MBA943 Guest Teacher: Russ Stoddard – How to Build a Purpose-Driven Company

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Welcome to the Hundred Dollar MBA show where a business lesson a day keeps the doubts away with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the hundred dollar MBA, a complete business training and community online over at 100 MBA net and today's lesson is a guest teacher lesson. On our guest teacher lessons I invite an expert to to teach you their area of expertise. Today's guest teacher is Russ Stoddard. And Russ is going to be teaching you how to build a purpose driven business. Many of us have been hearing about B Corporation certification. A certification that says hey, I'm one of the good guys, I'm doing business the right way, I'm serving the world, I'm serving the environment and I treat my team the way they should be treated. And there's a lot of benefits to building a purpose driven business. And some of those benefits are actually pretty good for business. But Russ is going to be teaching you all of that because he is one of the pioneers in that industry in building purpose driven businesses. If you want your business, your company to mean more than just offering a service or product, if you want to stand for something that helps the world we live in, then pump up the volume. Because this guest teacher lesson is going to be great. Let's get into it. Let's get down to business. Russ Toddard is the president and founder of Oliver Russell, an agency that's all about helping other businesses. He started this in 1991 when nobody was talking about this and he's become the go to person when it comes to becoming B Corp certified and building a socially responsible company. He's also the author of Rise Up, a great book that you should check out if you're interested in making your business a purpose driven business. And in today's lesson, he's going to really go in depth on how to become a purpose driven business. How to really enrich not only your customers and your whole staff, but also the world that we live in through your business. If that gets you going, if that makes you feel like, yes, that's why I became an entrepreneur, then sit tight because Russ is really going to be delivering an excellent lesson. I'm going to pass it on to him now, but I'll be back with my takeaways with my insights of today's lesson. But for now, take it away, Russ.

Hey everybody, thank you for joining me today. I'm Russ Stoddard. After 26 years building a socially responsible ad agency, Oliver Russell, and founding a few nonprofits and other businesses, I'm here to explain how adding purpose to your company can boost your bottom line and motivate your team of employees. If you like what you hear today, you can dive deeper by downloading a copy of my new book, Rise Up. We'll give you a discount code at the end of the episode, so stay tuned. Now let's get down to business. Purpose driven business that is. So what is social enterprise anyway? Social enterprise is increasingly a business buzzword, but what does it actually mean? To me, it centers on the why in the workplace? Why do you work? Why spend your days the majority of your adult life for most of us, at an office or company, unless it's enriching you as a human being. This feeling is what made me want to become a social entrepreneur and give back to nonprofits in the community more than I could on my own working a traditional corporate job. For most of my life, there were no B corporations. That's all changed now with more than 2,300 of us in more than 50 countries across hundreds of industries. B Corp is basically what Fair Trade certification is to coffee or USDA organic is to milk. It means your for profit company meets the B Lab's rigorous standards of social and environmental performance, accountability and transparency. So how is becoming a Certified B Corp different from a Public benefit corporation? Basically, B Corp status indicates certification, while Benefit Corporation is actually a legal status, a tool that protects your mission through any capital raises or leadership changes and creates flexibility when evaluating exit and liquidity options. We'll cover how you decide what's right for your company later on. This is a trend. Like I said, there are now more than 2,300 certified B corporations and more than 4,000 public benefit corporations in the United States. The first certified B Corp was in 2007 and when my company became certified in 2012, there were just 299. That's explosive growth. With that context, let's turn to my lesson today. Five ways to add purpose to your company Values, structure, people, funding and story Some of this is easy and some suggestions less so because they require introspection and thoughtfulness about what really matters to you and and to your business. First, we'll start with values because they are so fundamental if you aim to have a purpose driven company. I founded my company in 1991, long before people talked about stuff like this in the mainstream business world. Oliver Russell's values then and now are being creative, collaborative, progressive, which we define as moving forward by embracing change and socially responsible. Your values matter because they act as a compass on your map to building a socially conscious company. Your company's values guide short and long term strategy and they should help your business appeal to employees and customers. Here's an example of what living your company's values can look like. I've picked one that illustrates how your company's values can force you to confront some harsh truths as living your values often require short term sacrifice. Last year we won a client that would have been the largest in our company's history. We hired a couple of key new people. We invested considerable startup time in the account which was worth nearly $1.7 million. Upon further due diligence, it became clear to both parties that our organization's respective core values were not in alignment in very critical ways. So we parted ways. It was a tremendous short term hit to our company. We'd incurred significant costs and increased our fixed overhead through new hires. We had to make some painful changes as a result. But I can tell you what it was absolutely the right move for the long term and people at Oliver Russell were proud to stand up for our values. Bottom line is that you have to be prepared to live your values in good times and bad times. It's not all roses and daisies. Let's talk about how structure can infuse purpose into your business. When you start a business, you need to incorporate it for tax and regulatory purposes. You have several options. Will you become a sole proprietorship, an LLC or an S Corp? Why not a benefit corporation? If the legal status isn't right for you, perhaps B Corp certification or another certification is aligned with your purpose. You can learn more about this on the B Lab website, but I can tell you that for Oliver Russell we decided we wanted a corporate structure that illustrated our social commitment while taking into consideration that we are fundamentally a for profit venture. Becoming a B Corp is great marketing. You meet your tribe of like minded entrepreneurs including potential clients or suppliers. It makes you better at what you are already doing and it lets you, rather than shareholders decide what's best, including considering the triple bottom line of people, planet and profit. 31 states now offer benefit corporation status and there are several advantages to incorporating this way. The standards involved protect workers, customers and the environment and they protect your mission down the road from the short term thinking of future investors. Potential disadvantage can be the higher level of scrutiny you willingly face because of the higher standards. Shareholders that own just a 2% stake can launch benefit enforcement proceedings if they believe managers aren't fulfilling the public benefit mission. And of course returns may be slower than traditional peers, though I think they are more sustainable over time. Third, how you fund your business can illustrate your purpose to the wider world. Will you bootstrap at first or maybe forever? How does choosing the right investors or not taking outside investment at all impact your ability to create a socially conscious enterprise? It's important to have a solid foundation before you become a certified B corporation or take investments, and here's why. For starters, you need to do everything possible to ensure that your startup is going to succeed. Resources are precious and any time you take away from the primary business of your startup, whether that's to seek certification or seed investments in your company, could well be time better spent on product development or customer acquisition. You need to survive to thrive as a social entrepreneur. Another piece of advice Be careful about tapping into your retirement to fund your social enterprise. I did this with a startup I co founded called Social Good Network. I withdrew more than $100,000 from my retirement to put into Social Good Network because I believed in it. I knew that I was spending down my future retirement funding and I knew that there would be a tax penalty associated with this as well as what I did not know is that the money I withdrew would be considered income in the year that I took it out of the retirement fund. So this created more than $100,000 of additional income that I now had a tax liability on. I'd have to come up with a tax payment against that just as the startup itself went out of business. It didn't take a rocket scientist to understand these consequences, but in the rush of trying to breathe life into a dying startup, I overlooked this. It made it very hard to rebuild my business life after the failure of our startup. Not a pretty picture at all. Now we'll turn to my fourth way to add purpose to your business. It's hands down the most important. Your people Millennials now make up more than 50% of the workforce and an overwhelming number of them seek purpose driven employment. Becoming a purpose driven company helps you recruit and retain the best and brightest. Being purpose driven also helps you retain employees. You can add purpose to your employees lives by offering creative benefits like a $50 wellness stipend, having office bikes to encourage healthy commuting to meetings, and set up an employee volunteer program where once a month you select a cause and spend an hour with your team making a difference. We also sent nearly the entire office on a volunteer trip to the Dominican Republic a couple of years ago, which was an incredible bonding experience for the team and and a defining moment I believe, for many of the individuals as they saw firsthand the needs of fellow human beings living in a third world country. Another benefit we have is paid maternity and paternity leave. Pretty unusual for a small company like ours. Pretty cool too. Last but not least, story can add purpose to your business and you've got an amazing story to tell as a purpose driven company. Here's my first piece of advice. When you tell your story of purpose, start with your internal audience, the people who work at your company. First off, your team deserves this. Secondly, they will be your most powerful ambassadors, proudly sharing your story with customers, suppliers, even their friends, families and neighbors. Too often companies look to the outside world first when telling their story and this is a mistake when it comes to external audiences. Pick off the low hanging fruit right away. Send out a press release when you complete a certification. You may be the first company in your city to certify, and that's newsworthy. You should also talk to local government officials because there may be preferred contractor opportunities for socially responsible companies like yours. Cities such as Philadelphia and San Francisco are providing special incentives for social entrepreneurs because they want to encourage this type of business. Whether that's a special tax benefit for social enterprises or preferential treatment on city contracts. And why not social enterprises generally have less environmental impact on city services and also invest in the community in ways that traditional companies don't. We've been trying to spur this sort of policy in our hometown of Boise, Idaho, so far with little progress. Oh well, we'll keep trying to wish us luck. As we begin to wrap up, I want to leave you with three examples of highly motivated and innovative social entrepreneurs who are changing the world. These companies can show you how adding purpose advances your brand while doing good Red Ants Pants founder Sarah Calhoun grew up on a farm and was frustrated that work pants never fit women with curves. So she designed her own cut of rugged get your hands dirty work pants tailored for women that are 100% made in America. Sarah's pants don't just make money, they support a higher purpose. Promoting her Red Ants Pants foundation, which expands leadership roles for women and girls, supports working family farms in rural communities like White Sulphur Springs, where she's based. The foundation's signature annual music festival draws 10,000 people to her neighbor's cow pasture and has drawn the likes of Emmylou Harris and Merle Haggard. Proceeds support the foundation and of course, help Sarah sell more pants Most everyone has heard of Ben and Jerry's Ice Cream, but do you know it was also the first certified B Corporation in 1988? Not only do they focus on environmental and economic justice at every step of their production model, they're also leading the way with innovative partnerships with other purpose driven companies, including beer maker New Belgium Brewing. Before I sign off today, let's recap the major points we covered today. First of all, adding purpose will boost your profit. I know this because I've lived it and I've mentored and interviewed hundreds of other social entrepreneurs who have seen the power of purpose boost their bottom line. Again, these are the five ways that purpose will help grow your brand values. Being purpose driven means you live by a set of values. This will help you stay focused in the long and short term as you grow your business and and provide a valuable lens for business strategy. Structure Talk to your attorney and CPA about the best structure for you, but make sure you consider becoming a certified B Corp and or a legal public benefit corporation. There may be tax or other regulatory benefits that come with such a designation that reflects the good you are already doing or plan to do with your business funding. Don't rush into taking investor capital. Be lean as long as you can. If and when you do jump in, remember all investors are not the same. Make sure it's the right fit. If you're going to dip into your personal retirement or ask family and friends for help. Make sure you think through tax impact and what this may do to personal relationships. I learned this the hard way at the Social Good Network People. Your people are your greatest asset. Treat them well by offering creative benefits and engagement opportunities and paying a living wage. Make sure they drink the Kool Aid and have the proper buy in to your company's mission and values and you have enthusiastic champions who will help tell your story to the wider world. People are hungry for authentic brands that are making the world a better place. As you get started, remember your internal audiences may be motivated by your purpose. We covered employees, but also think about vendors and suppliers who may choose you because of your story. All right, Dear listeners, this was a treat for me to tell you about my passion for building socially conscious businesses. If you want to continue learning about how to mesh purpose and profit in your business or startup, or learn more about B Corp. Certification, you can visit www.russstoddard.com and use discount code 100 MBA for 50% off my ebook or audiobook Rise up how to Build a Socially Conscious Business. Thanks again for joining me today. Now back to Omar.

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Thanks for that fantastic Russ and that awesome offer that you offered at the end of your lesson. If you want to learn more about Russ Stoddard, check them out@OliverRussell.com I want to wrap up by giving some quick reasons why you may want to become B Corp Certified and figuring out how you can be a purpose driven business. Number one, it's great branding, it's great marketing. And I'm not saying this in a crude way. I mean that it tells other people what your meaningful company is all about as well as why you started this business. It's bigger than just making money. It tells people that you believe in integrity, you care for your fellow human and the earth. And for many people, that really resonates with them. I gave examples in the past about how other companies put their purpose front and center, whether it's Warby Parker with glasses giving away glasses to people in need, or Toms with shoes and giving shoes to people in need. Another reason why it's a good idea to be B Corp Certified is it forces you to become better. When you go through that process of certification, you're forced to improve because you gotta meet the standards. You gotta make sure that you're ticking all the boxes in all the areas in your business, whether it's the environment, whether it's the way you treat your staff, whether it's your policies in your business. And lastly, a good reason to be B Corp Certified is that if you ever get investors by becoming B Corp Certified, you have to state your purpose, that you're here to serve your stakeholders, your customers. So in a way, that certification protects you from pressure from investors of doing something that's not really in the interest of your company or what you want as the leader of the company. Thank you so much Russ, again for being on the $100 NBA show. If you love this podcast, let us know in an iTunes rating interview. It takes two minutes to leave us a review, but we read every single one of them. It helps us improve. It also helps other people to read about the show and subscribe. That wraps up today's lesson. But before I go, I want to leave you with this. It's just a great exercise to sit down and ask yourself, why did you build this business? What are you trying to accomplish outside of making an income? As a business owner, you have the luxury of having reasons to build the business other than just money. This is just an awesome, awesome exercise. It could take a couple hours, but it's really going to help you have more motivation to succeed and build a better business. Now that doesn't discount the fact that you need to run a tight business you need to make sales so you can grow. And speaking of sales, in tomorrow's episode, I'm going to be covering how to create a sales video with no camera, just recording your screen on your laptop or computer. We're talking about sensational sales videos, ones you see on super bowl commercials or ads created by huge companies like Apple, Samsung, and Microsoft. We get into all that in tomorrow's episode, so make sure you hit subscribe so you do not miss it. All right, I'll check you then. Take care. Foreign.

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