Determining Your Corporate Donation Budget: How Much Should You Donate To Charity?

When a company donates to charitable causes, they benefit in several different ways beyond doing good for the community. Charitable donations pay off in goodwill and reputation, deeper community connections, better customer relations and increased employee engagement and retention. That's in addition to any tax benefits your business might accrue through charitable donations. But how do you determine how much you should donate to charity? Let's walk through the benefits and calculations that can help you make that decision for your company.

5 Benefits of Corporate Philanthropy

When you understand the varied ways that giving back to the community can benefit your business, it gets a whole lot easier to assign a value to it. This isn't an exhaustive list of the pros, but it can be helpful framing when you're deciding how much to budget for charitable donations.

1. ‍Giving Back to the Community Improves Your Company's Reputation - Today more than ever, customers want to do business with companies that put giving back at the core of their business operation. In fact, 85% of consumers say they have a more positive view of businesses that support causes they care about.
2. ‍A Strong Employee Giving Program Increases Employee Engagement and Cohesiveness -Donation matching and other corporate giving programs are valuable benefits. In a recent survey, nearly half the companies who responded said that their corporate giving program helped increase employee engagement.
3. ‍Offering a Corporate Giving Program Helps Attract and Retain Top Talent - In the same survey, nearly 60% said that their giving program is important in attracting and retaining top talent. In addition, corporate social responsibility (CSR) programs help develop strong leadership skills in your employees.
4. ‍Giving Back to the Community Deepens and Broadens Community Connections - When your company and employees support local charities and causes, you increase your opportunities for networking in the community. Companies that follow the lead of their employees in choosing causes are more likely to engage with important organizations within the community.
5. ‍Companies With an Authentic CSR Policy and Giving Program Build a Loyal Customer Base -  Your company's commitment to making a difference matters to your customers, especially millennials, Gen X and Gen Z. Today's consumers expect businesses to be good corporate citizens — and they vote with their wallets. They also vote with their social media accounts — 82% of millennials interact with their favorite brands online, and will publicly support companies they admire.

How Much Should I Donate to Charity as a Corporation?

The key factor in deciding how much your company should donate to charity is your balance sheet — in other words, the amount you budget for philanthropy should be what you can afford to give without affecting the cash flow you need to do business. That said, there are some industry standards and best practices.  Many large corporations — and smaller businesses — earmark 1% of their pre-tax profit for charitable giving. This isn't a hard-and-fast rule. Some companies give considerably more. Whole Foods, for example, donates 5% of its after-tax profit to charity each year, and small businesses — those with fewer than 100 employees — contribute an average of 6% of their pre-tax profits to charity.

Some small retail or service businesses choose to donate a percentage of each sale rather than calculate an annualized figure. A local brewery, for example, might funnel all profits from the sale of a particular brew into its corporate giving account. A realtor might designate a percentage of each completed sale as a donation to their corporate giving fund. Using a percentage of your profit as a giving guideline makes it easier to scale your donations as your business grows, but it can make it difficult to budget for the year ahead. Author Curt Weeden, one of the most influential voices in the area of social philanthropy, proposed a simple formula to help businesses set their corporate philanthropy budget, which he calls the Sabsevitz Ante-Up Formula: Multiply last year's pre-tax net income by 1.2%.Once you've established a target amount for your giving, you should do three things to increase the impact of your donation:

1. Make it part of your operating budget.
2. Keep your employees informed and engaged with frequent updates.
3. Make your corporate giving philosophy part of your marketing and outreach strategy.

Choosing a Charity for Your Donations

There are two main ways to choose which causes and charities your company will support.

• Top-down decision where your board or leadership team identifies one or more causes the company will support with donations, matching donations and other forms of corporate giving.
• Inclusive decision making where employees choose and/or recommend the causes and charities that matter the most to them.

More and more businesses are opting for more inclusive ways of determining the causes their company will support. There are a number of benefits to this approach:

• Employees who participate in decision-making are more engaged and likely to feel valued and make a difference. Engaged employees are good for your business.
• Your employees live in the community, which gives them unique insights into the organizations and people who do good work in the areas that matter to them. Employee decision-making is good for the community.
• The more involved people are in choosing where to direct donations, the more invested they are in the program. This results in more charity donations, which benefits the nonprofits involved.

Ways Your Company Can Donate to Charity

Your company can give back to the community in many ways, including several models for making monetary donations. Some of the most common include:

• ‍Volunteering for a Cause - Serving dinner at a soup kitchen, building playgrounds for schools, or helping build houses for Habitat for Humanity all help build team spirit and cooperation. While many companies volunteer as a team, some businesses choose a different way to encourage volunteerism — they use volunteer hours as a metric to determine the amount of money to add to their corporate giving account.
• ‍Sponsor Local Events - From softball teams to parades and awards dinners, there are always opportunities for your business to sponsor local events and activities. The payoff is goodwill and name recognition for your business.
• ‍Set Up a Donation Match Program - Donation match programs allow your employees to double their donations to causes that matter to them.
• ‍Donate With Groundswell - Groundswell makes it easy for your employees to support the causes they care about by removing friction from the donation matching model. Learn more about our philanthropy-as-a-service model and find out how your company can provide your employees with a cutting-edge benefit that will add value to your business, their lives and the community. Get in touch with us to get started.