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The Benefits of Charitable Donations Are About More than the Tax Deduction
Updated: July 22, 2019 |
MoneyCouple

Why Companies that Donate to Nonprofits Thrive

It’s pretty easy for me to argue in favor of giving back to the community. I believe giving is one of our most important responsibilities, using the means we earn to improve the world around us. To dismiss charity as a foolish waste of money is to miss the point entirely, overlooking the benefits of helping others a person can receive just from the act of giving.

At the same time, I know very well how hard it is to part with the money you’ve earned when you feel like you need every penny in order to make ends meet and keep your family living in relative comfort. No matter how much you have, it always seems as though finances get pulled in a million directions and spread way too thin. When you start questioning whether you have enough to pay all your bills, charitable giving is likely one of the first things to hit the scrap heap.

It may take a leap of faith, but you’ll simply have to trust me when I say that giving leads directly to getting. Companies that give back pretty generally do better on the bottom line. If your company has chronic cash flow issues, gifting some of your revenue might, in a roundabout way, be the cure to what ails you. It’s extremely counterintuitive and hard to process logically, but sometimes the best thing a business owner can do is crank up the generosity.

I speak from personal experience and I’m going to provide some general examples that will hopefully persuade you. Since I’m not asking you to give me the money, you can trust that I’m only motivated by the prospect of you and your company having more success.

Surface-Level PR

This could be the least meaningful benefit of donating, but it delivers the most immediately tangible results. Companies that donate to nonprofits get their names out there and the advertising more or less takes care of itself. You don’t have to write radio copy or buy banner space, you just let people appreciate a nice thing you did, and that appreciation often turns into business.

If you ever watch popular talk shows and games shows, big companies are always donating merchandise and money and making it seem like the board of directors are all giant philanthropists who spend all day looking for ways to give away money. As good as the intentions might be, these generous CEOs very much understand that a charitable donation comes with both tax benefits and a huge marketing boon. Exactly the same applies to your small business’s brand within the community.

How you spend money says a good deal about what you think is important. When you give to a certain cause, that indicates where your priorities stand, and thus how they line up with the priorities of everyday consumers. Give to an organization, group, family, or individual that people in your community care about, and those people will start to feel a certain kinship with your company.

I’d like to stress that giving superficially – donating without taking much interest in anything beyond future gains – usually appears pretty transparent. If you give to one charity while bankrolling an enterprise in direct opposition to that cause, people are going to find out. If you see your charitable donations as tax deductions and nothing more, this will affect how effective your giving is and have a massive effect on how the public sees you.

Companies that give back in an underhanded way are going to be exposed and may well end up doing their reputations more harm than good. This is why the surface-level PR that comes with giving doesn’t hold up to the other benefits. If you want your charity to deliver long-term improvements, you need to make sure your actions can keep up with your good intentions.

Next-Level PR

When you put time and money into improving a cause that you truly care about, the impact is real and the recognition you receive is lasting. As more people acknowledge your efforts, word-of-mouth advertising starts to pick up. Pound for pound, few things promote a small business’ brand better than people talking.

Let’s use the example of a pediatric clinic in a rural area. I’ve worked with a lot of healthcare professionals and know how demanding the work is and how some of the smaller offices plug away all week long just hoping to keep the lights on. An understaffed, underfunded pediatric office is exactly the type of company we should all be supporting, and people take notice when you do make an effort to help them and the kids they serve.

A sustained financial effort goes a long way with a business like this, with the ability to upgrade facilities and services that business revenue won’t cover. Even without a big banner thanking your business for the donation, the staff and patients will talk about the generous gift and word will spread. As people talk about the change you helped bring about, appreciation for your business will grow.

Essentially, your financial efforts will make you part of an appealing narrative. When people visit your business or see you in town, they’ll connect you to real-life experiences and things that matter. The money you gave won’t be a simple donation, but a tool that had an important impact on others. You and your business become part of the discussion when children and their parents talk with pediatricians and other patients. People won’t just know about your business; they’ll want to see it succeed.

This type of donation requires an investment of time as well as money. The people you connect with and help matter as much as the dollars you give. Fortunately, with each person you affect come another three or four who will hear about it. And all the while, you get to go to bed every night knowing you made people’s lives better.

Stronger Communities, Stronger Economy

While a pediatric office has a direct connection with people’s health, many other services can influence the well-being of the members of your community. Physical environment, access to recreation, healthcare facilities, local agriculture, and a million other factors go into the healthiness of a society. And the healthiness of a society has a very direct correlation with that group’s economic wellness. Companies that donate to nonprofits understand this and realize that they can take an active role in improving their community.

So many things we take for granted wouldn’t exist if not for generosity and philanthropy. No one is making millions of dollars off public parks, and the free services offered by your city or county aren’t lining some CEO’s pockets. Pleasant public spaces and free events exist to make people happy, with the knowledge that happier, healthier people make for a much better local economy.

When you sponsor a free concert series, you get your name on a banner and maybe a shout-out from the MC. That’s a decent way to create name recognition and build your small business’s brand, but that’s the smallest of the benefits of helping others. The bigger picture has people feeling a sense of pride for what happens in their community. That pride translates pretty directly into additional efforts to improve local amenities and spend dollars at local businesses.

Plenty of research has been done showing that investing in communal services pays serious dividends. When you chip in to fund the annual Easter Egg Hunt or help sponsor a recreational sports league, you give so much more than a financial gift. These things became a part of people’s lives and routines, increasing that feeling of hometown pride and loyalty, and thereby increasing the likelihood those people will make similar investments and contributions. Companies that give back to their communities can often start a kind of snowball effect even without meaning to.

A few examples to help connect the dots: access to a park with hiking trails helps a person stay active and fit, giving them more energy throughout the day and increasing the odds that they’ll spend time and money socializing; families that attend the farmers market get to buy healthy, local goods and support small vendors; children playing rec league sports make friends and then go out to pizza parlors after their games. The sponsored amenities people use inspire them to spend at other local businesses, plain and simple.

And, looking beyond those already living in your area, more money going into tangible improvements and services will increase your town’s appeal to potential transplants. Businesses need new customers and economies need new businesses, so the more of both a municipality can attract, the better everyone in that area will do. It won’t happen overnight, but a community that invests in itself will absolutely develop a little extra curb appeal.

Now, I understand that this type of charitable giving is more involved than just cutting a check for a nonprofit. You have to up your level of engagement to ensure your dollars go toward the right ventures. Do a little research and find out which charities give the most bang for your charitable buck. With that said, you know as well as anyone what could make your community stronger. Initiating something you feel passionate about could be the first step in an economic renaissance that will benefit your company and all the other businesses in your area.

For example, say you loved acting and performing in plays during your youth. Now, as a grownup with a business, you have a chance to underwrite a performance at the community or high school theater. You give $1,000 dollars to the cause and get a full-page spread in the program. As nice as that is, the real return on your investment will be shown by how those dollars get spent:

● Wood from the hardware store to build the set

● Labor hours for lighting and sound technicians

● Costumes from a local clothing store

● Increased ticket sales for the theater

Like a thriving stock that pays dividends, that thousand-dollar donation will spread out and seemingly multiply, turning into extra exposure and revenue for people and businesses other than your own and the theater company to which you donated. Then, when the set builder takes his or her extra earnings and spends that money at your restaurant or hires your marketing firm, the benefits of helping others will come full circle.

Whether it’s the local theater, softball league, or summer concert series, financing these causes has a tremendous impact on your community. When you help fund these events, you strengthen local morale, and that goes on to boost the local economy. Think about the services you use and appreciate, and try to imagine how you might be able to make them even bigger and better.

Long-Term Trust

Businesses come and go, especially small startups. It’s hard to keep customers engaged and maintain steady revenue, and it’s even harder when people don’t know much about you or your company.

Advertising on a park bench might help a little with name recognition, but your marketing will have a much greater influence if it’s attached to a good deed. That’s how you show people you care about what’s happening locally, and that’s the best way to earn trust.

This ties directly in with the topic above, as people who feel happier and healthier because of the strength of their community also feel more gratitude toward those who make it all possible. By chipping in to restore the public swimming pool or renovate a section of the church, you’ve made a lasting contribution. People see that and will appreciate a one-time donation for years to come.

As much as we consumers appreciate convenience, we still want to shop consciously. As long as the cost discrepancy isn’t too drastic, most people will try to buy from someone they know and like before taking their business to a stranger. Since you probably don’t have time to develop a relationship with every other resident, you can get the ball rolling by making a donation and showing your interest in local affairs.

Again, it’s important not to expect an immediate cause and effect. Donating to the Boys and Girls Club won’t land you 10 new customers that week, but it could land you 100 new clients over the next couple years.

Employee Incentive

The relationship between Bob Cratchit and Ebenezer Scrooge is very well known. A good man works hard and looks to provide for his family, while a miserly business owner makes it very hard for him to do so. No one wants to work for Scrooge.

A generous CEO will have a much better shot at employee retention, and not just because of the salaries offered. As I said at the beginning of the article, it’s difficult to find money you can confidently give away to charity; you’ll always be able to find another use for those dollars unless you commit to regular giving. If you, the owner of the company, feel that way, it’s safe to assume your employees aren’t particularly eager to give away the money they earn.

When you finance worthy causes, the effect is twofold. First, your workers understand that their efforts help drive dollars toward something important. Nothing is less motivating than working hard to make someone else rich, whereas working diligently to get paid and improve the lives of people less fortunate is a great incentive. In addition to that, the generosity you display as a business owner will influence the company culture. Workers might be more inclined to donate some of their own money, or perhaps they’ll try to think of ways to make your dollars go further.

Go talk to anyone who works for any of those companies that give back and have developed a corresponding reputation. I’m guessing the employee will list that generosity as one of the top reasons they like working for that organization. It feels good to give, even when you’re just giving by association. Your charity as a business owner has a greater effect on your employees than you might think, and that can magnify the effect you have on the community as a whole.

I’ll readily admit that I have a giving bias. Tithing is one of the core values I try to instill in my children. However, the data is on my side when it comes to businesses benefitting from being charitable. The above are just a few examples of how your donations can lead to personal gains, and I’m sure you’ll find many more if you commit to using a small percentage of your earnings to do good things. There are always a million reasons not to give to charity, but the real-world benefits of helping others outweigh all of these.‍

Make it happen!

Taylor & Megan Kovar

The Money Couple

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