As America’s fear was escalating alongside the spread of the coronavirus, the U.S. Chamber of Commerce released the results of a poll it conducted with small business owners.
The highlights of the poll were unsettling:
- 24% of small businesses said they were two months or less from closing permanently
- 11% were less than one month away from permanently going out of business
- 24% of small businesses had already shut down temporarily
- Among those that had not shut down, 40% said they were likely to close at least temporarily within the following two weeks1
This means a total of 54% of all small businesses reported that they had already closed or were expecting to close temporarily in the following 14 days.
The Greater Purpose of Business
Countless organizations and government programs have rushed to help save small businesses.
But why?
It’s simple—the health of our communities is largely tied to the health of the businesses within them. When just one business, whether large or small, closes its doors, the impact of the closure goes far beyond the company’s profit and loss report—it reverberates to its customers, employees, suppliers, host communities, the environment, and the broader society that rely on its success. This negative ripple effect on stakeholders is the reason for the visceral outcry of people across the country to save businesses.
Surely the deep concern for the health of businesses during a global pandemic comes from the realization that business serves a greater purpose than simply generating a profit. Profit generated by business is merely one of the essential elements that allow it to fulfill its greater purpose. As Charles Handy explains, profit is a necessary condition, not a sufficient one that gives purpose or meaning:
We need to eat to live; food is a necessary condition of life. But if we lived mainly to eat, making food a sufficient or sole purpose of life, we would become gross. The purpose of a business, in other words, is not to make a profit, full stop. It is to make a profit so that the business can do something more or better. That “something” becomes the real justification for the business.2
The “Something More” of Business
So, what is that “something more” that business provides?
We believe that the “something more” that a good business provides is the ability to create value for its stakeholders rather than merely redistribute resources. Consider the following ways in which a good business creates value:
- It creates a product or service that brings enjoyment, practicality, or efficiency to the lives of its customers.
- It creates dignified work for its employees and provides them with income so that they can flourish outside of the workplace.
- It creates avenues for other businesses to succeed by being a reliable and responsible customer to its suppliers.
- It creates opportunities for its host communities by contributing to a flourishing economic culture.
- It creates products and practices that sustain the resources of the environment.
- It creates a positive impression on broader society by carrying out its mission.
We believe that the ability to take raw goods and labor and create something more or better is far more than just profit generation—it’s value creation. Good businesses create value.
The Business of Business is More Than Business
What is perhaps most remarkable about good businesses is the lengths to which they will go to ensure value for their stakeholders. Amid this crisis, we have seen several struggling businesses become scrappily creative about how they care for their stakeholders. CEOs are taking pay cuts and private investors are doubling down to float cash flow needs with the caveat that stakeholders are taken care of.
While this behavior is generous, it is not entirely selfless—there is a deep understanding on the part of business that its future wellbeing is heavily dependent on the wellbeing of its stakeholders. Indeed, the future health of a business’s stakeholders will determine its future success or failure. Stakeholders have a true impact on businesses.
This symbiotic relationship between businesses and their stakeholders has been brought to the forefront during this pandemic, reminding us to consider that the business of business is more than business.