Over the decades, much ink has been spilled over the importance of having a strong mission and vision statement to guide your business. But more recently, companies have been seeing a different principle as key to their long-term success: having a meaningful purpose statement that’s not only written down, but actionable.

What exactly is a purpose statement, and how does it differ from other paradigms? In the simplest terms, you can think of your mission statement as the “what” of your business and your vision statement as the “how.” But your purpose statement is the “why.”

Here’s something worth considering:

Why does any entrepreneur decide to start a business? An obvious answer would be, “to make profit.” But there’s often more to it. Having a powerful sense of organizational purpose can steer your company in the right direction in many areas: from recruitment to conflict resolution to loss prevention. And yes, to potential profits.

In today's world customers, employees and even investors are looking for more than just profit from the companies they choose, they want to see that they have an aligned set of values. In fact, Larry Fink, CEO of Blackrock the world's largest asset manager stated in his annual address to CEOs " A company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders.”

Purpose in print and in practice

Your purpose statement is a sentence or two defining why your business exists. It should be memorable, sharable and universally understood—by your employees, your customers, your investors or your favourite cousin. More crucially, it’s something true to your beliefs that you genuinely intend to live out over the lifespan of your enterprise.

To understand your company’s purpose, first you must consider your own core values: What’s important to you? What traits would you insist upon in an employee, investor or business partner? Write it out, narrow it down to your top five, and spin it into a clearly articulated and evocative statement.

Much more than moving units

An example of an enduring Canadian business emphasizing its purpose is Maple Leaf Foods: “To become the most sustainable protein company on earth.” If that’s how the company sees its raison d’être, you’ll notice it doesn’t describe its function—what products they make, or how many units of each. It’s more fundamental than that.

After all, mission statements are useful, but missions can fail and are often more time based with a limited life span. Strategic visions can pivot, especially when the unexpected happens. But values generally don’t change. So looking to your purpose as your North Star—even if it’s just a sticky note hung on your monitor—gives you a moral framework that reminds you what of you’re trying to achieve.

In Maple Leaf’s case, their purpose statement quickly relays the company’s potential breadth and depth. Beyond selling consumer packaged meats, their goal to be a sustainable protein company allows them to explore other alternatives such as plant-based meat or even edible insects, all while being conscious of food insecurity, animal welfare and their carbon footprint.

For another example, take ATB client Rocky Mountain Soap Company. Their purpose, in a few words: “To remove toxins from the world.” Sure, they want to sell skincare products that feel good. But beyond that, their stated commitment is reflected in their products, processes and community events. Their customers align with this sentiment, inspiring them to want to associate with the company.

Embrace your emotional intelligence

If this all sounds a bit lofty to you, you’re not alone. Organizational purpose is often a necessarily audacious yet grounded goal—you don’t know how you’re going to get there, but you’ll try. In some cases, it’s okay if your purpose sounds a bit like a motivational quote you’d find on Instagram.

It’s no surprise that the movement towards purpose statements grew out of nonprofits, charities and benefit corporations—organizations that have always been crystal clear on why they exist. But in the last decade, successful businesses have learned that positive social engagement is crucial in today’s economy.

So what’s the upside to communicating your purpose statement to the world? Beyond attracting consumers—and potential investors, who are increasingly socially aware—businesses with clear purpose can improve cohesion and accelerate decision-making. When there’s an important strategic decision to be made, you ask: Does this align with my purpose? More often than not, you’ll already have your answer, and it will be well understood by stakeholders, employees and the public.

Hiring on values

If you’re in a growth phase, your brand purpose will help you in one particularly acute way: human resources. Whether you’re recruiting, screening or deciding whom to hire or fire, your purpose is a handy litmus test. Does this individual’s viewpoint line up with my company’s? Will they rally to help us reach our goals? Will they thrive within our culture?

“When I’m hiring, the posting mentions our company values and my interview questions are based around those values,” says Kate McKenzie, manager of ATB X Calgary and an entrepreneur. “Because I value great customer service, I’ll ask them to tell me about the best and worst customer service they received and why. At the end of the day, I can train people in a lot of skills, but I can’t train them to have shared values.”

Younger hires, particularly Millennials, consistently rank a deeply held sense of purpose as something they seek in employers. Research shows that a large majority of Millennials are willing to accept a pay cut to work for a company with a defined set of values.

How purpose pays off

If you’re still not convinced that purpose can boost your bottom line, a recent Gallup study found that one-third of employees worldwide strongly agreed that “the mission and purpose of my organization makes me feel my job is important.” But among individual companies where that rate is eight out of 10 employees, “business units realized a 51% reduction in absenteeism, a 64% drop in safety incidents and a 29% improvement in quality.”

Of course, no purpose statement automatically delivers windfalls if they’re just words scribbled on a whiteboard. Your purpose only matters if you stay true to it. Writing a purpose statement can take seconds; continually delivering on your purpose takes a lifetime.

If you have any questions, concerns, or ideas on your entrepreneurial journey, contact one of our experts at amplifybusiness@atb.com or download ATB’s Entrepreneur’s Guide to starting a business.