Very interesting post last week from Steve King, in Small Business Labs. He’s looking at Ethos, Starbucks’ branded water linked to investing in clean water where it’s needed in so many places in the world. Here’s the kicker, but don’t settle for this little excerpt, read the post:
As I sat in Starbucks, I realized my issue with Ethos is they may be doing too well financially relative to the good they are doing. They also may be doing too well relative to their positioning. Ethos positions itself as a mission-based social service organization, and their website makes them look like a non-profit. I have a hard time reconciling this positioning with their pricing and my back of the napkin calculations of their profitability.
I give Steve a lot of credit for looking behind the curtain. So often there are questions we fail to ask.
We had a similar discussion recently when judging business plans for a social venture competition. One of the companies had a solid idea and business model, and a pretty nice plan overall. But we were all uncomfortable with their financials, which projected relatively high prices and huge profits, especially since they were looking to outcompete existing non-profits with a for-profit model.