Mission statements are a core part of building a business and are essential when conducting any business planning. In this article, we examine mission statements in detail; what they are for, how to build one, and its various uses in businesses of all shapes and sizes.
How a Mission Statement Works
An effective mission statement works as a fundamental tool for your business. It will outline what your business does, the audience your business serves and how it can benefit them. A mission statement provides clarity on WHY your business exists.
Mission statements are useful not just for your customers, but for your employees, leadership team and board of directors; making sure that everyone is on the same page and working together towards a common purpose.
Having a well-defined mission statement can facilitate key decisions to be made, having already built the foundation for making decisions that support business objectives and purpose.
Example of a Mission Statement
Let’s imagine a Software as a Service (SaaS) company is creating their mission statement. Here’s what they come up with:
At abc.app, we create productivity software to help remote and hybrid workers across any business. We do this by providing project trackers, communication channels and user-friendly dashboards, all in one place. Our applications allow for the seamless workflows, easy interactive collaboration, and total transparency required for effective teamwork.
Let’s break down the basic components of the mission statement, and why they’re needed.
1. What your business does
“At abc.app, we create productivity software to help remote and hybrid workers across any business.”
When defining what you do, it’s best to keep it simple to maximise the impact. If you’re pitching your business as new to an investor, for example, you will need to be perceived as confident and knowledgeable in your chosen line of work, so keep the “elevator pitch” approach in mind. Can you define what your business does in one short sentence?
2. How does your business deliver?
Answering this draws out how you actually provide your product or service.
“We do this by providing project trackers, communication channels and user-friendly dashboards, all in one place.”
Going back to our example, we have again kept it simple and impactful. Also here is a good place to lay out what you provide that differs from your competitors and gives you that advantage over them.
3. What value do you provide / how do your customers benefit from your product or service?
Ask yourself what problems you are solving with your product or service. Once you have defined your business and how it delivers, a strong mission statement will link that to how your customers benefit, as we can see in the conclusion to our example mission statement:
“Our applications allow for the seamless workflows, easy interactive collaboration, and total transparency required for effective teamwork.”
Who Needs a Mission Statement?
In short – every business needs a mission statement!
A mission statement is important for businesses because, as we mentioned earlier, it is a fundamental tool that drives business planning, strategies and operations as effectively as possible. This provides an aligned way of working for employees, leadership and board of directors and allows a clear pathway for success.
Mission statements are prevalent in large corporations, but businesses of all sizes and even solo entrepreneurs can benefit hugely from having a mission statement in their business toolkit, especially when it comes to business planning.
Running a small business or being a sole trader can be challenging as there is a lot to do without the resource to help. A mission statement can be an effective way to bring focus and clarity when there’s seemingly a million things happening at once!
Advantages and Disadvantages of Mission Statements
Advantages
It provides the foundation for business planning. Your mission statement should be used to determine your objectives for the coming year and provides a clear route for business growth.
It informs your strategy and subsequent tactical activity. It can help you to prioritise in areas that are covered by the mission statement and prevent you from losing focus.
It creates a strong brand identity and drives the company culture and ethos, particularly important if you have employees.
It creates alignment for your employees in terms of guiding performance and prioritising areas for personal development and training.
Disadvantages
The only potential downside to having a mission statement is the difficulties it could bring if you want to pivot your business to something new, or if you want to diversify.
However, this does depend on how specific you have been in certain phrasing in your mission statement. If we go back to our example from earlier, where it says:
“we create productivity software to help remote and hybrid workers across any business”
At an earlier time, the SaaS company may have only targeted creative agencies, or dentists, or manufacturing businesses, before branching out to cater for “any business”. As organisations evolve and improve their offerings, mission statements can therefore evolve with them. What’s important is that you demonstrate consistency in the simple definition of your core business, how you deliver, and to what benefit to your audience.
Where it goes in your business plan
In a business plan, the mission statement usually sits near the start, in or just after the executive summary. Keep it to two or three sentences. A lender or investor will read it quickly, so it should tell them in plain words what the business does, for whom and why that matters, and the rest of the plan should bear it out.
It is worth being honest with yourself about what a mission statement can and cannot do. It will not persuade a lender on its own, and a grand statement attached to a thin plan does more harm than good. Its real value is internal: it gives you a test for decisions, and it keeps a growing team pointed in the same direction.
In summary
A mission statement that clearly distils your business and its purpose is a useful tool for any organisation, however small. Take the time to get it right early, because it will shape the values and aims of the business as it grows.
If you are writing your plan now, SquarePlan’s software takes you through each section, mission statement included, and builds the financial projections alongside. If you would rather have it written for you, see our business plan writing service.