If you’re reading this, we can both agree you’re probably a Type A personality and are looking to do things right (you’re not alone….I’m right there with you!). In working with some of my clients, I often get asked what are some of the best practices in corporate philanthropy. What I found was that the answers aren’t easy to find.
So what do Type A people usually do? I decided to take on the challenge myself and write a series of “best practices for corporate philanthropy” so that professionals and people interested in corporate giving or employee volunteerism could have this information easily accessible. It’s my philosophy that once you know what the best practice is, you can then decide if it’s the best fit for your company when devising a corporate giving plan.
Best Practice #1: How Much to Give
The question I get most often is what is the right amount of money to give. To be considered a “comprehensive corporate citizen,” (meaning your company believes in good works and charitable contributions) the industry standard is for companies to give 1% (cash) of their pretax profits. And for the record, donating in-kind products doesn’t count into this sum.
If you’re anything like me and numbers and finance aren’t your forte, you’re probably wondering what that means. So instead of asking your finance/banking husband (like I did), let me help you out. Pretax profits is synonymous with a company’s operating income. The easiest way to get this number is to set up a date with your company accountant or CFO. Most companies are “shy” about giving out this number externally so you’ll understand why the company account is leery when you ask for this information. Just make sure you tell him/her that you need the information for budgeting purposes and the information would only be used internally. Make sure that you ask for the previous year’s operating income as the company probably won’t have the current year figures yet.
So here’s an example based on a company’s 2012 figures:
2012 Company Revenue = $150,000,000
Pretax profit/Operating Income = $4,500,000
1% pretax profits = $45,000 in charitable giving for the year
But if you’re in 2013 and you need to budget for 2014, you may be wondering how much to give and budget for 2014. A very smart corporate philanthropy professional that I admire, Curt Weeden, and his mathematician friend, Art Sabesevitz, developed the Sabsevtiz Ante-Up Formula. While I will spare you how the algorithm was created, the formula is simple:
Multiply 1.2 percent times last year’s pretax net income to set the minimum cash giving budget for next year’s contributions.
For example: it’s July 2013 and you’re looking to begin budgeting for 2014. Using the example from above, you would multiply the $4,500,000 x 1.2% and your 2014 charitable budget would be $54,000.
It’s important to note that this is just an industry best practice. These are guidelines and recommendations if you and your company are looking for some answers. Know that there are companies that give way more than one percent, like Target which gives 5% of their pretax profits each year. Other companies give less. Your job is to determine what works best for your business.
So the next time someone asks you the question, “what’s the right amount to give to charities?” Your Type A, confident self can answer.
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For more information on the Sabsevtiz Ante-Up Formula, click here.