Philanthropy is a critical part of running a successful and well-respected business. Learn why philanthropy is important, and the different ways that your business can get involved.
Pursuing growth opportunities for your company is key for driving long-term business success. But new growth can bring new challenges, and small business owners must consider how they connect with their community, cultivate authentic relationships with their customers, and build their company culture as their revenues increase and their operation expands.
For small business owners looking to overcome growing pains and move their companies forward, business philanthropy could be the key to achieving smart, sustained growth. Recent research suggests that purpose-driven companies—ones that clearly demonstrate their values to their employees, their customers, and their communities—grow three times faster on average than their competitors.¹ And with half of American consumers in one survey indicating that they would switch to a company that supports a charitable cause that they believe in, making an effort to give back can have a real impact on your bottom line.²
When executed correctly, the right philanthropic strategy can help unlock the full growth potential of your business. Here’s what you need to know about small business philanthropy and how you can get started today.
Why Philanthropy Is Important for Your Business
Small business philanthropy can benefit your business in a variety of ways, including your brand and marketing efforts, your employee management, and even new customer acquisition. Here are four ways that implementing an effective philanthropic strategy could pay off for you:
1. Boosting your business’s image
Charitable giving and other types of business philanthropy can serve as great PR for your business. This is especially important for businesses looking to make inroads into new markets. If you’re looking to expand, developing a positive image for your business and a reputation for giving back can make members of your new community more receptive to your business’ arrival—and it can help you make local connections more quickly.
2. Enhancing your customer relationships
Small business philanthropy can also have a tangible impact on your sales. According to SCORE, 85 percent of consumers have a more positive image of a company that gives to charity. This means that making an effort to give back can offer you a major leg up in the customer acquisition and retention game.
3. Improving your employee relationships
Employees like to know that their employers are interested in making a positive impact on the community. With business owners looking for any edge they can get in the current labor market, prioritizing philanthropy could be a key differentiator for attracting and retaining the top talent at your business.
4. Providing personal fulfillment
In addition to the concrete benefits to your company, business philanthropy can help you measure and quantify the true impact that your company is having on your community and the world.
How to Decide if Your Business Is Financially Ready for Philanthropy
When considering how you can establish a successful long-term philanthropic strategy for your business, the first step is to consider your business’ current financial position and how various philanthropic methods could impact your cash flow and working capital.
Review your business’s budget and understand whether you have the cash available for charitable donations. Do you have any big capital expenditures approaching in the coming months? Are there certain times of the year when your business experiences a cash crunch? If you’re offering your employees paid time off to volunteer, how might this impact your payroll? These are the types of financial questions that could impact your short- and long-term strategy, and help you determine which philanthropic methods you pursue for your business.
How to Choose the Right Type of Philanthropy for Your Business
Once you have a clear understanding of your business’s financial health, the next step is deciding how and where your business will give back.
Selecting the right outlet for your business philanthropy is a two-part process, and it’s unique to every business owner. First, you need to determine the issues and causes that matter most to you. What are you passionate about? What values do you want your business to represent? Where do you think your business can do the most good? Once you’ve reflected on these questions, then you can start researching and identifying the organizations and initiatives that align with your values.
After determining where your business will focus its efforts, you can start thinking about the method of philanthropy that is right for you. This will likely depend on your business’s financial health and your personal goals. Here are four potential options available to small business owners:
1. Monetary donations
Some business owners may choose to support their causes through direct donations. These donations could be set dollar amounts or a percentage of sales and could be organized as a one off or on a regular timeline, such as monthly, quarterly, or annually.
2. Sponsor a local program
You can also opt to sponsor a program or initiative in your community. Supporting a youth sports team or a local 5K race is a great way to give back, and can help get your company’s name out there on team jerseys and event banners and T-shirts.
3. Host a charity drive
As an alternative to cash donations and sponsorships, your business could offer to host a collection drive for a charitable organization like Toys for Tots, a food pantry, or a local animal shelter.
Finally, one of the most valuable resources your business can offer is your time. You and your employees could spend regular afternoons working at a soup kitchen, reading at the local Boys & Girls Club, or visiting residents at a children’s hospital or nursing home.
Navigating Your Business and Personal Philanthropy
How should your personal and business philanthropy interact? Should your business support the same organization you are involved with in your personal life? If you’re thinking about getting your business involved with a charity, these are some of the key questions you may be asking. Ultimately, the answers depend on your personal goals. If you are passionate about a single cause and give back to an organization with your personal finances, it may make sense to double down and support this issue through your business as well. You could also branch out and get involved with new causes that align with your values.
As you consider your options, it can help to talk with your banker or financial advisor. There could be financial benefits associated with the philanthropic decisions you make in your personal and business lives, and you’ll want to take advantage of every opportunity you can. If your advisors have a deep understanding of your full financial picture, they can help you make decisions that will set you up for success and maximize your impact in the long term.
Making an Impact Through Business Philanthropy
There’s a lot to consider when establishing a philanthropic strategy for your business, but getting your company involved and giving back is a great way to keep your personal values at the forefront of everything you do, even as your business grows and evolves in the future.
Successful business philanthropy doesn’t always happen overnight, but reflecting on your values, thinking about what you want your business to be in the long run, and talking to your financial advisors about strategies that makes sense for you can set your company on the path to success.
1. Deloitte. “Purpose is everything: How brands that authentically lead with purpose are changing the nature of business today.” October 15, 2019.
2. MIT Sloan Management Review. “Boosting charitable giving can also boost profits.” December 16, 2021.
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