member of your team. 

While this process is effective for hiring, it is equally effective for evaluating current team members. In other words, you can use the People Analyzer throughout the year as part of your performance evaluation process to see if your team members continue to be the right people in the right seats in your business. 

The beauty of this tool is how it can simplify the performance evaluation process and enable you to see very quickly which team members should move seats in your business, and which ones may need to move on from your business altogether. 

Founders Forum: 6 key takeaways for business owners

This week I attended the 2nd annual Founders Forum hosted by Planet Hatch in Fredericton. It was so great to be back at an in-person conference (yes, with all public health protocols in place) for the first time in what seems like forever.

Founders Forum bills itself as “the place for no BS conversations amongst entrepreneurs & operators”, and it didn’t disappoint in this regard. The moderators did an excellent job of teasing out, and the panelists candidly and openly shared, key insights and practical advice from their own entrepreneurial journeys for the benefit of attendees. 

In all there were six sessions in the day-and-a-half event on topics including courageous leadership, adapting to change, the future of sales, building resilient teams, competing in the global marketplace, and social entrepreneurship.

Despite the different topics for each of the sessions the following themes and threads emerged throughout the conference, and were—in my opinion at least—the key takeaways for business owners:

  1. Think Big. Dare to stretch the vision of your business in ways that make you a little bit—or even a whole lot—uncomfortable. This requires a leap of faith. Set BHAGs (Big Hairy Audacious Goals – from Jim Collins’ Good to Great). You don’t need to know how you’re going to get there, but believe in yourself and burn the boats. Even though we’re based here in this little corner of the world, we can—and should—aim to compete in the global marketplace. 
  2. The importance of FOCUS. Entrepreneurs have lots of ideas. That’s what makes them entrepreneurs. But knowing you can’t act on them all—at least not all at once—is essential. Pick one thing, focus on it, get really good at it—like, say, the best in the world at it (see point #1)—and try not to let your focus get diverted from that one thing.
  3. We’re all social entrepreneurs. Doing well by doing good is good for business, good for the soul, and good for society. And a business doesn’t need to fight poverty or climate change or cancer to be doing good—solving small problems for your customers or your community is important too. Getting a handle on how, exactly, our products and services help our customers, and therefore society, is a wise thing to do.  
  4. The best AND most frustrating part of business is the same: the PEOPLE. But there are lots of best practices that you can implement to tip the scale and minimize the frustration. Go Go CEO Kara Angus’ comments, advice, hilarity, and practical tips in this area were worth the price of the conference and then some.  
  5. Let core values be your guide. Several panelists referred to their core values as a guiding force in their business. Whether it be around the mechanics of a pivot, or the approach to dealing with customers and employees, or to deciding which clients to take on and which ones to cut loose, the business owners on the stage looked to their core values to help them make decisions—both big and small.
  6. Taking care of and investing in yourself.You have to put the oxygen mask on yourself before you put it on your business. Part of the benefit of running a business from here in Atlantic Canada is the quality of life it affords. Don’t sacrifice that for your business. Take care of yourself mentally and physically. Set personal goals that align with your business goals. Set boundaries and stick to them. Seek out personal and professional development opportunities, and surround yourself with a supportive network. 

Why the Be-Do-Have mindset is so critical for business owners

There is a concept I have learned from some mentors over the years called the “Be-Do-Have” mindset.  All business owners should keep this concept in mind as they strive to create profit, impact, and joy in their business.

In the last article I argued that each of profit, impact, and joy affects the other, and that a win in one area is generally a win in the other two areas as well. For example, if you increase the impact your business makes in the world, that can lead to more value being created for your customers, leading to more profit, and also leading to more joy due to the fulfillment that comes from making a greater impact. 

But this isn’t always the case. An over-commitment on the impact or profit side can negatively impact joy levels. Similarly, too much focus on your happiness could come at the expense of impact and profit. It is a balancing act. A business needs to create goals in each of these three areas and continually measure progress in each to ensure that one piece of the profitability, impact, and enjoyment pie doesn’t get too much attention at the expense of the others. It’s a constant work in progress.

It’s precisely because this process is a constant work in progress that the Be-Do-Have mindset is so important to keep in mind. The concept is this: 

Being leads to doing and doing leads to having.

It’s a simple concept, but one that many business owners—and many non-business owners too—get backwards. 

Most people have a mindset of, “if I had X, I would do Y, and I would be Z.” For example, they might say:

  • If I had more money, I would do more travelling, and I’d be more fulfilled.
  • If I had more motivation, I would do more exercise, and I’d be healthier. 
  • If I had more training, I would do more public speaking, and I would be more confident.
  • If I had more free time, I would do more work on the business, and I would be more successful. 

In each of these examples, being is the end goal, which results from having something and doing something. This is backwards. Having should be the end goal, resulting from what you must do and who you must be in order to get there. 

The Be-Do-Have mindset applies to joy and happiness. If you say, “if I had more profit, I would make more of an impact, and I would be happier”, you’re leaving happiness to the end. The problem with that is there is always more you can have and more you can do. If you always put the being after the having and doing, you might never get there. There might always be one more thing you need to do or have before you say to yourself, ok, I can finally be happy now.

You need to enjoy the process of creating more impact and profit in your business. You need to be happy doing the things that lead to having what you want. If you’re not, it’s likely that having what you want won’t in fact, make you happier. In most cases, having something only makes you more of who you already are. For example, if you’re a good person, having more money will give you the opportunity to be more of a good person. And if you’re a crank pot, having more money will make you more of a crank pot. 

Similarly, if you’re a happy person, creating more impact and profit in your business will make you more of a happy person. But if you’re a grump, hitting your profit and impact goals likely won’t change that.

The Be-Do-Have mindset is perhaps best summed up in this quote, attributed to Albert Schweitzer:

“Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.”

Success follows happiness—not the other way around. Having follows being—not the other way around.

So make sure to enjoy the process of building and running your business. Don’t think that happiness is waiting for you on the other side of your next profit or impact goal. Make the decision to be who you want to be first, and then go out and do the things you need to do to have what you want. 

What comes first in your business – profit, impact, or joy?

In the last article I wrote about the three most important measures of business success: profit, impact, and joy

Which of the three comes first? If you can only tackle one at a time, where should you start?

The answer? It depends. (Did you know I practiced law for 10 years? Some habits die hard.)

It depends based on the current state of your business. Of the three—profit, impact, and joy—which is most lacking in your business at the moment? Where is the biggest gap? Start there. 

If you’re profitable and are making an impact, but are miserable, you need to start asking why. Why are you unhappy in the business? Is it the long hours? Is it frustration caused by inefficiency? Is it people problems? Is there a misalignment somewhere in the business that is causing the lack of joy? Maybe a disconnect between your personal values and the values of the business? Or is it something else? 

Or maybe you’re super happy running the business, you’re making the impact you want, but struggling with profitability. Again, time to start asking questions. Is the poor profitability a result of poor sales, poor expense control, poor systems, inefficiency, or something else? Resist the temptation to blame market forces—some businesses in your industry will succeed in any market.

If the problem stems from poor sales, you need to revisit your impact. Are you really making the impact you want? Because if you are making an impact, you’re creating value for your customers, and they will buy from you. So maybe the impact you’re trying to make isn’t the impact your customers actually want. 

Then there’s the scenario where you’re happy and you’re profitable, but you’re lacking in impact. But wait, you say. You just said that if you’re making an impact and creating value, profitability will follow. So how do you create profit without impact?

So here’s the thing. If you haven’t figured it out yet…you need to understand that profit, impact, and joy are inextricably linked. They are all levers that affect the other. A win in one area is usually a win in all three. 

Making an impact creates value and leads to profit. And the meaning that derives from the impact is a key element of joy. You tend to be happier when you are making a difference. And let’s face it, all things being equal (which, granted, is a big assumption) most people are happier making more money than less. Profitability can lead to more joy.

Profitability can also lead to more impact. Profit means you get to stay in business and have a fighting chance to create the impact you want. More profit can also amplify your impact, by giving you more options and a broader reach. 

And if you and your team members are happy pursuing the mission and vision of the business, you and they are naturally going to be more invested in the business and driven to create the desired impact, which in turn can lead to more profit. 

And so on and so on and so on. That’s why the image at the top of the article shows the continuous cycle of impact leading to profit, leading to joy, leading to impact, leading to…you get the picture.

There is, however, a cautionary principle related to this concept. It’s called the Be-Do-Have mindset, and I will dig into that in the next article. 

The 3 most important measures of business success

I believe that the three most important measures of business success are profit, impact, and joy. All businesses should strive to be profitable, to make a positive impact in the world, and to create happiness (joy) for the owners and for all stakeholders of the business. 

Readers interested in corporate social responsibility will notice this is similar to the triple bottom line (TBL) concept that encourages business to focus on people and planet, in addition to profit. Here’s an interesting article on that concept. 

My goal isn’t to reinvent the wheel here, but rather to tweak it somewhat for the small business context. The original TBL concept is by and large aimed at and designed for large corporations. The triple bottom line that I use for my business, and the one I focus on with my small business clients, is profit + impact + joy

Let’s look at what I mean by each of these concepts:

Profit

Simply put, profit is the difference between the revenues and expenses of the business. But more importantly, profit is the difference between staying in business and not staying in business. 

Profit comes from creating value for your customers. It comes from creating a product or service that people are willing to pay more for (hopefully a lot more for) than it costs to produce. Not coerced, or tricked, but willing. They buy what you’re selling because the value of it, to them, is more than the value of the money they pay for it. The exchange has made their life better in some way—for a moment or forever or for any period of time in between. In this sense, the more value your business creates, the more profit it should make. 

Conversely, if customers don’t value what you’re selling, they are not going to buy it, and the business won’t make a profit. And businesses that don’t make a profit for a long time don’t tend to stay in business for a long time. That is a shame for many reasons, not the least of which is that the business won’t get a fighting chance to have its intended impact in the world.

Impact

Impact is the difference your business makes in the world. If you have a clear purpose for your business (as articulated in your vision, mission, and core values), you’ll find clues to your intended impact there. As in, why does your business exist? In some way, it exists to solve a problem, and in doing so, it makes people’s lives better. And making people’s lives better makes the world better. 

Impact doesn’t need to be a grandiose, save-the-world, black-tie acceptance speech sort of thing. No lives, or whales, or trees need to be saved by your business in order to make a significant impact. But to be successful in this day and age, your business does need to make some positive impact on your community, or your industry, or your employees, or your other stakeholders, or something else, or any combination of those.

Why? Because in today’s world, meaning is currency, and meaning comes from impact. Meaning is no longer a nice-to-have. More and more, customers want a reason to do business with you that extends beyond the nuts and bolts of your product or service. Your employees want to be part of something bigger than themselves, bigger than the business. And most important, as a business owner, if you can’t answer the question what’s it all for? with something that involves impact separate from profit, there will be a void in your life—and in your business. 

Joy

Joy is the simplest of the three measures of success, but oftentimes the hardest to achieve. Does your business make you happy? Does your business make your life better? 

Michael Gerber highlighted this concept so well in his classic book The E-Myth. In it, he writes that many small business owners get into business because they love what the business sells, but they end up hating the business soon after. For example, a talented cake maker might open their own bakery because they love baking cakes, not realizing that once you’re running a business, baking cakes becomes the least of your worries. With everything else involved in running the business, they end up hating what they once loved to do, and unhappy in business and in life. This is a tale repeated often by small business owners everywhere.

So even if your business is making a profit and an impact, if it’s not making you happy—if you’re not deriving any joy from your business—then what’s the point?

Aristotle got it right when he said that “happiness is the meaning and purpose of life: the whole aim and end of human existence.” Running a business is a huge part of your human existence—if it doesn’t make you happy, your life will be unhappy. That’s no fun.

The concept of joy in business goes further. It extends to your employees. Are they happy to work for your business? It extends to your customers. Are they happy to do business with you? It extends to all stakeholders of the business—investors, suppliers, community members, and so on. But it all starts with the business owner—if you’re not happy, it’s hard for your business to make others happy. Joy is like leadership: you can’t fake it for long. 

Perhaps you use different measures of success in your business, and that’s great—you should do whatever works for you and your business. But for me, and the businesses I work with, prioritizing, creating, and measuring profit, impact, and joy are essential on the path to business success.