Is Donating 10% of Profits to Charity too much?

[Kak]

I’m starting a business with my spouse and she is adamant that we donate 10% of the profits to charity.

While I am all for supporting charities and helping out the community, I am worried that such a significant financial commitment could limit our growth and make it difficult to compete with other businesses in our niche that aren't doing this. I think it might make better sense to reinvest that 10% back into our business so we can grow faster, and then we can make annual donations when once we are in a stronger position?

What are your guys' thoughts on this?

Thanks.

So I have heard it all the time... My network is very largely from philanthropic circles. Everyone in these circles almost unanimously considers themselves very blessed with abundance.

On the other side of that coin, I talk with people that don't give a lot. They are often concerned about not having enough. It is an interesting perspective to see.

My take is this... Giving is a great thing to do. I consider myself a giving person... As a Christian, I believe in tithing. I don't believe God will smite me down for not doing it, but I believe it is an act of obedience and a recommendation for a reason. A reason that I have already had the pleasure of experiencing. In my life I have been very very blessed by my giving. It has set me up with key players. Investors. Opportunities. It has been better for my own personal ambitions than golf and college combined.

THIS SAID... 10% is my number. It is the number in the bible so I roll with that. Beyond that you will see me donate a hundred bucks here and there to things like Americans for Prosperity or something political that I like, whatever.

The reason I won't EVER give more than 10% to a charity is this... I am better with money than them. They will ultimately get more in the long term if the other 90% stays with me. I keep giving them golden eggs instead of geese to slaughter.

10% is the dead on number for me. I have fit it into my life, but my life is so far inside of my means I could afford like 5 more of my lives.

"Giving back" is a term I hate. I never took anything that didn't belong to me. As capitalists we are giving to the world by operating businesses that solve problems and employ people from the beginning. Donating to stuff for marketing value? Meh, that sucks.

 

[Odysseus M Jones]

I’m starting a business with my spouse and she is adamant that we donate 10% of the profits to charity.

Doesn't really matter what we think
"spouse, she, adamant"

Game over.

 

[Primeperiwinkle]

I dare you to give double what your wife is asking you to give for six months. A full 20%. Track every single expenditure, every single bill, every single profit. Then, at the end of six months, stop giving to charity completely. Track everything again.

You will see a clear, yet bizarre, correlation between your overall income increasing when you give and decreasing when you do not.

Don’t believe any of us or disagree with your wife until you test this theory.

 

[minivanman]

So what you are saying is that before you ever get the business going good, you both already disagree on how the business should be structured. Get ready for a fun business and personal life.

 

[Kak]

It becomes very easy at some point.

You can also do a family foundation with a growing endowment.

As in, donate the 10 percent chunk to your family foundation, grow that money invested aggressively... Once a year give away 50% of the gains only!

Then watch how big of a philanthropist you become over the next 30 years.

I am pretty passionate about generous philanthropy... Here is an example of a foundation with a growing endowment and being funded by your 10% tithes.



THIS is exactly why I don't give them more than 10%... Because THEY won't do things like this.

This example assumes an entrepreneur starting with a 100k per year business, grows his income 10% every year for 35 years. Relax nitpickers, it is an example.

At the end of 35 years the entrepreneur has contributed $2.7 million to the family foundation that they control. The foundation has given away over $2 million. YET... and this is HUGE... It will keep on giving growing payments FOREVER because the foundation still has $4.5 million left in its coffers!

This is what I mean about being better with money than charities. Also, I would be happy to give more than 10% to my own foundation if this is what was going on.

 

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[Primeperiwinkle]

Interesting theory.

Though, I don't think it would look good from a branding perspective to be giving away a percentage of profits to charity and then suddenly stopping.

Lol. Do it privately. I once gave 20% of what I HOPED my profits would be. I ended up earning 4x that in the next month. The following month I literally forgot to give money to any charities and my profits barely met my needs.

You’re in for a big surprise man.

 

[AgainstAllOdds]

John D. Rockefeller tithed 10% of his income since the first check he ever got.

Taxes were lower then... but it's still impressive to know that the richest man to ever live got there with a self-imposed outflow of wealth.

Donate what you consider fair and find a way.

 

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[Young Money]

Lol. Do it privately. I once gave 20% of what I HOPED my profits would be. I ended up earning 4x that in the next month. The following month I literally forgot to give money to any charities and my profits barely met my needs.

You’re in for a big surprise man.

Lol ah gotcha!

That is very interesting. Subconsciously, knowing the more you sell, than the more you are helping others probably causes us to work harder.

 

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[Young Money]

So I have heard it all the time... My network is very largely from philanthropic circles. Everyone in these circles almost unanimously considers themselves very blessed with abundance.

On the other side of that coin, I talk with people that don't give a lot. They are often concerned about not having enough. It is an interesting perspective to see.

My take is this... Giving is a great thing to do, I consider myself a giving person... As a Christian, I believe in tithing. I don't believe God will smite me down for not doing it, but I believe it is an act of obedience and a recommendation for a reason. In my life I have been very very blessed by my giving. It has set me up with key players. Investors. Opportunities. It has been better for my own personal ambitions than golf and college combined.

THIS SAID... 10% is my number. It is the number in the bible so I roll with that. Beyond that you will see me donate a hundred bucks here and there to things like Americans for Prosperity or something political that I like, whatever.

The reason I won't EVER give more than 10% to a charity is this... I am better with money than them. They will ultimately get more in the long term if the other 90% stays with me. I keep giving them golden eggs instead of geese to slaughter.

10% is the dead on number for me. I have fit it into my life, but my life is so far inside of my means I could afford like 5 more of my lives.

"Giving back" is a term I hate. I never took anything that didn't belong to me. As capitalists we are giving to the world by operating businesses that solve problems and employ people from the beginning. Donating to stuff for marketing value? Meh, that sucks.

Thanks a lot for the valuable insight @Kak .

Kind of funny that my girlfriend's number of 10% is the same as yours.

I really like the analogy of giving charities golden eggs as opposed to geese to slaughter. Definitely makes sense to keep 90% to reinvest in your business, which then in turn allows you to give back more in the long run.

Initially I thought 10% was too high and would stunt our growth significantly, but maybe it won't. And it would be nice knowing that we're making a difference in other peoples lives with each sale.

 

[Young Money]

I’m starting a business with my spouse and she is adamant that we donate 10% of the profits to charity.

While I am all for supporting charities and helping out the community, I am worried that such a significant financial commitment could limit our growth and make it difficult to compete with other businesses in our niche that aren't doing this. I think it might make better sense to reinvest that 10% back into our business so we can grow faster, and then we can make annual donations when once we are in a stronger position?

What are your guys' thoughts on this?

Thanks.

 

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[WillHurtDontCare]

I’m starting a business with my spouse and she is adamant that we donate 10% of the profits to charity.

While I am all for supporting charities and helping out the community, I am worried that such a significant financial commitment could limit our growth and make it difficult to compete with other businesses in our niche that aren't doing this. I think it might make better sense to reinvest that 10% back into our business so we can grow faster, and then we can make annual donations when once we are in a stronger position?

What are your guys' thoughts on this?

Thanks.

It sounds like you already know what you want to do and that you aren't actually looking for new perspectives, but for someone to give you the confidence to go with your own decision.

You're only just starting the business - you have nothing to give yet. Be ruthless in running that thing and don't give anything away until you have more than you need.

 

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[Primeperiwinkle]

I am a bit confused... You seem to like what I said and then you proceed to attack me.

What part of what I said reads as: "not giving to a group or organization" ???

I have literally just outlined a lifetime of planned giving and administrative sacrifice for philanthropic (in my case Christian) endeavors...

This is MY gift for finance. This is me doing my best with philanthropy.

I am not trying to reveal mismanagement or foolishness. I am not even saying they are irresponsible with money. When I give to an organization, I usually love that organization. They, of course, spend it relatively quickly. That is their point. Then it is then gone. It is no longer available to grow for them.

If I give to them in a long term sustainable way, like the example above, there is literally 4 million more dollars in my giving coffers for them. I am trying to give in an ultra sustainable, long term, growing way that never stops... Which makes my ability to give to them literally infinitely larger. You do realize this is a way to give unlimited money right? This goes to year 100 and beyond... Would you care to have me calculate it out that far? I would be willing to bet the foundation would be giving tens of millions per year.

THAT is me doing MY best. Which is what I feel responsible and Biblically led to do. I feel held to this higher standard.

Go read the parable of talents. If you feel the Bible leads you to a cop out, flippant position of slinging an organization with no financial talent the golden goose and saying see you later... That is your prerogative. I don't bury money. I make it work for me AND I make it work for my philanthropic endeavors. I am giving my financial expertise. I am giving money. Both. I fail to see how that is wrong and I don't appreciate your judgmental dissertation.

Oh.. it’s a tone thing. I failed to convey tone. I launched into talking to you like I would talk to my brother. I apologize.

I’m glad you give. Giving is a deeply personal thing and lots of ppl don’t. I’m always running into ppl who don’t have a clear view of how or why to give as well, and you have that wisdom. It made me wish I could bring you with me when certain sermons are taught.

I attempted, poorly, to disagree theologically with someone whom I have a high regard for and it came across judgmental. I really wasn’t attacking.

 

[Odysseus M Jones]

You've got a point there! Lmao

Just make sure it's net profits.
And it's tax deductible.
Great selling point too!

 

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[xmartel]

So what you are saying is that before you ever get the business going good, you both already disagree on how the business should be structured. Get ready for a fun business and personal life.

I believe this is an ignorant thing to say. I've built a successful marriage while building a successful business with my wife for many years, so I do have some experience in this area.

If you have a marriage or business relationship that has no disagreement ever, then you've got a problem.

If you live with someone that just agrees with everything you believe, then you're just living in an echo chamber and not being challenged or growing as a person.

Successful marriages are rife with disagreements. But you communicate and talk the issues through like mature adults and come to an agreement that is often better than what either of you started with in the beginning.

As iron sharpens iron, so one person sharpens another.

To the OP.
Having this disagreement is good. Talk it through and wrestle with it. It may take months. But if you both act mature I think you'll find that you come to a good solution in the end.

As far as what you should do, I won't say. That's between you and your wife, and every business and relationship has different goals.
All I will say is maybe start with what your vision is 20 years from now for this venture, then start acting like that now.

 

[Guest1413tpa]

I’m starting a business with my spouse and she is adamant that we donate 10% of the profits to charity.

While I am all for supporting charities and helping out the community, I am worried that such a significant financial commitment could limit our growth and make it difficult to compete with other businesses in our niche that aren't doing this. I think it might make better sense to reinvest that 10% back into our business so we can grow faster, and then we can make annual donations when once we are in a stronger position?

What are your guys' thoughts on this?

Thanks.

Reinvest. If you want to give back right now, look at some volunteer time if you have it handy. Then donate a percent later, when you can afford to.

 

[Young Money]

Doesn't really matter what we think
"spouse, she, adamant"

Game over.

You've got a point there! Lmao

 

[Young Money]

Just make sure it's net profits.
And it's tax deductible.
Great selling point too!

Yeah I guess if its off net profits its less risky.

Would look good to have on the website for sure, don't want to advertise it too hard though or people might think I'm just "boasting" charity donations to increase sales

 

[amp0193]

I’m starting a business with my spouse and she is adamant that we donate 10% of the profits to charity.

What are your guys' thoughts on this?

You and your wife need to go through your projected income / expenses with a fine tooth comb, determine the goals you want to achieve with this business (does it need to support you?), and see if that's realistic with giving away 10% of the profit.

Also, talk with her and define profit. Gross? Net? After taxes?

 

[Kak]

You’ve outlined a problem that you should solve. Now, where’s the book that you can point to with this explained? A book I need mind you, a book I can give to the wealthy Christian friends of mine.

If it’s not written you wanna make a simple PDF please? I’m sick to death of church leaders always pointing us to Dave Ramsey. It’d be nice to have an alternative.

Also, not giving because a group or organization can’t manage their money is ridiculous btw. That’s not your responsibility. I’m sure it FEELS like it is, though.

It’s not your money. It’s Gods.

You do with it what He tells you to.

Hopefully you are listening intently to His voice so as to give where He wants you to give. If you happen to be the instrument that reveals mismanagement and foolishness in a particular church governing body, breaking open the doors for other leaders to step up because all the money you gave was wasted so be it.

Maybe God had another use for the money than you know. Maybe, because the situation was revealed, souls were saved. Your only concern is doing what He commanded you to do. Give and you’ve done well.

I am a bit confused... You seem to like what I said and then you proceed to attack me.

What part of what I said reads as: "not giving to a group or organization" ???

I have literally just outlined a lifetime of planned giving and administrative sacrifice for philanthropic (in my case Christian) endeavors...

This is MY gift for finance. This is me doing my best with philanthropy.

I am not trying to reveal mismanagement or foolishness. I am not even saying they are irresponsible with money. When I give to an organization, I usually love that organization. They, of course, spend it relatively quickly. That is their point. Then it is then gone. It is no longer available to grow for them.

If I give to them in a long term sustainable way, like the example above, there is literally 4 million more dollars in my giving coffers for them. I am trying to give in an ultra sustainable, long term, growing way that never stops... Which makes my ability to give to them literally infinitely larger. You do realize this is a way to give unlimited money right? This goes to year 100 and beyond... Would you care to have me calculate it out that far? I would be willing to bet the foundation would be giving tens of millions per year.

THAT is me doing MY best. Which is what I feel responsible and Biblically led to do. I feel held to this higher standard.

Go read the parable of talents. If you feel the Bible leads you to a cop out, flippant position of slinging an organization with no financial talent the golden goose and saying see you later... That is your prerogative. I don't bury money. I make it work for me AND I make it work for my philanthropic endeavors. I am giving my financial expertise. I am giving money. Both. I fail to see how that is wrong and I don't appreciate your judgmental dissertation.

 

[Sanj Modha]

Make money/profit first then consider donating to charity.

This is what I'm doing with our newest brand (its in progress). We'll feed one dog for every product sold.

 

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[Young Money]

It becomes very easy at some point.

You can also do a family foundation with a growing endowment.

As in, donate the 10 percent chunk to your family foundation, grow that money invested aggressively... Once a year give away 50% of the gains only!

Then watch how big of a philanthropist you become over the next 30 years.

I am pretty passionate about generous philanthropy... Here is an example of a foundation with a growing endowment and being funded by your 10% tithes.

View attachment 33550

THIS is exactly why I don't give them more than 10%... Because THEY won't do things like this.

This example assumes an entrepreneur starting with a 100k per year business, grows his income 10% every year for 35 years. Relax nitpickers, it is an example.

At the end of 35 years the entrepreneur has contributed $2.7 million to the family foundation that they control. The foundation has given away over $2 million. YET... and this is HUGE... It will keep on giving growing payments FOREVER because the foundation still has $4.5 million left in its coffers!

This is what I mean about being better with money than charities. Also, I would be happy to give more than 10% to my own foundation if this is what was going on.

I love this idea! So smart, thanks for sharing the graph it really breaks it down nicely!

 

[Kevin88660]

I’m starting a business with my spouse and she is adamant that we donate 10% of the profits to charity.

While I am all for supporting charities and helping out the community, I am worried that such a significant financial commitment could limit our growth and make it difficult to compete with other businesses in our niche that aren't doing this. I think it might make better sense to reinvest that 10% back into our business so we can grow faster, and then we can make annual donations when once we are in a stronger position?

What are your guys' thoughts on this?

Thanks.

In Principle I agree with your wife. I live in a culture that believes in karma. The more you give the more you will get.

But again I would negotiate on the details. Why not try convince your wife 5% on the first $50k of the profit, 10% between $50-150k and 15% above $150K.

Somewhere along the line of thought where you can assure her sincerity while it gives you peace of mind of not draining away too much cash when you need it. Make a "progressive tax".

 

[MakeItHappen]

For anybody that is (considering) giving to charity I would recommend to read a little bit about effective altruism:

Effective altruism - Wikipedia

en.wikipedia.org

Ineffective businesses go out of business sooner or later while non-profits don't.
$1 donated in an effective way can results in a lot more good being done than $50 donated to an ineffective charity.

 

[Young Money]

It sounds like you already know what you want to do and that you aren't actually looking for new perspectives, but for someone to give you the confidence to go with your own decision.

You're only just starting the business - you have nothing to give yet. Be ruthless in running that thing and don't give anything away until you have more than you need.

I am open to new perspectives, I just want to be careful and consider each detail. Maybe see if other Fastlaners with successful businesses were able to grow while still having a charity component?

Thanks for your opinion, I tend to agree that it would be better to ruthlessly grow the business first, and then give back.. But on the other hand, there is more than one way to skin a cat I suppose? Haha

 

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[Young Money]

I dare you to give double what your wife is asking you to give for six months. A full 20%. Track every single expenditure, every single bill, every single profit. Then, at the end of six months, stop giving to charity completely. Track everything again.

You will see a clear, yet bizarre, correlation between your overall income increasing when you give and decreasing when you do not.

Don’t believe any of us or disagree with your wife until you test this theory.

Interesting theory.

Though, I don't think it would look good from a branding perspective to be giving away a percentage of profits to charity and then suddenly stopping.

 

[Primeperiwinkle]

It becomes very easy at some point.

You can also do a family foundation with a growing endowment.

As in, donate the 10 percent chunk to your family foundation, grow that money invested aggressively... Once a year give away 50% of the gains only!

Then watch how big of a philanthropist you become over the next 30 years.

I am pretty passionate about generous philanthropy... Here is an example of a foundation with a growing endowment and being funded by your 10% tithes.

View attachment 33550

THIS is exactly why I don't give them more than 10%... Because THEY won't do things like this.

This example assumes an entrepreneur starting with a 100k per year business, grows his income 10% every year for 35 years. Relax nitpickers, it is an example.

At the end of 35 years the entrepreneur has contributed $2.7 million to the family foundation that they control. The foundation has given away over $2 million. YET... and this is HUGE... It will keep on giving growing payments FOREVER because the foundation still has $4.5 million left in its coffers!

This is what I mean about being better with money than charities. Also, I would be happy to give more than 10% to my own foundation if this is what was going on.

You’ve outlined a problem that you should solve. Now, where’s the book that you can point to with this explained? A book I need mind you, a book I can give to the wealthy Christian friends of mine.

If it’s not written you wanna make a simple PDF please? I’m sick to death of church leaders always pointing us to Dave Ramsey. It’d be nice to have an alternative.

Also, not giving because a group or organization can’t manage their money is ridiculous btw. That’s not your responsibility. I’m sure it FEELS like it is, though.

It’s not your money. It’s Gods.

You do with it what He tells you to.

Hopefully you are listening intently to His voice so as to give where He wants you to give. If you happen to be the instrument that reveals mismanagement and foolishness in a particular church governing body, breaking open the doors for other leaders to step up because all the money you gave was wasted so be it.

Maybe God had another use for the money than you know. Maybe, because the situation was revealed, souls were saved. Your only concern is doing what He commanded you to do. Give and you’ve done well.

 

[sparechange]

I like primers idea, 20%

Use it as motivation

 

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[Lyinx]

Lol. Do it privately. I once gave 20% of what I HOPED my profits would be. I ended up earning 4x that in the next month. The following month I literally forgot to give money to any charities and my profits barely met my needs.

You’re in for a big surprise man.

sounds like you might have an experience similar to "the Blessed Life", I'm wondering if you ever read it?

 

[kleine2]

I’m starting a business with my spouse and she is adamant that we donate 10% of the profits to charity.

While I am all for supporting charities and helping out the community, I am worried that such a significant financial commitment could limit our growth and make it difficult to compete with other businesses in our niche that aren't doing this. I think it might make better sense to reinvest that 10% back into our business so we can grow faster, and then we can make annual donations when once we are in a stronger position?

What are your guys' thoughts on this?

Thanks.

Watch this video. It might give you a new perspective on this.

Shifting Limiting Beliefs with Marie Forleo

In this lesson, Marie Forleo, NY Times best-selling author and life coach, guides us through how we can seperate ourselves from our limiting beliefs that could be holding us back from our true potential. In the words of Marie, “It is our beliefs that drive our actions, and our actions drive our...

www.gaia.com

 

[Young Money]

Unless the giving is a significant part of your brand strategy, my recommendation would be for your business to donate nothing. Businesses have a responsibility to their shareholders, first and foremost. And while you and your wife are the current shareholders, if you were ever to add more -- partners, investors, employees with equity, etc -- you'd be doing them a disservice by donating part of their equity return to charity.

I'm not saying don't give -- but distribute the funds to the shareholders first, and give personally, as opposed to through the business. As long as you and your wife are the sole shareholders, the benefit is exactly the same, but it provides more flexibility -- and better accountability to other shareholders -- don't the road.

For reference, this is how I run my businesses. Over the past 10 years, I've given more than 10% of my income to charity. But, I haven't given anything through my businesses. Same amount donated, but no risk of future issues with my partners or investors.

I admit this is one of my concerns, especially if it ever came to the point where we wanted to sell the company.

Having 10% of the profits allocated towards charity could lead to a lower valuation and a smaller liquidation for us? I don’t know, it could scare off potential buyers.

I’m glad to hear so many perspectives on this though. I don’t think there is one “right way” to donate, just some things that need to be considered when setting up the structure.

 

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