In my view, in the 21st century, investing against a forecast measure of financial performance on its own is far too narrow. There is an increasing desire to invest in companies and funds that intend to generate a positive social or environmental impact alongside (or maybe at the expense of) making a financial return.
Think about it - a company’s value is normally calculated using a financial formula – related to profit, turnover and maybe cash. But value is merely a number ascribed to an entity based on what someone will pay for it. It's buyer sentiment that ultimately determines price and value. If your principles, as a buyer, are not just about money but are about the number of corals you plant on your artificial reefs (as ours are at CCell), then the more corals that are planted on an increasing number of reefs the more the value of the business rises.
Investors tend to fall back to measuring financial performance because it’s a universal measure across all businesses, whether you attach corals on reefs or sell taps to plumbers. But in my experience, particularly as investment tools like crowd-funding platforms have grown in popularity, being able to say what positive environmental or social impact your business is going to have and how you are going to measure it is very important. I also believe that there are investors who will accept a lower rate of financial performance in exchange for the positive impact the business is having. And part of the value of the business is derived from that impact.
Have a think about the genuine positive social and environmental impact your business is having - not the woolly eyed CSR bullshit variety - but real, tangible and measurable. And if it's not, think about how it could. Establish a set of KPIs that will measure it, and then report it in a factual way in your business updates.
Investors will like it.
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