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Start up Giving away percentage of profits to Charity

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Paul David

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Has anyone ever launched a startup and gave away a percentage of profits to charity from the get-go? Or introduced it further down the line?

I'm seriously considering doing this but would like some feedback from others if possible who have been there and done it.

My new brand/company is going to be my life's work. Something that becomes greater than me. Something that still survives when i'm long gone. I also want to use this brand as a platform to give to something back to people less fortunate in the world. And when i say "people" i mean children.

I'm considering giving away 10% of profit from my company from the start for 2 reasons:

1. I want to use this as a USP compared to my competitors.

2. I strongly believe that life as an adult can be hard enough so Children should be allowed to be children. I would like to give terminally ill children the chance to fulfil their dreams, visit locations (disney world) or help make whatever time they have left as best it can be. This also ties in with my brand which is in Travel.

Has anyone got any thoughts on the good/bad points of this idea? My Wife thinks it's a ridiculous idea and i should concentrate on generating profits first and giving back later. I think by doing this it will actually increase sales and i can also offset a percentage of the donation towards the tax liability.
 

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Stargazer

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Your wife is right. (You probably know this already :) )

Almost every large company you can think of gives money to charities. Many, many small one too. There is no USP.

However they don't necessarily feel the need to tell you about it as that is not really why people buy.

McDonalds have some charity giving respite to families of very ill children. Is that why anyone buys McDonalds?

They make the money and then allocate sums.

Sometimes it is their own charity, sometimes it changes every year, sometimes it is Board Level decision, sometimes a company may have a poll with staff coming up with small local charities.

It is commendable that you wish to help beyond simply helping your immediate customers.

If you truly desire to make enough money to pass some on to charities you need to focus on one thing often mentioned on this forum.

You had better produce the very best service or product you are capable of to the market.

Dan

PS: Obviously this is my opinion.
 
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Paul David

Paul David

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Your wife is right. (You probably know this already :) )

Almost every large company you can think of gives money to charities. Many, many small one too. There is no USP.

However they don't necessarily feel the need to tell you about it as that is not really why people buy.

McDonalds have some charity giving respite to families of very ill children. Is that why anyone buys McDonalds?

They make the money and then allocate sums.

Sometimes it is their own charity, sometimes it changes every year, sometimes it is Board Level decision, sometimes a company may have a poll with staff coming up with small local charities.

It is commendable that you wish to help beyond simply helping your immediate customers.

If you truly desire to make enough money to pass some on to charities you need to focus on one thing often mentioned on this forum.

You had better produce the very best service or product you are capable of to the market.

Dan

PS: Obviously this is my opinion.
Thanks Dan. I have a competitor in my space who has excellent branding and fantastic customer service. Our products are pretty similar also. They have 4 years head start on me. They don't however give to charity.

One of my thoughts was that it would be a USP compared to them and i could also give back to something i believe in.
 

sparechange

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Noone will care about the fact you donate a % to charities, people are selfish in general.
 

jon.M

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How good would a potential customer feel by supporting your charity donations? People are selfish, but sometimes they like the feeling of being "good", especially if it can be used as a status symbol etc.
 
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Paul David

Paul David

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How good would a potential customer feel by supporting your charity donations? People are selfish, but sometimes they like the feeling of being "good", especially if it can be used as a status symbol etc.
I'd be specifically helping disadvantaged and terminally ill Children's charities so i'd expect they'd feel pretty good. Whether that's enough for them to choose my company over a competitors remains to be seen.
 

sparechange

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If your business is traveling I'd guess people would opt for the cheaper price, you could give it a try although your marketing will need to be spot on
 
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Paul David

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I don't care about those people either. I donate Charity if I want.
Running a business with a powerful mission makes you stand out from the crowd. Being different is super important and will help your business stay in peoples minds. You can use your mission as a competitive advantage and use it to win over new customers. If you were looking at two different products before deciding to buy, and both products were similar in quality and price - however, one of them had a powerful cause attached - which one would you choose? I think most people would choose the product that makes a difference. I sure would.
 

sparechange

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I would choose the cheaper one, along with the other few billion people on the planet IMO
 
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Paul David

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I would choose the cheaper one, along with the other few billion people on the planet IMO
What if both were exactly the same price?
 

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The Abundant Man

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Running a business with a powerful mission makes you stand out from the crowd. Being different is super important and will help your business stay in peoples minds. You can use your mission as a competitive advantage and use it to win over new customers. If you were looking at two different products before deciding to buy, and both products were similar in quality and price - however, one of them had a powerful cause attached - which one would you choose? I think most people would choose the product that makes a difference. I sure would.
This is about Charity. I'm an idealist when it comes to Charity-that a person should give to charity because it's genuine and not to make oneself look good for others. So out of my own selfishness I donate to Charity because I genuinely want to donate to Charity and not to gain new customers. My business should be getting customers anyway due to my products not because I donate to charity. To me charity shouldn't be transactional.
 

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MTEE1985

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What if both were exactly the same price?
It is not a USP.

If you were competing with a grocery store and both selling me a banana for $.25, then yes, I would buy yours because of the charitable portion, but it doesn’t sound like you are building a commodity brand.

Build your business, give to your cause, put a section on your website to show the charitable donations, but do not use it in an attempt to influence customers. While we may know 100% that your intentions are good, it comes off as sleazy.
 
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Paul David

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It is not a USP.

If you were competing with a grocery store and both selling me a banana for $.25, then yes, I would buy yours because of the charitable portion, but it doesn’t sound like you are building a commodity brand.

Build your business, give to your cause, put a section on your website to show the charitable donations, but do not use it in an attempt to influence customers. While we may know 100% that your intentions are good, it comes off as sleazy.
Yes i can understand that. It was actually an episode of Shark Tank that gave me the idea in the first place when a company called Sand Cloud where on there. They donate 10% to marine life. Looking at their website i don't think it comes across as sleazy.

Our Mission
 

sparechange

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bio phase has an already established business that nets him XXX amount and he chooses to donate a % out of his own goodwill, don't believe he does it as a marketing idea
 

MTEE1985

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Yes i can understand that. It was actually an episode of Shark Tank that gave me the idea in the first place when a company called Sand Cloud where on there. They donate 10% to marine life. Looking at their website i don't think it comes across as sleazy.

Our Mission
Just looked through it, it comes across as a little sleazy. But that’s not the point. The point that everybody in this thread is trying to say is that nobody will buy from Sand Cloud because of their charitable contributions. (Which could be $1 by the way as it’s a percentage of net profit. I could net my business into the red if I wanted to.) I would be more impressed to see that they gave “X Millions away in 2017” instead of an undisclosed net profit.

People will buy if they like the product.

I think you are 100% genuine and also think children are a great cause, I’m a big supporter of St. Jude’s for reasons similar to yours. I would also encourage giving early even if it’s small amounts. As Tony Robbins says, if you won’t give $10 out of $100 then you won’t give $100,000 out of $1,000,000.

Lastly, my final thoughts on your initial post which was basically asking if it’s a good way to get people to buy your product here is my opinion:

Give to charity = Good

Using it to entice customers (or any suspicion or appearance however good your intentions are) = Bad
 

DVU

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So you are going to sacrifice 10% of profits just because?

Build the company, get the money and then donate and help.

You don't even know if the company will work.

Plus, that is not a USP. No one will buy whatever you are selling just because you donated 500$ to some charity.
 

DVU

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Running a business with a powerful mission makes you stand out from the crowd.
Not it doesn't. 99% of companies have it because "other" companies have it because its what you used to put in a business plan.

use your mission as a competitive advantage
Not a competitive advantage.

In what world do you live in?

When was the last time you bought something just because of the company's mission?

use it to win over new customers
Why, how and when has that ever happened?

Who gets customers because of their mission statement?

People buy because of their selfish interests not because they like your mission. NO ONE is going to come to buy from you and say "hey man I found your mission statement and I love it, let me buy your stuff."

Your way of thinking about business is a$$ backward.
 
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Paul David

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Not it doesn't. 99% of companies have it because "other" companies have it because its what you used to put in a business plan.



Not a competitive advantage.

In what world do you live in?

When was the last time you bought something just because of the company's mission?



Why, how and when has that ever happened?

Who gets customers because of their mission statement?

People buy because of their selfish interests not because they like your mission. NO ONE is going to come to buy from you and say "hey man I found your mission statement and I love it, let me buy your stuff."

Your way of thinking about business is a$$ backward.
I’m not saying they will specifically buy because of these reasons. I’m saying if there are two very similar products at the same price then it’s more likely they’ll purchase from the company who offers a percentage to charity than one who doesn’t.




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sparechange

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Hey I have a business, if you guys buy from me I'll donate $100,000 as long as my net profit is $1m

Anyone want some dog toys? :D

Ill throw a puppy in there to, free shipping
 

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DVU

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I’m not saying they will specifically buy because of these reasons. I’m saying if there are two very similar products at the same price then it’s more likely they’ll purchase from the company who offers a percentage to charity than one who doesn’t.
Here is the situation where that would be true:

2 companies selling the "same" product, similar market %, similar brand recognition, no other factors that would differentiate the product.

Even then it would just be a nudge and a maybe.

You already said that the company you will be competing with is 4 years ahead of you. You are going to close that gap with a better product or by finding a more efficient way to sell it among other possibilities.

Not by having a good mission statement and donating.

Meaning that it won't do jack in your situation.

I think you are putting way too much emphasis on that and it's going to hurt you in the long run.
 

DVU

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Hey I have a business, if you guys buy from me I'll donate $100,000 as long as my net profit is $1m

Anyone want some dog toys? :D

Ill throw a puppy in there to, free shipping
I'm donating 101$k out of my 1mil net + all the things you listed.

Woop. Just put you out of business. Lol, what a sucker.
 

Lex DeVille

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You said your "new brand / company."

Does that mean you have other brands and companies? Are any of them successful yet? If yes, then I say go for it. Donate 10% from the start. Build it into your systems and pricing and mission and execute. Don't let anyone stand in your way!

If they're not successful, then to me it makes more sense to figure out how to build a profitable business first. Until you can do that, charity won't be the deciding factor that builds your legacy. 10% of zero, whether up front or on the back end, is still zero.
 
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Paul David

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You said your "new brand / company."

Does that mean you have other brands and companies? Are any of them successful yet? If yes, then I say go for it. Donate 10% from the start. Build it into your systems and pricing and mission and execute. Don't let anyone stand in your way!

If they're not successful, then to me it makes more sense to figure out how to build a profitable business first. Until you can do that, charity won't be the deciding factor that builds your legacy. 10% of zero, whether up front or on the back end, is still zero.
I’ve run my own businesses for 20 years. I know how to make a business successful but previously they’ve been commodity type.

This one is different and thought it would be the right time to introduce giving back at the same time.


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Hi Paul ...giving a percentage of profit to charity is a fantastic idea . Not many people enter in business with this thing in the mind.
But I disagree with this statement 'I want to use this as a USP compared to my competitors' . I find it morally wrong . This is like using misery of people for your own profits .I also feel it is wrong from customer point of view because you are using their emotions for your own profits (of which 10% will go to charity).

Why not make your product better than competitors by skewing values ?
Why not make charity your main motivational tool to work harder ?
Why not increase your profits so that every time you give charity the net given amount also increases ?

Do the charity but don't use it as USP .
 
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Paul David

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Hi Paul ...giving a percentage of profit to charity is a fantastic idea . Not many people enter in business with this thing in the mind.
But I disagree with this statement 'I want to use this as a USP compared to my competitors' . I find it morally wrong . This is like using misery of people for your own profits .I also feel it is wrong from customer point of view because you are using their emotions for your own profits (of which 10% will go to charity).

Why not make your product better than competitors by skewing values ?
Why not make charity your main motivational tool to work harder ?
Why not increase your profits so that every time you give charity the net given amount also increases ?

Do the charity but don't use it as USP .
Yes all very valid points. I wouldn’t be donating charity specifically to make it the USP of my business I was simply stating that actually my competitor doesn’t so as a side by side analysis it is. (At any point in the future they could start donating anyway).

I was actually looking at it from the aspect of if advertising the fact I’m donating 10% of profits to charity increases sales, compared to just donating undisclosed then surely it’s better for the charity to do it that way?

I’m certainly not going to create a massive company on the basis I donate to charity so the benefits from that point of view are ineligible.

The main benefit I can see from a company perspective is that it would make us look more trustworthy. Which is important when it comes to customers spending money but as others have pointed out it’s the product or delivery which ultimately makes the difference.


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