How to Balance Profits and Philanthropy in Your Business

A business that supports a good cause has the potential to be one of the most successful and simultaneously impactful types of business there is. Why? Simply put, consumers like supporting businesses that support causes that they care about. There’s a bit more to it than that, but that is the core reason why philanthropic for-profit businesses are some of the most important businesses out there. But despite it being one of the most important and influential business platforms there is, a lot of businesses set up this way give up entirely or at least omit the philanthropic portion of their business structure. Why?

Finding balance is hard

Finding the right balance between profit and philanthropy is really hard. Hard enough, that some people just can’t find that right balance, and give up the venture altogether. When it comes to business and profit margins, it’s all about percentages. You have to make sure that the percentage of income kept is enough to keep you in business, while still putting a profit in your pocket. You also have to make sure that the percentage of money going to your philanthropic cause is enough to make it worth it to your customers, without charging an arm and a leg for your product and therefore making your customers not value your product enough for the extra cost.

Impact Investing

What this type of business model is trying to implement, is more simply called impact investing. Impact investing is a way to make a positive social and/or environmental change in the world, by investing in specific entities that support the causes that you are passionate about, through your business. There are a lot of great reasons to start a business that focuses on impact investing, or by converting your existing business into one that practices impact investing. Mainly, the positive change and effect that you will have on the cause that you choose to support and invest in.

Get help and insight from people more experienced than you

If donating to a philanthropic cause is an aspect you want to add to your business model, one of the smartest things you can do is to talk to someone who has experience in that area. Talk to other business owners who donate a share of their profits to a cause. Don’t feel embarrassed or ashamed of your questions, because I promise they love it! They’re passionate about their cause, and obviously they’ve been able to make it successful. They will love getting the chance to talk about something they care about so passionately, so don’t hold anything back and ask them everything you’ve been curious about. You don’t have to ask them anything too specific, but ask them about what their profit margins are, so you know what percentage goes to their cause, what percentage goes to business costs, and what percentage turns into a profitable income. This will give you an idea of how to set up your own business model!

Be creative in your positive efforts

We limit ourselves when we assume that a business with a cause is just about donating food to orphans in Malawi. There are so many ways to have a positive impact in the world around you. Consider charitable missions where you and your employees are able to donate time and expertise to an area with great need. It might even happen in your own backyard, with a free day. It might be something that trickles down to your employees, where you give bonuses for people to donate to their own pet cause. Identify one of the biggest problems in your industry or community. It might be anything from an extreme problem with mental health awareness, or local pollution. In this case, you can start with ways in which you can reduce your own contribution to the problem, and then share the ways that you changed and motivate others to do the same. Reach out to organizations close by and find out what they need and how you can supply it!

Making sure you stay profitable

One of the hardest parts of donating some of your profits to a philanthropic cause, is that it’s easy to charge either way too much or way too little. Part of this is just a learning curve and as your business grows, you can adjust your pricing to work a bit more effectively. You probably are afraid of charging too much, because then no one will want to buy your product, but if you don’t charge enough, you’ll go out of business and won’t be able to make a difference.

A good rule of thumb is to first take the cost of business(ie, the cost of product). Double this. This is the minimum you would need to charge to NOT make a profit, but be able to stay in business because you could replenish your stock. Find out how much you want to donate to your cause, and add that percentage. Lastly, find out how much profit you’d need to make to make it worth your time, and add that to the above. That’s how much you’ll need to charge to stay in business and make the impact you want to.

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