Startup 101

Jim Cossler:
Why – and When – Capitalism Works Best

November 1, 2018

I am an ardent fan of capitalism.

Yeah, I know that may be hard to swallow if you follow me on social media. Because you will quickly learn that I’m a die-hard liberal as well. I feel passionate about a woman’s right to choose, human rights, equal opportunity, equality, equity, civil justice, gun control and stewardship of the environment.

Yet, I am still a capitalist. And that belief is not incongruent with my liberal philosophies.

The promise of reward is the necessary motivation to spur the exploration, imagination and creativity needed to make all of our lives, and our planet, better. But it is when the reward of capitalism is focused solely on creating wealth that things go downhill quickly.

Why? Because if that becomes the sole motive, the customer, the worker, the environment and the best interests of our nation become only an afterthought. And that never turns out well.

So, I guess, it would be better to say I am an ardent fan of regulated capitalism. Yes, by all means, go out and start a new business and make as much money as possible. But here are the rules and regulations you will be working under to protect the customer, the worker, the environment and the best interests of our nation.

Given our rapidly changing society and culture, is the purely profit-driven corporation playing fairly by all the rules, still the right model today? Is it a model that engenders critically needed customer and worker loyalty? Is it a sustainable model?

No. Because it ignores two very strong and growing desires of the customer and the worker: customers who want to feel good about the company from which they make a purchase, and workers who want to labor for a company that has a social purpose on par with making a profit.

I guess what I really am is an ardent fan of social capitalism as practiced today by a rapidly increasing number of social enterprises.

A social enterprise is just like any other for-profit corporation. It was formed with the intention to make the greatest profit possible. But, its drive to do so is accompanied by a parallel desire to accomplish social good.

Let me use as an example Method, one of my favorite social enterprises.

Method is a manufacturer of a complete line of environmentally safe cleaning products for the home, bath, kitchen and laundry.

This company located its plant, powered exclusively by solar and wind energy, in the inner-city Pullman district of Chicago, so that it could hire and train local residents who have been desperate for good-paying jobs with benefits.

There never has been, nor will there ever be, animal testing of its products. Its packaging is made from 100% post-consumer waste. One-third of its fleet of trucks is already bio-diesel powered.

And because of its focus on social good, Method has exploded on the sales side.

Launched in 2001 as a homemade product sold in just one grocery store, Method quickly rose to become the seventh-fastest growing company in America by 2006. And with its acquisition of Ecover in 2012, Method is now the largest green cleaning company in the world.

But do you know the really interesting point about Method and all other social enterprises? They have dramatically reduced customer acquisition costs and dramatically increased customer lifetime value. Extremely low customer acquisition costs, with extremely high lifetime value, is exactly what investors are looking for in startups. And it’s what every business owner needs to be relentlessly driving toward.

What drives these two critical metrics for social enterprises, unlike traditional for-profit businesses, is that they create, without expense, loyal customer evangelists for themselves.

Think about what I just did. I used this column, which will reach 45,000 readers and 100,000 website visitors, to promote Method and its product line.

This isn’t the first time I have done so. I’ve done the same many times before on my personal social media, exposing them to thousands of other potential customers. And, I am far from the only customer doing this for them.

The cost to Method for all of this enormous, positive exposure? Zero. Because its loyal, lifetime customers attach strongly to the social good it is doing.

How cool is that?

By the way, you can find more about Method at MethodHome.com and buy it at most large grocery and department stores. If they don’t carry the product, tell management they need to.

See? I just did it again.

Published by The Business Journal, Youngstown, Ohio.