17 Jun How to build a business that gives back
Many people start a business for more than just the profit. Alongside the freedom and creativity that comes with being an entrepreneur, running your own venture gives you the opportunity to build a business that gives back to good causes.
You may have a cause close to your heart, a charity you want to support or a desire to help your community.
There are countless examples of businesses that give back – from Gandys, founded by two orphans who are on a mission to build children’s homes around the world, to Patagonia who give 1% of their annual sales revenue to environmental causes.
Why should your business give back?
Being a business that gives back can have big benefits.
Greater awareness of, and access to information about, the social and environmental impact of businesses and their products means that customers have more resources at their fingertips to help them shop in line with their values.
Consumers are trying to be responsible citizens of the world and they expect the same from the businesses they buy from.
According to Forbes, more than 88% of consumers think companies should try to achieve their business goals while improving society and the environment.
83% of consumers also think that companies should support charities and nonprofits with financial donations.
In fact, the average American consumer will drive nearly 11 minutes out of their way to buy a cause-marketing product!
And when choosing between two brands of equal quality and price, 90% of US shoppers are likely to switch to a cause branded product.
Building a business that gives back can help you attract more customers by connecting with them over a shared cause.
Although making a positive impact won’t market your business for you, it could help you become more profitable and unlock more business growth.
Global giant Unilever has 26 sustainable living brands under their umbrella, and those brands grew 46% faster than the rest of the business, delivering 70% of overall turnover growth in 2017.
Around the world, brands are giving back in a variety of ways and seeing the benefits of embedding philanthropy, corporate social responsibility and cause marketing.
How to build a business that gives back
Many small business owners and aspiring social entrepreneurs assume they have to be making a massive profit before they’re ready to embed giving back into their business – but that’s not necessarily the case.
Here are several ways you can build a business that gives back from the beginning:
Donate a percentage of your sales revenue
When you’re planning to bring a product or service to the market, you need to know your finances.
Your sales revenue is the income that covers your business running expenses. What’s left is your profit, and it’s usually calculated at the end of the year.
When you’re calculating your prices you need to take into account the cost to make the product or deliver the service, and the overheads involved in running your business – as well as how much you’re going to pay yourself, your staff and contractors, and how much profit you want to make.
When you know your margins, you can donate a percentage of your sales revenue to good causes, or a set amount for each product sold.
This means you don’t have to wait until the end of the year to calculate your profit, and you can make donations more regularly.
To keep things simple, you might opt to give back once a month based on the amount of revenue you’ve generated, or every time you make a sale.
If you partner with more than one charity, you could even give customers the option to choose their cause.
I recently purchased insurance from Evergreen Insurance, a broker who donates up to 25% percentage of their income from each policy to animal, wildlife and environmental charities.
Operate a Buy One Give One model
The Buy One Give One model was first made famous by brands like TOMS Shoes, who give a pair of shoes to a child in need for every pair they sell.
Buy One Give One can work really well for product based businesses. The simplicity of the impact story naturally fuels conversations, making this a perfect model for harnessing word of mouth marketing.
Several finalists in the 2019 Be The Change Awards operate a Buy One Give One model for their impact.
Pala Eyewear make sustainable sunglasses and give back to eye-care programmes in Africa by providing grants to vision centres for every pair sold.
By calculating a ‘cost per patient’, Pala are able to equate buying a pair of sunglasses to giving a pair of spectacles to a person who needs them.
YOU Underwear actually operate a Buy One Give Two model for their organic, ethically made underwear – two pairs are donated to girls in need for every pair sold.
Buy One Give One also seems to be one of the most popular models of impact according to consumers.
64% of shoppers say simply giving money away isn’t enough – they want businesses to integrate social impact directly into their business models – such as Buy One Give One campaigns.
However, if you’re considering implementing a Buy One Give One model there are some considerations to take into account.
In their early days, TOMS were criticised for failing the community they were trying to serve.
International development experts say that charitable gifts often undermine local businesses in the regions they are trying to help – creating a culture of dependency on donations, failing to address the root causes of poverty and reducing demand for local products, which damages trade.
TOMS founder Blake Mycoskie has admitted that his critics were right, and has since tried to support activities that better alleviate poverty, such as shoe manufacturing operations staffed by locals.
Choosing the right charity partner is key to the success of any give back model, and particularly important when it comes to implementing a Buy One Give One system in your business.
At Ethical Hour, I chose to partner with B1G1. As a business, their model is straightforward and easy to implement – you can create “giving stories” for each transaction in your business, make your impact easily online and track your impact in real time against the Sustainable Development Goals.
In terms of the charities they partner with, they have a screening process to make sure there is transparency about how the impact projects are run. Businesses pay an annual membership fee and B1G1 cover the transaction costs, so you know that every penny you donate goes to the cause you’ve chosen – not on admin fees, salaries and overheads.
Choosing a transparent organisation and understanding exactly where your donation goes is essential if you genuinely want to make an impact and communicate this openly and honestly to your customers and stakeholders.
Commit a percentage of profits and operate with “profit first”
Profit isn’t a dirty word in the ethical business space, but many impact entrepreneurs feel a sense of guilt or shame at the idea of profiting from their cause – especially in the beginning.
Donating a percentage of your profits can help you overcome difficult money mindset barriers, and motivate you to make your business as profitable as possible. More profit means more positive impact!
Depending on your country of operations, there are legal structures that dictate how much profit to donate. In the UK not for profit companies must reinvest 100% of their profits into their cause.
Organisations like 1% for the Planet are another way to formalise your commitment to your impact.
Becoming a certified Social Enterprise might also involve committing to donating a certain percentage of profits.
However, even if you’re not ready to enter a formal arrangement, you can still decide on how much to donate at the end of the year when your accountant calculates your annual profit.
Accessories brand Elvis & Kresse re-distributes up to 50% of their profits to projects and charities related to the unique materials they reclaim.
Alternatively, if you don’t want to wait until the end of the year to donate, you can follow Mike Michalowicz’s “Profit First” plan.*
He recommends implementing a simple accounting system where you set up a separate bank account for profit, and commit to moving a percentage of all sales income into that account before you pay your expenses and overheads. That way, your business can start being profitable from day one!
You’ll also have a clear overview of how much you’re putting away to give back and can make donations more regularly if you want to.
Give time instead of money
If your margins are tight or you’re not ready to commit to a financial model of giving back yet, you could donate time instead of money.
This works particularly well for service based businesses where you can lend your expertise to a charity, not for profit or community organisation who could benefit.
I give around one day a month to a local children’s charity in my role as trustee, supporting them with marketing and business advice.
If you charge an hourly or day rate, you can allocate a financial value to the time you give and include this in your impact report as a way of demonstrating how your business gives back.
Embed social value in your supply chain
When you’re trying to build a business that gives back, you put a lot of thought into where your money goes.
Choosing your suppliers is another opportunity to vote with your wallet. By purchasing from ethical businesses, social enterprises and other businesses committing to giving back, you can maximise the positive impact of money you’re spending anyway.
As a marketing strategist, I’m committed to making positive impact through B1G1, investing a percentage of sales revenue into microfinance loans for entrepreneurs in developing countries, and planting trees each month for every member of my subscription community. So when my clients choose to work with me to grow their business, they know the money they invest is growing their impact too.
As an ethical business, you have a unique opportunity to influence and improve communities by giving back.
Philanthropy can have big benefits for your brand, and if you embed giving back into your business you have a powerful opportunity to create a significant impact in the world.
*Please note, this is an affiliate link, which means I get a small percentage of the sales revenue if you make a purchase. It doesn’t cost you anything extra, and I only recommend products, services and resources that I’ve used personally and have seen good results from.