Building an email list, researching the competition, and forming strategic partnerships are some of the most common strategies used to grow businesses. However, there’s another effective technique that often slips business owners’ minds: Donations.
Accepting donations is most often linked to nonprofit organizations, but for-profit businesses can take advantage of this as well. Generally speaking, this form of fundraising is called crowdfunding. However, that’s not always the case.
Let’s dive into accepting donations in for-profit businesses.
Why Would Your Business Want to Raise Money?
Whether your business is already up and running or you’re trying to get it off the ground, there are many benefits and reasons your business should consider accepting donations—let’s take a look at four of them.
1. Offset startup costs
One of the main priorities of new business owners is finding ways to reduce startup costs and maximize profits. After all, the less you spend on initial business costs, the more you can enjoy the profits of your startup. This also allows you to allocate extra funds into other business operations.
Accepting donations is an excellent way to help offset the initial expenses and get your business off the ground. It’s most successful when paired with other cost-reduction methods, such as purchasing second-hand office furniture and equipment, negotiating prices, making deferred payments, sharing office space, and hiring interns.
2. Kickstart a new product
Technology has allowed us to be more connected than ever. This, of course, is extremely beneficial for businesses looking for money to finance a new product. In the past, no matter how good of an idea you had, if you didn’t have the resources for the project or didn’t want to take on all of the risk, the idea didn’t see the light of day.
Now, websites and plugins like GiveWP allow thousands of for-profit and nonprofit organizations to crowdfund money from the general public to launch their products. These contributors are often called “funders” and receive inside scoops or products in exchange for the money they donate.
For example, the team behind the quirky card game Exploding Kittens set a goal to raise $10,000 to launch their product. To their surprise, they ended up raising over $8 million. The game became so popular it is now sold in big retail chains, like Target.
3. Raise money to donate to a charity
There’s no denying that donating to charity and participating in Giving Tuesday are great ways to help communities around the globe, but did you know that corporate philanthropy is also beneficial to your business?
Some of the main benefits include:
- Improving customer perception. Donating to charities will show that, despite being a for-profit business, your business cares for the greater good and differentiates from others, which will help build strong customer relationships. In fact, over 77% of people would rather purchase from a business with social responsibility. (Harvard)
- Finding partnership and marketing opportunities. With social media being so widely used, your charitable endeavors can be photographed, shared, and spread. This will bring more attention to your business and even have it covered in newspapers and online articles.
- Boosting employee morale. It’s common for employees to feel uninspired and stressed out once in a while. Reminding them that your business is also fighting for a good cause is a great way to rally up your team.
- Giving your employees a sense of belonging. Donating to charity gives you the opportunity to connect with your employees on a deeper level. For example, you could allow them to pick which charities the business should be involved with and do team-building events that focus on raising money and awareness.
- Saving in taxes. For-profit businesses can typically receive tax deductions from sponsoring charities or events. That being said, you should always ensure that you follow the rules and comply with all tax requirements.
Despite all its corporate benefits, donating can be a little tough if your business doesn’t have a big budget. That’s where raising money online comes in for your business in this situation.
4. Setting employee giving programs
Employee giving programs, also known as philanthropy programs, are an opportunity for businesses to motivate employees to engage in small acts of kindness that can result in a huge impact.
The most common program offered to employees is donation matching. This is a corporate giving initiative in which your business matches your employees’ contribution to a specific cause.
For example, if a GiveWP employee donates $100 to a local organization, GiveWP would donate an additional $100, resulting in a total of $200 received by the organization. There’s often a cap on the amount a business will match per employee.
These types of programs are more beneficial than simply donating because you actually get employees engaged. It also improves your business culture by proving that you care about your employees by empowering them to give to their communities and make their impact even greater by matching it.
Employee giving programs can also encourage friendly competition (employees can see which department has the most impact in the community each year), improve employee retention, promote feelings of belonging, and even allow you to recruit higher-quality candidates.
[green]To maximize the impact of these types of campaigns, create Team Fundraisers with our Peer-to-Peer add-on.
Can My Business Accept Donations?
Currently, there are no laws that forbid for-profit businesses to ask people or customers for gifts or donations without expecting a product or service in return.
It’s completely normal, especially for small business owners, to ask relatives, friends, and other people for donations to keep their business afloat. Additionally, some private and public entities provide for-profit businesses with taxable business grants—which are basically donations.
One of the main differences between for-profits and nonprofits when it comes to donations is that, nonprofits have an exclusive status with the IRS that makes their donations tax-deductible while for-profits that accept donations won’t be able to provide the same tax-deductible benefit to their supporters.
When you decide to start accepting donations, remember to follow your state’s laws against soliciting the public for donations without registering with the state attorney general. When asking for donations, your business must make it clear that the business is not a nonprofit organization.
Add Donations to Your Business Now
Setting up a way to accept donations on your business website has never been easier. With the free GiveWP WordPress plugin, you get access to PayPal and Stripe payment gateways, a donor management dashboard, unlimited donation forms, reports, and much more.
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