Small Businesses and the Benefits of Charitable Contributions

As a brand-new small business owner, you may not be feeling inclined to give money away. After all, the whole idea was to get that cash flowing in the opposite direction. Guess what? That cash flows from consumers, and consumers like companies to support charitable causes. So, start with your business plan. Incorporate charitable donations, but be smart about it. Here are some recommendations for making charitable giving part of your business plan:

Charitable giving should be ongoing.

Don not make it a one-off. You are building a relationship with your customers and your community. Companies grow based on charitable giving. They tend to accomplish this by creating incentives for customers to support a charity through using your business. Cleaning companies may offer to make a donation every time they clean a client’s office. Car dealerships may make a donation every time a customer test-drives a vehicle. Be creative. You are creating the image that the public will see every time they think of your business.

Keep it local.

Making an impact will impress your customers. Making one where they can see the direct results in their own community is even better. Forget big names. Let your name be the name they remember. Name a local charitable organization as the benefactor of your charity.

Do your homework.

There are tools that keep track of charities. They will start narrowing down your choices. For example, there may be over a million charities in the U.S., but only 8000 meet the financial threshold to be ranked by Charity Navigator. Charity Navigator evaluates charities based on two criteria: Financial Health and their Accountability and Transparency. Do not hesitate to exhaust all resources. Do the following before choosing the charity you will support:

• Use the IRS website to verify the charity’s status.
• Find and review any brochures, website and financial reports pertaining to the charity.
• Investigate third-party assessments of the charity.
• Meet with the charity’s leaders or key staff members to learn more about their work.

You will want to make sure the charity can clearly explain its mission, past successes and current challenges. ​It should be able to identify its board members, offer photos and testimonials about the work it does. You want to feel comfortable with the organization as it will now be directly tied to your image and reputation.

What about tax benefits?

Generating goodwill in the community should certainly benefit your business. Any charitable donation is potentially tax deductible. This may include donations of cash, volunteered services, inventory or sponsorship of a charity event.