How can brand new businesses afford to give away 100% of their profits to charity and still survive? Its hard enough for many new start ups to stay afloat let alone give away all of their profits. Well this is exactly what a select few of start ups are doing and believe it or not they are financially BETTER off then if they didnt!

How is this possible? Its simple really. Although not a technique that I’ve ever used, some new start ups are adopting a creative new marketing strategy where they scream from the roof tops that they will be giving 100% of their first year profits to charity! Although a noble cause and something that should be praised there is a motive to this genorisity. You see in the example of a new building company in the first year of trading the company will probably purchase a van, mixing equipment, spades, shovels, website, spend heavily on advertising etc and so as with most new businessses it is likeley that the company will simply break even and so not lose or make any significant revenue.

So in the scenrio that our builders set up costs were £40,000 and he advertised and marketed in the classic sence in the first year of business he may generate £43,000 worth of revenue giving him just £3,000 profit.

However some have found that by promoting there business as “100% or 50% of this years (their first year of trading) profit goes to charity” are attracting them MUCH more business than they would have received otherwise which is not suprising as if you were to flick through your local paper looking for a builder and you saw an ad for a builder who donated 100% of profits to charity would you be interested in receving a quote from him?

These businesses are also proving to be PR gold mines! Which again is not suprising as a story like “Local Builder Gives 100% of Profits To Local Care Home” is a story thats likely to spread like wild fire around his local community.

With this kind of publicity and uniuque selling point I would not be suprised if the builder generated an additional 20% - 25% business which in this case would mean that he would generate around £51,600 of income and therefore around £11,600 worth of profit instead of £3k, but the builders worse off right? Although he’s made £11k of income he has to give it all to charity where as if he didnt do this promotion he would have £3k in the bank. WRONG he’s much better off!

Why? because its a LONG term marketing strategory NOT an overnight promotion. As, as the builder has been doing the work for charity he’s company is likely to have received a great deal of publicity from the local press which for him means FREE advertising, the work he did in the first year for charity would have also gained him a great deal of referrals for the second & third year and third its likely that due to his noble cause he would have picked up a great deal of recurring work e.g. the local counsil phone him when a wall needs repairing etc.

And lets not forget a 2nd PR bomb which would read “Local Builder Proundly Donates £11k to Charity” with a picture of him and one of those jumbo cheques. A second priceless campaign that would drive shed loads of business to his company for the 2nd year. This also makes his comany much more stable for the 2nd, 3rd and so on years in business that may have been shakey if he’d promoted his business down the conventional route.

So in the 2nd year when he is not obliged to donate to charity, I would not be suprised if he generated 25% - 30% extra revenue due to his initial marketing campaign then he would have done by not giving his 1st year profits to Charity. Depending on the size of their business & finicancial commitments some business owners still run this campaign but ensure that their salary is withdrawn before revenue is declared a “profit”.

What do you think is our builder a saint or a sinner?