Entrepreneurs and business owners are often solicited for donations of one kind or another — by everyone from national advocacy groups and political campaigns to local soccer teams and school dance troupes.
So how do you decide where to donate? And what’s in it for you and your company?
Some things to consider when making decisions on charitable planning:
What matters to you
Even the superwealthy don’t donate to everything. It’s important to support causes that you care about.
There’s really no downside to charitable giving. Nonprofits get the funding they need. With sensible charitable planning, your company gets increased customer loyalty, increased recognition and potentially useful tax deductions.
You might, for example, want to donate to Alzheimer’s research if you have a parent suffering from dementia. Or if you were once a devoted member of your high school marching band, you might want to support those musical young people.
There’s an intrinsic reward from helping people or causes that resonate with you.
Research the organization
It’s worth taking a few moments to be savvy about the charities you choose. There are a number of watchdog organizations that scrutinize how nonprofits allocate their donations (including CharityWatch and Charity Navigator).
Ideally, you’ll be contributing to organizations that funnel a substantial percentage of their donations to the cause or people they’re supporting.
Is the donation tax deductible?
This question is entirely practical. Contributions to registered charities and nonprofit groups are tax deductible, and having a slew of deductions at year’s end will make your accountant happy.
It’s absolutely all right to donate with the deduction in mind. You’re getting a tax break, but you’re also supporting someone who needs it. This kind of charitable planning is win-win.
But be savvy about how those deductions work. Whether a donation is categorized as a business expense or a personal deduction — or even if it qualifies as a charitable donation at all — varies based on a number of factors, including: (1) whether you are a C corporation or a sole proprietor; (2) whether you’re donating money, services, sponsorship, or goods; and (3) whether you receive anything (such as advertising space) in return.
Local vs. national
Beyond the deduction, donating to charity is simply good business sense, so much so that it’s worth including donations in your business plan so you can track the potential outcomes.
Consider steady support rather than onetime donations, as this will allow your customers to associate you with a particular charity.
And customers are significantly more likely to engage with a company that supports something they care about.
That’s also a good argument for keeping your support local. Sponsor a youth sports team or buy advertising space in the program for every local theater production.
You’ll build up goodwill when it’s clear that you’re as invested in the community as your customers are.
Your employees will respond positively as well because they get two benefits — they appreciate that you’re supporting their community, and they feel good because they are part of making that support happen.
Consider linking to customer behavior
You can also increase engagement by tying donations to interactions with your business.
For example, making a donation every time a customer makes a purchase, spends a certain amount of money or refers a friend means that you’re sharing the emotional rewards of your charitable support with your clientele.
Like your employees, your customers will feel a sense of togetherness that will increase their loyalty to your brand.
The bottom line
There’s really no downside to charitable giving. Nonprofits get the funding they need. With sensible charitable planning, your company gets increased customer loyalty, increased recognition and potentially useful tax deductions.
