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Uncovering The New Transparent Business Movement (And Why You Should Join)

Several years ago, Joe and I ran our company very differently. We approached business from a secretive “don’t feed your competitors” approach. We kept everything – from our business processes, to our clients and salaries – close to the vest because we thought it gave us a competitive advantage.

As it turns out, we actually lost out on a lot of opportunities with this approach. After making the swap to a more transparent business model, we have significantly expanded our horizons, and are now getting opportunities that we never thought possible.

So when did this transparency movement begin?

Why does it matter and how can you benefit from it?

When It All Began

For decades now, many companies have been internally transparent. Information like salaries and quarterly profits are openly available to employees. In fact, Whole Foods was the first to introduce an internal transparency policy. Their Co-CEO, John Mackey, launched their open salary policy in 1986, just six years after the company was founded.

Why?

Because he wanted his employees to understand what sort of actions and achievements deserved (and received) a higher salary. The result was a more motivated and trusted community of workers.

While it may have taken years for companies to take action, the conversation surrounding external transparency started long before that.

Customers and consumers began setting the bar higher and questioning the products they were paying for. Not only did they want to know what was in the product, but they began asking how it was made, who was making it, and how you were treating your employees and contractors.

They were demanding full disclosure.

At some point, it seems businesses realized the conversation was going to continue until they delivered the information. Around 2013, we began seeing more companies and businesses picking up on the transparent business model, most notably Buffer, Groove, and Baremetrics.

These companies began sharing everything from traffic and finances, to salaries, open-source coding, and even the books their employees were reading.

Internal transparency clearly made a positive impact on Whole Foods’ business, so why did it take several more years for companies to adopt this principle and become more externally transparent?

Why It Matters

Back in the day, it seemed like building a profitable brand (though not necessarily a successful or long-lived one) used to only require advertising — a controlled message and an overwhelming representation of the stakeholder, not the consumer. In other words, it required hype. And plenty of it.

The problem with hype is that it doesn’t expose the staggering 90% failure rate that new startups experience. From the startup’s perspective, it doesn’t project the reality of what a new business looks like; and for consumers, it leaves them investing in a potentially failing business.

The abrupt pausing of Zirtual’s business operations comes to mind.

Zirtual’s CEO, Maren Kate Donovan, withheld the fact that their burn rate was consuming funds faster than they could create profit. The result was 400 employees finding out they lost their jobs via email one Monday morning, and their entire client base was left in a lurch.

Perhaps the most disturbing fact in this case is that Donovan was featured on the podcast This Week In Startups that weekend, and didn’t say a peep about the company shutting down.

In this case and many others, transparency could have been eye opening in many aspects. It could have prevented new clients from paying for a service that would be closed down in days. It would have shown that their current business model was not sustainable and required re-jigging. It also could have allowed employees to secure their future, even if that meant finding a new position.

Ultimately, transparency — for both customer and company — creates accountability and confidence. Something we could all benefit from.

The Risks

Plenty of potential risks exist when adopting the transparency model — most notably, scrutiny.

By allowing the public to see your numbers, you risk losing out on potential customers. If you are experiencing a high burn rate (as was the case with Zirtual), this will make your numbers look bad. What potential customers may not see are the changes you are making to the business to decrease the burn rate and increase profitability.

The most common risk factor many businesses fear is an increase in competition. They worry competitors will steal their ideas and processes and then become more successful. While this could be true, if you are genuine and true to your customers, you can prevail.

The Benefits

Risks aside, this new business model definitely has the potential to create a positive impact on your business, like it has ours.

As I mentioned earlier, the more open and transparent Empire Flippers becomes, the better our business does.

We’ve been sharing our monthly business reports for years now and have opened up about our struggles and successes in blog postsand podcasts. That has allowed us to build  a large amount of trust in an industry where trust is critical.

Aside from Empire Flippers, we’ve seen benefits to other businesses applying this transparent model as well.

The honesty in opening up Baremetrics’ dashboard bred confidence in their product. Groove’s openness surrounding their journey to a $100k business and Buffer’s Open Blog rewarded both businesses with plenty of attention in the press and allowed them to engage their customers in a new and profitable manner.

The biggest takeaway is that transparency opens the door to new opportunities and can help you build a loyal customer base.

So tell me: Do you still believe that leveraging secrecy will lead to your business or company’s success, or do you believe in the power of transparency?