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Tips on How a Nonprofit Can Partner With Businesses

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Mixing business and charity seems like it’s all the rage. Done well, it can be an effective way to both further the mission and raise financial support. In this post, we’re going to explore examples of each.

Introduction

Out of the gate, I want to say that this article is NOT about nonprofits which have wholly-owned for-profit subsidiaries, nor ones with any legal ownership stake in another company. We’re going to keep this one focused on partnering with existing businesses, of which the nonprofit has no direct stake or control.

We want to look at 2 specific areas of focus: money and mission. We’ll follow up with a twist on mission. Here we go!

Partnering with Business - Money

Let’s start with the one most people think of first anyway, financial. There are a number of ways that a charity can connect with businesses in order to scale up its funding.

Donations and Sponsorships

Rare is the nonprofit that doesn’t solicit individuals for donations to support its mission and operations. Often overlooked is the potentially rich vein of support that can come from business.

Asking businesses in your community to donate is certainly one way to do it. Many times, however, it’s not the best way. Businesses are not people. There are often multiple personalities involved in the decision-making process. Those persons may not care about the same causes. Also, businesses are busy trying to sell their goods and services, so it is doubtful your organization is going to be a priority for them if all you are proposing is that they give to your nonprofit.

Try sponsorships!

Sponsorships can provide the necessary incentive to get businesses to donate to your organization. Businesses need exposure, and the exposure that comes from sponsorships can result in significant community goodwill for that company.

Such sponsorships can take various forms, including temporary and (semi) permanent. For some organizations it could be visibility for sponsoring a fundraising event. If you have a private school, it could be naming rights for a period of time for the football field or scoreboard. We’ve all seen these examples in real life, but often people don’t stop to consider trying it themselves. There are endless ways to creatively encourage businesses to sponsor your organization in exchange for public acknowledgement.

The question is often asked, “How is this any different from selling advertising?” That’s a fair question, and done improperly, it might be the selling of advertising… which is something you don’t want to do. Ad sales create unrelated business income, which complicates matters unnecessarily. There are several keys to this:

  1. Don’t call it advertising!
  2. Acknowledge the support, but keep calls to action (buy now!) and superlatives (they’re the best dentist in town!) to a minimum.
  3. Don’t use a sponsor’s typical ad copy beyond a slogan or catch-phrase.

It’s best to simply acknowledge their generous support and recommend your constituents patronize their businesses.

Percentage of Sales Arrangements

This is another creative way for nonprofits to partner with business. You will occasionally see a local restaurant agree to partner with a charity for a percentage of sales event. For example, a local pizzeria will donate 10% of proceeds to a charity for everyone that comes in on a particular night. Sometimes you will see a retailer do something like this for a week or a month, maybe on a specific item.

Some retailers, like grocery chains, have charity-share programs as a permanent fixture of their service. Amazon Smile is a perfect example of this.

The point is, the opportunities are there, but you’ll have to make them happen.

Partnering with Business - Mission

What I mean here is a business that actually helps a charity accomplish its mission by action, not just cash. This is more unusual, but it happens. Obviously, this is going to involve the more charity-minded business owners.

An example of this might be a group of company employees who volunteer their time to serve food for participants of a homeless shelter. Maybe it’s a local CPA firm whose staff goes into a school and helps kids learn personal finance. The possibilities are as numerous as your imagination.

The key to making it a possibility is just getting creative. It may be that your nonprofit’s purpose is not well suited to outside involvement, and that’s fine. But, I think way too many organizations never consider opportunities like this that are right under their noses. Plus, getting other entities involved in your activities creates a whole new group of brand ambassadors sharing the good news of what your nonprofit is up to.

Partnering with Business - Mission (The Twist)

OK, so there is no actual twisting going on with this one. It’s just a different perspective.

There are times when parts of your organization’s program activities or administrative needs might be better served through outsourcing. In these situations, it’s likely that your charity isn’t receiving donated services, but rather is paying for what it is receiving. Some things… like outsourcing your bookkeeping… is obvious. Not-so-obvious examples can include a private school hiring a catering business to run its cafeteria instead of staffing it internally.

These examples certainly aren’t typical partnerships, but they do demonstrate how business and charity can not only co-exist, but thrive together.

Final Caveat - Watch for Conflict of Interest and Private Benefit

Whether a company is getting paid for a product or service provided to your nonprofit, or it is simply receiving public accolade for donating money, it is getting a benefit. These examples are perfectly fine. But watch out for conflict of interest and private benefit.

Conflict of interest can occur when the business being promoted belongs to an insider of the nonprofit. There’s no prohibition on such, just make sure decisions are fairly made and make sense for the charity.

Private benefit can occur when such arrangements are made primarily for the benefit of the insider at the expense of the nonprofit. In other words, Jason, the insider, is manipulating influence for the purpose of benefiting himself to the detriment and harm of the nonprofit. This is not allowed and can result in penalties from the IRS called intermediate sanctions.

Conclusion

Mixing business and charity can work to the benefit of your nonprofit. Understanding what’s possible, and how to avoid problems, makes it something possibly worth pursuing.

What it ultimately looks like for your organization may be quite unique. But by thinking creatively, and maximizing the value of working together, businesses and charities can accomplish much.

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Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

This Post Has 3 Comments

  1. Thank you great article. We are seeking other music or arts centers that may be profit to partner with to continue the mission and vision of our non profit.
    We were informed of 2 possibilities, merging the two and the for profit assuming leadership or give our non profit exempt number to the first profit, I am not in favor of thus one and concerned it was suggested. Is this a recommended remedy?

    1. There’s not quite enough detail here to advise well, but it doesn’t sound right. There’s no tax exempt “number” you can give or transfer. The only thing a 501(c)(3) has is an IRS determination letter that the nonprofit is tax-exempt, and that is permanently tied to that corporation and its EIN number. Mergers are extremely complicated, both practically and legally, so proceed carefully. You may need legal assistance with this one.

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