As a Small Business Owner, would you like to improve your business finances? Social Responsibility can help, but first, let’s address some misconceptions.
The more I speak about Small Business Social Responsibility and interact with Small Business Owners, the more I encounter the same thoughts. So many Business Owners are reluctant to share their social good efforts (if this is you, you might want to read Part 1 of this blog series before continuing).
But I also run into another common thought – Social Responsibility, or the concept that you can be both profitable AND contribute to social good, is only for Social Entrepreneurs or Social Enterprises. This one really gets me fired up!!!
You do NOT need to be a Social Entrepreneur to do good. You CAN be profit-driven FIRST, and purpose-driven second. Who Says You Can’t Do Good AND Make Money? With all the emphasis on purpose-driven companies lately, do not be ashamed to focus on profit first.
After all, you need to make a living. You are supporting your family. You are also supporting other families. And you are contributing to our economy. And you are providing much-needed goods and services. All of those deserve to be praised. Making money is NOT a bad thing. Especially if you then use some of that money to help others.
So with that clarification out of the way, here are a few ways that Social Responsibility can increase potentially improve your business finances:
- Decrease Marketing Costs
- Reduce Operations Costs
- Increase Profits
- Obtain Tax Benefits
These are rarely a driving purpose for embracing social responsibility, but they are related benefits to keep in mind.
The difference between a profit-driven business and a purpose-driving business is something I discuss a lot… stay tuned, a blog post is coming for that! Social Responsibility is equally important for both. Just because you are a purpose-driven business already does NOT mean you can’t contribute MORE by adding additional social responsibility elements. Yes, I’m QUITE passionate about this topic.
Top 3 Ways Social Responsibility May Improve Business Finances
1. Decrease Marketing Costs (by attracting new customers)
Marketing and advertising are a critical element of most small businesses. The studies vary, but it may range from 1% to 8% of your revenue, according to an SBA blog. No matter how much you spend, finding new clients with less effort is one of the easiest ways to decrease your marketing costs and contribute to your bottom line.
Social Responsibility can help attract new clients by:
- Word of mouth (let your existing customers market for you) – 81% of American consumers would tell their friends and family about a company’s CSR efforts (Cone Communications)
- New exposure – attending or sponsoring community events can bring more attention to your business and therefore attract new customers. However, choose the RIGHT community events that match your values and will attract your target audience. Otherwise, you won’t see much business benefit.
You can ALSO leverage your existing customers to help attract new customers by:
- Inviting your existing customers to attend community events and to bring a friend.
- Inviting your existing customers to take part in any volunteer activities and to bring a friend.
- Asking for referrals. If you have highly engaged customers, take a moment and ASK them to refer others. Consider providing rewards for referrals. And what if those rewards were socially responsible as well? SO MUCH CAN BE CONNECTED!
Not only is this good in theory, according to the Boston College Center for Corporate Citizenship, “10% of Corporate Executives saw an increase in the success of attracting new customers when corporate citizenship (another word for Social Responsibility) was integrated into their business strategy”.
2. Reduce Operating Costs (besides marketing)
Marketing is just one element of the overall operating cost for a Business. The result of Socially Responsible actions can also decrease various elements of your operations costs.
These impacts can be subjective and may be different for each business as there may also be some increased costs associated with the actions. It’s important to consider and review each specific action relative to your unique business operations to determine the potential financial benefits.
Some examples include:
- Reduced energy as a result of energy efficiency changes (although there may be increased equipment costs).
- More efficient use of raw materials and packaging as a result of evaluating and reducing the waste produced from your operations (therefore decreasing raw material costs).
- Reduced employee costs as a result of wellness activities (and less health care costs) (referenced in Part 3 of this series).
- Reduce turnover costs as a result of happier and more engaged employees (referenced in Part 3 of this series).
3. Increase Profits
Social Responsibility efforts can also help increase your profits. As with most financial benefits, the benefits aren’t as easy to define.
Some benefits ways to increase profits include:
- Selling at a higher price point for green or sustainable products – In some cases, particularly for Millennials, consumers may pay more for sustainable or green products. However, there are a lot of factors to consider as often it’s more expensive to make sustainable or green products and you have to be careful of not pricing too high (Neilsen).
- Increasing your employee productivity, therefore, producing more goods or offering more services (referenced in Part 3 of this series).
- Increasing sales to existing clients (referenced in Part 2 of this series).
4. Obtain Tax Benefits
There may be tax benefits as a result of the Socially Responsible actions you implement, particularly in relation to efforts to go green or reduce energy use. I recommend you keep your Certified Financial Planner informed of any actions you take to find out if there may be associated tax benefits you were not aware of.
How Else Can Social Responsibility Benefit Your Business?
To do more than improve your business finances, refer to the other blogs in this series to learn about additional benefits including:
- Improve your customer relationships (Part 2).
- Improve your brand awareness (Part 3).
- Improve your business finances (Part 4).
- Invesp (Customer Acquisition Vs. Retention Costs – Statistics and Trends)
- SBA Blog (How to Get the Most from your Marketing Budget)
- Boston College Center for Corporate Citizenship (State of Corporate Citizenship 2017 )
- Neilsen (The Sustainability Imperative, 2015)