Can philanthropy really help my startup grow?

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Many entrepreneurs think of philanthropy as something to consider way off in the future when their businesses are mature and profitable. There is a better approach. Philanthropy works best when it is included in a company's business plan from the very start — when it is part of a company's daily operations strategy, growing and prospering over the years as the company itself grows and prospers.

When determining how to integrate social responsibility into your company, it is important to map out a program to support this activity in the long term. The best way to build in philanthropic work is to focus on one or two beneficiaries for the company as a whole. Often, startups can barely afford support staff let alone have a whole barrel of money to donate. By limiting the focus, you can have a greater impact. At the same time, you can keep the company-sponsored charitable activity lighter so that your employees do not feel overwhelmed with the number of events to participate in.

Beyond the rewards to your community, philanthropic activity can significantly benefit your corporate culture when used properly. It allows for opportunities to build relationships both within your company and across your industry.

Building a company culture is all about building relationships and respect, and charitable activity is great for team building. For example, whether you host an internal fundraiser or gather a group to clean up a community park, the activity requires individuals to interact across departments. Especially when the project is focused more on a group activity, it encourages employees to get to know each other on a different level — and with colleagues they may not interact with day-to-day.

Startups don’t have their own foundations, heaps of cash to give away, or lots of time to run charitable programs. But every company and every individual can find a way to give back, supporting the idea of “universal philanthropy.” And there are creative ways to go about doing so. Here are five recommendations for startups to consider:

  1. Find the right match: Choose an organization to support that fits with your company’s values. Whether you fund one charity for the long haul, or choose a new one each year, it’s important the organization supports a program aligned with your company’s vision and values. To select your charities, do a bit of research, read through their multi-year plans, visit the places they’re doing work, and ask a lot of questions. When you find the charity or charities that “fit” with your company’s vision, it will be obvious.
  2. Give 1 percent of your EBIDTA or profits: Once you’ve identified the charities you want to support, consider setting up a simple, ongoing way to give. The easiest way for a startup to donate money is to give 1 percent of your EBIDTA (What’s an EBIDTA?). This model works well for startups for two reasons. First, it’s simply calculated as part of your budget and becomes a line item you can expect from year to year. Second, it’s a profit-sharing model that rewards the charity with more funds as your company improves performance. If you go through lean times, the charity gets less. The 1 percent of EBIDTA model gives an extra incentive to everyone in the company to deliver the most profitable growth possible.
  3. Get employees involved: If you involve your employees in your charitable program from the beginning, they’ll be more eager to support the cause. Invite representatives from the charities you support to your office for special events, allow employees to volunteer at the charity during work hours, and support them if they want to get more involved.
  4. Give, even if you don’t have profits: Many startups aren’t yet profitable, but that doesn’t mean they can’t donate to charity. In the absence of profits, you can give 1 percent of your company’s equity to a charitable organization or foundation. This is an incredibly generous gift, because you’re donating your company’s future upside. It’s fairly straightforward to draw up a contract giving 1 percent of your company to a charity.
  5. Become an agent of change: Creating a culture of giving within your own company is just the first step toward fostering universal philanthropy among all the world’s organizations. Aim to set an example by publicizing your charitable endeavors and encouraging other startups to follow suit. Host industry events where you invite charities to present, and use social media to share your experiences with charitable giving. Many startups believe they don’t have the time or resources to be philanthropic, but once they learn about innovative charitable models, they’ll realize there are always ways to give back.

As entrepreneurs, we all strive to creatively solve problems, build great companies and, most importantly, work with talented, committed and humble people. Philanthropic work is one of the components to help you do just that.

But remember that regardless of how you translate being socially aware for your company, you need to be authentic in your actions. Outsiders and your employees will see through any lip service you give to charity work. Get out there and plant a tree, serve a meal or paint something, and spend time with your team outside the office. You might be surprised what you learn and how it will impact you and your business in the long run.