Small Business

Make Giving Part of Your Business Strategy


Use charitable giving to increase sales, lift employee morale—and help out your favorite cause

Talk about great philanthropists, and the names of celebrated entrepreneurs—think Carnegie, Ford, and Rockefeller—are sure to come up. Those who've amassed fortunes but haven't forgotten their hardscrabble beginnings have long formed the backbone of philanthropic giving in the U.S. In more recent years, a new generation of success stories, from Bill Gates and Oprah Winfrey to younger moguls such as Google's Larry Paige and Sergey Brin, have joined the ranks of givers.

Most business owners, of course, haven't quite reached the point where they need to worry about dying rich. But many are continuing the entrepreneurial tradition of giving back. Some 90% of small businesses already donate to charity, according to a 2001 Better Business Bureau Wise Giving Alliance survey, with some 35% giving more than $5,000.

That doesn't mean all those businesses gave cash—many entrepreneurs donate products, services, or even real estate. It adds up: In 2004, small businesses collectively gave some $40 billion to nonprofit organizations, according to the National Federation of Independent Business. "Small companies cover a wide spectrum in the kinds of donations they give," says Dwight Burlingame, associate executive director at the Center on Philanthropy at Indiana University. "They are primarily focused on local and community needs."

While you may consider it just good citizenship, corporate giving is part of your business and should be operated as such. Like any business effort, it should be organized to maximize return, which can take the form of increased sales, better employee retention, or higher visibility in your community. Done properly, giving is good business.

If sales are slowing, it could be tempting to curtail your philanthropy. But a little creativity will allow you to adjust your efforts rather than cut them. If you've set up your giving well, you should still get maximum impact out of it, even in a rough economy. And that, of course, is when your beneficiary—and your business—need it most.

Figuring out how and what to give, however, can be tricky. There are a host of factors to consider, all of them intertwined. You'll need to decide what cause to support and how, and if you want your employees to be involved. Whether you donate cash, discounted services, or products, you'll want to track your giving and stick to a budget. Then think about the business benefits you hope to get from your activity and decide how to publicize your good works.

CHOOSE YOUR CAUSE

Since you can't contribute to every worthy cause, those you do support should be deeply connected to your business. Try to resist "checkbook charity," or the practice of haphazardly writing checks to whoever asks for support, says Stacey Wedding, a principal at Henderson (Nev.) consultants Professionals in Philanthropy. "It's important to transition from reactive giving to strategic giving."

To do that, start by choosing one cause that reflects your business and resonates with your customers. Deb Turpin, founder of Kansas City (Mo.) River City Studio, a $1.3 million, 16-employee design and branding company, had given on and off for years. But after working with a consultant who pressed her to express her core values and her company's reason for being, she incorporated "giving back" into her mission statement in 1995. That's when she decided to focus her efforts, providing a 10% discount on design work for local nonprofits. The majority of those she supports foster the arts in Kansas City, and therefore reflect River City Studio's creative bent. Turpin had originally wanted to offer pro bono work across the board—and she does some—but, she says, "If you give it all away, then people don't value your work." She estimates she donates about $100,000 in services per year.

Jason Linkow, founder of the upscale Metafolics Salon in Denver, found his philanthropic inspiration in a client. Although Metafolics regularly makes in-kind donations to community fund-raisers, the 12-employee, $500,000 company's major philanthropic work focuses on melanoma research. "A client of mine was diagnosed with Stage IV melanoma five years ago," says Linkow, whose grandmother also died of the disease. "It really was the catalyst that motivated me to make a difference."

Linkow launched his annual "Cuts for a Cure, a Lifetime of Health" event in 2004, offering a free spa service, a full-body skin cancer screening, and a goodie bag to customers who donated $100 directly to the University of Colorado Foundation, which supports one of the country's top melanoma research facilities. Spa employees donate their time to the event, local dermatologists provide the skin cancer screenings for free, and much of the gift bag contents are donated by the salon's vendors. Linkow has even organized "challenge matches" with 10 Denver area foundations. If the salon meets its goal of raising at least $5,000 during the event, those foundations will match its contributions to the University of Colorado Foundation. The result: For a mere $200 out-of-pocket cost, the salon was able to raise $65,000 last year.

Once you've settled on a cause, think about the various nonprofits that support it, and ask which would help you best achieve your business goals. "There is a way to be strategic and get business value out of your giving, and still do it in an authentic way," says Susan Hyatt, founder of philanthropy consultant Business Nonprofit Connections. Are you trying to raise visibility? In that case, choosing a small organization to which you can become a major benefactor would be a good strategic move. If you're looking to improve recruitment and retention or to boost morale, canvas employees for their opinions about worthy causes. For those looking to increase sales, it's worth asking if a nonprofit's other patrons might be potential clients.

You'll also want to evaluate the nonprofit itself. Speak to other business owners affiliated with the organization about their experiences, and consult the Web site of the Better Business Bureau, which ranks nonprofits at bbb.org/charity.

Premier Relocation Solutions worked with a number of charities before finding the right partner. The $17 million company, which rents out luxury corporate apartments in New York and New Jersey, launched its giving program in 2000, donating gently used furniture and household goods to the Salvation Army. But the Salvation Army preferred to cherry-pick a few pieces at a time and couldn't manage Premier's volume. Next, says Carla Conti, one of the 19-person company's founders, Premier tried to donate to local churches, which would then sell the furniture at flea markets. Turned out the churches could take goods only on a seasonal basis. Eventually, in 2004, Premier joined with the New York-based Partnership for the Homeless, which helps families who are leaving homeless shelters. The company usually donates a truckload of furniture each month. The Partnership needs goods year-round, and, says Conti, has ample warehouse space in Brooklyn.

Don't forget to do some budgeting. Analyze what the value of your giving has been to date. Is that sustainable, or should it be scaled back? Can it grow? Is it primarily cash, pro bono work, or in-kind donations? The national average for small companies, says Professionals in Philanthropy's Wedding, hovers around 1% of pretax income, but each business will be comfortable with a different level. "A lot of companies don't know exactly what they're giving, which is ridiculous," says Hyatt. "If philanthropy were a business unit, you would know what you were spending to the penny."

Then establish some metrics. That means preparing to track what your employees are doing and how much time they give, and the value of in-kind gifts and pro bono services. If you're giving cash, ask your organizations to tell you how they spent your money, and consider the payback. Did you gain greater visibility or any new clients? You don't need to quantify the returns on every dollar spent, but if you don't keep track of what you're doing, it's hard to know the benefits either to you or your cause.

If you've chosen an organization you don't already have a relationship with, start building one by contacting either the development director or the executive director, depending on the size of the nonprofit, says Hyatt. If you know someone on the board, start there. Or, if you want to support a specific program, reach out to the program director. Although the frequency of your contact will vary depending on what kind of support you plan to offer, plan on a minimum of quarterly updates. This will give you a chance to explore future opportunities and evaluate the impact of past giving. "You want to create new opportunities, not show up and deliver a check," says Hyatt.

It's important to start small. As your business grows, or shrinks, you can adjust your giving accordingly. Decide where the donations will come from in your budget, whether it's human resources, public relations, or marketing. Appoint a person in the company to monitor these efforts, making sure that the work is recognized as part of their job duties.

You'll also want to think about how to celebrate your success. There is a fine line between good marketing and appearing self-serving, and the instinct may be to resist saying anything. But remember, most customers want to do business with companies that do good, says Hyatt. "Clients like the fact that you give something back," says Turpin. "Over the years, as one person gets to know you, they tell others. It brings your name up in front of important people. I sit on the boards of many of my nonprofit clients, and I know I've gotten business out of the relationships I've made there with other executives."

Turpin has also found that her charitable activities have boosted employee morale and retention. The average tenure at River City is eight years, a long time for a small advertising business where there aren't ample opportunities to grow. "I believe our culture, including our philanthropy, is truly what keeps people here," says Turpin.

If broadcasting your own work is off-putting, ask your nonprofit partner to send out a press release, or include a page on your company Web site that discusses your program. But don't be too shy. "We choose our annual giving day very specifically," says Linkow. "The first Monday in May is considered Melanoma Monday nationally, so we either do the Sunday before or after that in order to maximize our media exposure." And the event has helped increase his customer base. "We have an 85% retention rate as a salon, which is very high," Linkow says. "Our problem isn't keeping clients, it's getting new business into the salon. The event does that."

GIVING IN A RECESSION

An economic downturn doesn't have to mean that your giving stalls. For some businesses, just the opposite is true. Conti, for example, cuts back on the number of apartments she maintains during a recession, leaving her with more furniture to donate.

Even if you don't suddenly have excess inventory, you can still give as the economy contracts. If you need simple tasks done in the office, you could partner with a local nonprofit that offers skills development to underprivileged youth or disabled people. You might offer something as basic as the free use of your conference rooms. If you're launching a business promotion, look for a charitable tie-in. Linkow, for example, wanted to ramp up sales of certain items, so he offered customers a discount on new products if they traded in old ones. He then donated the old products to cosmetology schools where students can use them to practice on mannequins. "We don't write checks. In these economic times, money is too tight to be giving it away," says Linkow. "But it's not only money that can make a significant difference in the community and in people's lives." He, and other philanthropically minded small business owners, prove that every day.


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