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Small Actions Greater Good Blog

A Business Can’t Be Profitable and Do Good (Psstt… It’s a Myth)

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Written By Tanya Quinn

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Being profitable is essential to run a business. Any business. It’s a fact. Profitability is simply a measurement of a business’s expenses compared to income and how that continues over time. If you don’t have enough income to cover your expenses, you don’t have a business (or not one that will be sustainable for long). Yes, you may be in a start-up phase, but you still need a plan for how to make money. What you choose to DO with your profits depends on the type and purpose of the business.

Doing good through your business (also known as being socially responsible) is a choice Small Business Owners make when they create or as they manage their business.

Being profitable and choosing to do good are two different aspects of a business.

Yes, they can be connected based on your business type (which I’ll discuss below), but being profitable and doing good are NOT mutually exclusive.

And yet, I occasionally hear people say that “a business can’t be profitable and do good.” 

The first time I heard this, I was astonished. That thought, or limiting belief, never crossed my mind.

Why?

Because I don’t have either of the two most common causes of this myth – 1) negative money mindsets or 2) misconceptions about business structures.

However, many new or aspiring Small Business Owners think this way, and they let this myth hold them back from doing good.

If you wonder if this myth is holding you back, ask yourself, “Can my business be wildly profitable and make the world a better place?” The use of the term “widely” is intentional there to test your reaction.

  1. If you flinch or cringe in reaction to that question, you likely have a negative money mindset.
  2.  If you don’t flinch but immediately start questioning how to set up your business to make this possible, you likely have misconceptions about business structures. You may even go so far as to immediately think, “but I really don’t want to run a nonprofit.”

Let’s dig into each of these causes.

Negative Money Mindsets

As defined by The Motley Fool, a money mindset is a “manifestation of your attitudes and beliefs about money” that are formed by your experiences and the influencers in your life. Money mindsets affect how you think and feel about money, how you spend or save money, how you handle debt, and more. They can be both positive or negative, and you likely have more than one.

If you flinched when I asked you the question about being wildly successful and doing good, you most likely have something from your past that has conditioned you to believe that making money is evil, that nothing good comes from money, that all businesses are corrupt, that capitalism is bad, and so many more possibilities. I used “wildly” in the question as some people don’t realize they have a money mindset until you suggest more than average money.

A strong negative money mindset about doing good is rare among Small Business Owners who already have successful businesses. However, they may have smaller ones that are preventing them from growing their businesses more.

However, negative money mindsets about doing good are more common among new Entrepreneurs or Small Business Owners.

How can you overcome this? You’ll need to dig into your past, uncover the source of your money mindsets and figure out how to eliminate them. The mindsets may be so strong that you need to work with a coach to help overcome them.

Here are a few articles that may help:

If you need to work through a negative money mindset, don’t let your limiting beliefs hold you back. Your business CAN be profitable and do social good. Believe me, until you can believe it yourself.

Misconceptions About Business Structures

Historically there was a pretty clear dividing line between businesses that wanted to do social good: “For-profit corporations sought profit for shareholders while nonprofits sought to alleviate societal problems” (stroudlaw.com).

However, that has changed significantly in the last few decades. And honestly, it can be VERY confusing.

You can select many different business structures and tax entities when you start a business (which also overlap). Each type of business structure or tax entity has different requirements and options, such as the primary purpose of the business, who owns and controls the business, how taxes are paid, how income is raised or earned, and more. I’ve included links at the bottom of this blog for additional research.

But no matter your business structure, you can still “do good” through any of them. To simplify conversations with Small Business Owners, I use the four different business “types” as an overview of how a business can do good, not the structure in which it operates:

  • Nonprofit or Not-for-Profit – Nonprofit and not-for-profit organizations are not formed to make a profit. Although often used interchangeably, they are two different business types – “Non-profit organizations work for charitable purposes, while not-for-profit is small groups formed for some common interest” (wallstreetmojo.com). They raise money or take action to do good (without focusing on profit)
  •  Social Enterprise – Social enterprises sell goods or services to earn profit that supports their primary social cause(s). Their business goods and services may or may not be related to their cause. They conduct business to generate profit first, which is then used to do good. (These can also confusingly be structured as a nonprofit, but the main difference is that they use commercial practices).
  •  Socially Responsible Business – Socially responsible businesses provide goods or services to earn profits for their business owners or stakeholders. The owner(s) also intentionally take action to do social good. They do good, as possible, through their profitable business. There is a large range among these businesses with how “much” social good is done, including certified B-Corporations.
  •  Standard For-Profit Business – Standard for-profit businesses provide goods or services to earn profits for their business owners or stakeholders. If they do anything to contribute to the greater good, it’s only occasionally or accidentally. They do not intentionally do good through their profitable business.

*As a side note, if you flinch when I say “earns profits for their business owners or stakeholders,” please recognize this may be another negative money mindset. It is okay to “earn profits” or “make money” from a business. You are supporting yourself and your family, supporting other families, contributing to society by buying other goods and services, and more. It’s not BAD to have money. However, having a lot of money can become “bad” based on what you do with it and how you act. 

Simply stated, your ability to do good does NOT depend on your business structure.

I’ve included links at the bottom of this blog to additional sources about business structures and doing good. Please talk to a lawyer and/or tax accountant to help determine the best business structure for your business.

A Business Can Be Profitable and Do Good

If you believed this first myth about Small Business Social Responsibility, hopefully, you no longer do.

A business CAN be profitable and do good.

In fact, I’ll argue that a business MUST be profitable to do good. Otherwise, the business won’t be around long enough to do much good!

And… if the good you do helps benefit and grow your business, it will ultimately help you become more profitable, giving you more profit to do more good! Profitability and social responsibility then become a mutually beneficial relationship.

6 Most Common Small Business Social Responsibility Myths

This article discussed one of 6 myths or limiting beliefs that prevent Small Business Owners from embracing social responsibility. You can watch a free 40-minute training to learn about all 6 of the myths and why they are not true:

Sign Up for the Free Training

Cheers to doing more good!

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Additional articles to learn more about business structures and doing good:

About Small Actions Greater Good

Small Actions Greater Good provides education, resources, and training to make it easier for Small Businesses Owners to do more effective social good that benefits their business, makes them proud of their efforts, and inspires others (also known as Small Business Social Responsibility).

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