Making a Big Difference

Mike Lenhart, founder of an Atlanta charity for disabled athletes called Getting 2 Tri, says that until six months ago, he “didn’t even really understand the point of public relations.” But then the head of a local communications firm said she wanted to help build awareness of his organization — at no cost.

In that time, the company has provided 150 hours of free support, helping the charity revamp its Web site, pitch article ideas to local and national newspapers, use social-networking sites such as Twitter and Ning, and recruit volunteers for new chapters. The three-person business, Cloud Spark, chooses two charities each year to which it devotes 25 hours a month of free assistance.

“It has accelerated our growth and taken us beyond being a local or regional organization to become a national one,” says Mr. Lenhart.

Like Mr. Lenhart, many charity leaders say that local businesses can be important sources of support, providing not just cash but expertise.

A new survey of small-business leaders conducted for The Chronicle and the Advanta Corporation, a company that offers credit cards to small businesses, found that 66 percent of those who give through their company donate cash, while 51 percent volunteer, 41 percent give services, and 39 percent contribute products. The median amount businesses in the survey gave was $500 to $2,000 in cash last year, meaning half gave more and half gave less.

“There is a lot that companies can do, in terms of providing marketing, professional services, and other things that can really make a difference to a local nonprofit,” says Steve Meyerson, a fund-raising consultant in Washington. “Small charities and small business can be a very good match.”

Economy Squeezes Giving

But the poor economy has already started to hurt small businesses’ philanthropy. Sixty percent of small-business owners say the economic turmoil has affected their giving, and just 14 percent say their contributions rose in the past year.

The study, which was conducted in August by Chamberlain Research Consultants, in Madison, Wis., examined giving by 1,033 businesses. Companies in the survey employed a median of two people (meaning half had fewer workers and half had more) and had annual revenues of $100,000 to $250,000.

Small companies in the United States — those with fewer than 500 people and, in most cases, fewer than 20 — number 27 million and employ about half of the nation’s workers. A 2004 study by the National Federation of Independent Businesses estimated that such companies donated about $40-billion in cash, products, services, and volunteer time each year.

The survey found that small-business leaders take an ad hoc approach to their giving. While they say they value the importance of philanthropy to their work, most do not consider it to be influential to the success of their business or have a plan for giving away money.

Meanwhile, leaders of small companies say they tend to choose charities based on their personal interests or local connections, not because the group’s mission aligns with their business goals.

“Giving by small businesses is similar to individual giving,” says Michael Nilsen, senior director of public affairs at the Association of Fundraising Professionals. “It tends to mirror the philanthropic desires of the owner or president.”

But more young entrepreneurs are starting to incorporate philanthropy into their business plans from the beginning, according to the survey. People who own businesses that are less than five years old are more likely than those with older businesses both to align their giving with their business goals and to involve employees in giving.

Charity leaders say that a start-up company can become a more important source of money as the business grows.

Ellen Parker, executive director of Project Bread, in Boston, says that over the years many donors at small companies have moved on to larger businesses “and then taken us with them.”

Working with small-business owners is not just financially beneficial, but can sometimes be a more personal and rewarding experience than dealing with grant makers at large businesses, she says.

“You tend to know everyone in the company,” says Ms. Parker, whose charity has received support from local businessess such as Samuel Financial and FoodShouldTasteGood. “It can be a warmer relationship.”

Aiding Social Services

Among the survey’s other findings:

• Social-service charities won the largest share of support from small companies. Sixty-two percent of respondents say they gave to such organizations, more than any other cause. Fifty-five percent said they gave to educational organizations, 44 percent to health charities, 28 percent to arts institutions, and 27 percent to environmental causes.
• Owners of small businesses say they want to encourage their employees to give, but they do not necessarily provide the means to do so. Sixty-three percent say they promote employee giving, but only 40 percent say their employees are involved in charitable work through the company.
• Small-business owners say they are relatively pleased with how charities solicit their companies, rating their satisfaction a 6.6 on a scale of 1 to 10. Respondents who say they are dissatisfied cite phone calls as the fund-raising approach they like least.

Some large nonprofit groups say they have seen benefits from working with small businesses, although most do not devote resources to reaching small companies specifically.

“I wouldn’t say we have a really concerted effort for small businesses,” says Darren Mullenix, director of operations and a fund raiser at Samaritan’s Purse. “If we know someone who happens to be a CEO or a principal, we may ask them about giving through the business, but it’s about the person.”

Yet some small-business owners say they have run into challenges when they have tried to donate to large charities.

Deena Lurie, owner of a six-person jewelry company called Key to My Heart, in Boca Raton, Fla., says she e-mailed a dozen nonprofit groups with the word “heart” in their names, asking if they would accept 5 percent of the business’s revenue. Only one nonprofit organization responded within the first two months.

“We didn’t want to use their logo and there were no strings attached,” she says. “We had to practically beg a charity to take our money.”

Mr. Nilsen, of the Association of Fundraising Professionals, says that while it probably doesn’t make sense for fund raisers at larger groups to focus on small businesses, they “still need to treat them with the same respect as a larger corporation.”

Polly Aris Stamatopoulos, chief executive of the Rainmakers Group, says that fund raisers can often find small businesses right under their nose and should not overanalyze which groups to approach.

“If your nonprofit agency is in a building right across the street from the local watering hole, and once a month the staff goes down there for drinks, start engaging with the business owner,” she says. “Sometimes we have the tendency to overthink it.”

Personal Interests

Small-business owners say they value company philanthropy, ranking its importance a 7.1 on a scale of 1 to 10.

They cite personal interests (8.1), a charity’s local connection (8), and ease of giving (6.9) as the three most-important factors in deciding which groups to support.

Officials of small companies also say that the importance of a particular nonprofit group or cause to employees (6.1) and the tax deduction (5.7) play a smaller, but not insigificant, role.

Michael J. Schindler, president of Baden Sports, in Federal Way, Wash., a 100-person company that has given more than $1-million in sports products to World Vision and other groups in the last five years, calls the deduction “an encouragement.”

“I can think of several times where instead of discounting something, we donated it, because the deduction made it possible for us to do that and still be financially responsible,” he says.

The least-important factor for a small-business owner in deciding which charity to support is whether the group’s mission aligns with a company’s goals. People in the survey rate the importance of potential business benefits a 5.3 on a scale of 1 to 10.

What’s more, just 43 percent of small-business leaders say they use charitable giving as a way to promote their company.

“They could be encouraged to get a little more strategic in their giving,” says Mr. Nilsen. “Sometimes they are giving based on whatever solicitation catches their eye.”

Among those who do use philanthropy to market their businesses, the largest percentage (29 percent) give services or products with the company logo, while 18 percent say they use charitable work to increase awareness of their business among people in their hometowns, and 9 percent allow charities to list the business’s name in programs or theater programs. Still, entrepreneurs and charity experts say that nonprofit groups should not ignore the marketing benefits they can bring to small businesses, many of which are desperate for new customers.

Jackie Gordon, owner of Divalicious Chocolate, in New York, says she stopped lending chocolate fountains for fund-raising events because her efforts were not driving new customers to her store. Now, she holds free chocolate tastings in her store for charities, so new people are exposed to the business. “You have to make it work for you,” she says. “When you’re a small business, it’s hard to help. I don’t see the benefit of auctions unless they’re really pushing my brand.”

Barriers to Giving

Many small-business leaders (43 percent) say their business is not doing enough charitable giving. They say a lack of money, organization, and time are the three main reasons they do not contribute more.

For example, Brandon Small, co-founder of a firm called Invested Interests that specializes in socially responsible investments, says he would like to create more online tools such as one he built for the nonprofit group Genocide Intervention Network, to help it encourage people to divest from businesses in Sudan.

“We really would like to do more of this stuff,” he says of the six-person business. “We’re just so small and focused on working with our clients.”

Small companies — and their giving — may suffer disproportionately as recession looms. Thirty-eight percent of businesses in the survey gave less over the last 12 months, 47 percent gave the same amount, and just 14 percent donated more.

With health-care costs rising and the credit crunch making it more difficult for small businesses to acquire loans, those effects will be magnified, experts say.

“No one is going to bail out the Mom and Pop shop,” says Ms. Stamatopoulos. “They will be hit the hardest and will take the longest to recover.”

Narrowing Choices

Karen Kerrigan, chief executive of the Small Business and Entrepreneurship Council, says that fewer small businesses will be created in the current economy and more will declare bankruptcy. Many businesses may try to maintain their level of giving but will not be able to.

“I don’t know if it will be the first thing to go because they firmly believe in giving back,” she says. “But if a business is clinging for life, charitable contributions are not going to be a priority.”

As companies pare the number of groups they work with, fund raisers should try to position themselves to be among the one or two nonprofit organizations that a business develops a deeper partnership with, says Mr. Meyerson, the fund-raising consultant.

“We need to be expecting smaller gifts, but we can also be talking about a longer-term commitment,” he says.