Myth 3: Money is not one of the top 3 reasons real Entrepreneurs start their Business
What do you consider the primary purpose of starting a business or pursuing a career? For most people, it is to make a lot of money – who doesn’t want to gain financial freedom and live the larger life?
Like most of my course mates in schools days, I chose to study Petroleum Engineering in the university, because the oil and gas industry seemed like the golden ticket to wealth after graduation. A lot of students and graduates share similar orientation. And for most people, this is not different with starting a business.
Who doesn’t want to make a lot of money? What other purpose is there to start a business other than to make money?
Because the light of failure and frustration will often shine brightly on those who start a business or pursue their career for the wrong reasons, it is necessary we call out the money-for-business myth.
Contrary to business school doctrine…
… “Maximising profit” has not been the dominant driving force or primary objective of successful entrepreneurs. Entrepreneurs pursue a cluster of objectives, of which making money is a by-product… usually a secondary one at that.
Yes, they seek profits, but they are equally guided by a sense of purpose beyond just making money. Yet, ironically, they make more money than the more purely profit-driven business owners.
You must build a brand and never destroy it. One competitive advantage I had when I ventured into manufacturing was my brand “Dangote”, which I diligently built in the course of my trading commodities…
Youths of today aspire to be like me but they want to achieve it overnight. It’s not going to work. To build a successful business, you must dream big. In the journey of entrepreneurship, tenacity of purpose is supreme
– Aliko Dangote
Top 3 Reasons Today’s Entrepreneurs start their business – Meaning Is More Important Than Money
According to a study on State of the Business Owner – SOBO with over 1700 business owners, the top three reasons today’s entrepreneurs start their business include;
– Reason 1: freedom to pursue new opportunities
– Reason 2: following their personal passion
– Reason 3: to gain independence from the control of others.
They are looking for meaning, freedom and independence as they reach for their financial goals. Money only showed up as the forth reason.
Money appears to be the default motivator for starting a business because it is measurable, tangible and fungible – but it becomes a problem when the prospect of a lot of money becomes your primary goal.
It’s not just about today’s entrepreneurs and professionals…
Although the study concentrated on today’s entrepreneurs, this is not different from successful entrepreneurs of the past.
Highly successful entrepreneurs of the past also prove that to succeed in business the primary purpose should not be to make money.
We are in the business of preserving and improving human life. All of our actions must be measured by our success in achieving this goal.
– Merck & Company, Internal Management Guide
Putting profit after people and products was magical at Ford.
– Don Peterson, Former CEO, Ford
We’ve also remained clear that profit, as important as it is, is not why the Hewlett-Packard Company exists; it exists for more fundamental reasons.
– John Young, Former CEO, Hewlett-Packard
Example from Merck & Company
At a time when over a million people in the third world countries where suffering from ‘river blindness’, Merck elected to develop and give away Mectizan, a cure for the disease. A million customers is a good market size, but these were customers who could not afford the product. Merck decided to give the drug away for free to all who needed it. And also involved itself directly in distribution efforts to ensure that the drugs reach the millions of people at risk from the disease.
When asked why the company made such decision, P. Roy Vagelos, the then Merck’s Chief Executive commented:
…When I first went to Japan 15 years ago, I was told by the Japanese business people that it was Merck that brought streptomycin to Japan after World War II, to eliminate tuberculosis which was eating up their society. We did that. We didn’t make any money. But it’s no accident that Merck is the largest American pharmaceutical company in Japan today. The long-term consequences of such actions are not clear, but somehow I think they always pay off.
Did Merck take these actions as business or PR strategy? May be, but most business owners will never attempt such gestures even as a business strategy.
From Merck’s story, it can be tempting to assume that having a sense of purpose and such high ideals over profit is merely a luxury for successful companies. However, a close examination reveals that high ideals often existed in such companies not just when they become successful, but also when they were struggling to survive.
The Sony Example
After World War II in 1945, with Japan in devastation, Masaru Ibuka started Sony in an abandoned telephone operator’s room, with seven employees and $1,600 of personal savings. In addition to brainstorming on what product the company would sell, he created a prospectus, a guiding document for the company that included the following items (this is just a small part of the long document):
Purpose of Incorporation
– To establish a place of work where engineers can feel the joy of technological innovation, be aware of their mission to society, and work to their heart’s content
– To pursue dynamic activities in technology and production for the reconstruction of Japan and the elevation of the nation’s culture
– To apply advanced technology to the life of the general public
Ibuka created these ideals for the company when they were yet to articulate a clear idea of what products to make. These ideologies laid down so early in the company’s history played an important role in guiding the company’s evolution.
Evidently, these companies attain more success than businesses that are simply profit-driven, because such actions, like Vagelo puts it, “somehow… always pay off”. Businesses that operate with a sense of purpose are more likely to be successful than those operating solely to make money.
Do it for the right reasons
“Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?”
— The line Steve Jobs used to lure John Sculley as Apple’s CEO, according to Odyssey: Pepsi to Apple,
In his book, Presentation Secret of Steve Jobs, Carmine Gallo said, “Jobs was never motivated by computers. Instead, he had a burning desire to create tools to unleash human potential”.
The point is not that entrepreneurs do not care about making money; that will be rather hypocritical. Every entrepreneur wants to generate revenue to sustain their business and expand their lives.
However, money as the primary motivator will only create distractions. Instead of laying awake at night thinking about how to make money, think about better ways to solve problems, how to treat customers and employees, and how to make your product and service better.
This article is the third part of a series of articles on 7 Myths about building a business.
Stay tuned for coming part of the series.