Helen Brown Group

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Are We in a New Golden Era of CSR?

“Albert Above All” (c) 2018 Julie Kahn

This week my colleague Angie Stapleton kicks off February with a focus on companies and corporate giving. How does your nonprofit position itself with corporate donors? Do you have a written annual strategy with staff dedicated to company fundraising, or are companies a constituency you have yet to focus on? In this article, Angie sets the stage for us to think about companies and their impact on philanthropy – and our nonprofits – today. ~Helen

The national conversation on ultra-high net worth individuals (UHNWIs) and their role in philanthropy is beginning to shift. As we’ve discussed on this blog, a wave of critiques on traditional philanthropy – including Anand Giridharadas’s Winner Take All or Rob Reich’s Just Giving – have begun to impact public debate about effective philanthropy and the greater good.

While most of these discussions have centered on UHNWIs and individual giving, it has also cast renewed interest on the role corporations play in our society and their giving – also known as their Corporate Social Responsibility (CSR).

For the past few decades, the premiant philosophy on corporations was that their sole purpose was to maximize shareholder value. However, in the past few years, we have begun to see a shift in how the wider public views – and therefore interacts with – corporations.

As BlackRock CEO Larry Fink said in his most recent annual letter:

 Companies that fulfill their purpose and responsibilities to stakeholders reap rewards over the long-term. Companies that ignore them stumble and fail. This dynamic is becoming increasingly apparent as the public holds companies to more exacting standards. And it will continue to accelerate as millennials – who today represent 35 percent of the workforce – express their CSR expectations of the companies they work for, buy from, and invest in.”

A large portion of public discourse on corporate intent lately has centered on the imbalance of profit and wage growth but there is also a growing movement towards the better management of environmental, social and governance (ESG) issues and more traditional social responsibility and community giving.

Perhaps in response, the past year alone has seen a number of ultra-large corporate pledges…

And these are just a few!  In 2017, corporate giving reached $20.77 billion with an expected increase in 2018 (numbers not yet available).

So, are we seeing a new wave of corporate consciousness and philanthropy? Man, I sure hope so! And if we are, what does that mean for our fair philanthropic community? How can we better prepare ourselves – and the organizations we love – to be ready for a larger focus on corporate contributions?

Becoming “Best Buds” with the Business Section

CECP’s 2018 Giving In Numbers report shows that, of the businesses they surveyed (250 of the most well-known businesses in the US), most gave through corporate cash gifts.

For those that gave through a foundation, just under half were pass-through foundations with another 20% being a hybrid of endowed and pass-through. This means that how a business is doing financially matters.

As researchers and strategists, it is of vital importance that we know which industries (and individual companies) are hot and which are not! This way, we can direct our gift officers to the organizations likely to donate the largest gifts and help them better steward those that are not prospects now but may be in a position to give in the future.

While we’re talking about cultivation and stewardship, let’s go ahead and think about pipelines. This is a great time to begin thinking (and reading!) about the industries of the future and beginning to mark which prospects or companies you already have in your database that belong to those industries. That way, in three years when your gift officer says, “Hey, have you ever heard of…,” your answer can be, “Absolutely, and here is a list of people who work there!”

Find and Strategize About Industry Clusters

 Industries tend to rally around causes that in some way benefit them – technology companies that invest in education and diversity initiatives, for example; banks that invest in economic mobility; or health companies that invest in biomedical research. This is helpful for us because once you find a business that supports your cause, you can likely look at some of their peer institutions to find a few more prospects.

Look at the big picture, not just cash donations

 While all nonprofits love a cash donation, recent corporate conversation has centered on the many ways corporations can create value in the charitable sector. In fact, the fastest growth in giving is currently through pro bono work and volunteer programs, which many companies see as a win-win. When talking to gift officers, be sure to include not only foundation and corporate giving, but also information on the company’s sponsorship programs, cause marketing, matching gifts, volunteering, and their ESG work.

Do your research and think about the ROI

 You are absolutely never, ever supposed to say this in development, so I’m just going to whisper it very softly between us friends… sometimes the gift isn’t worth the staff time you have to put into applying for it or reporting on it.

Corporations have historically given small gifts to a large number of organizations. Recent trends have shown this to be shifting as companies focus their giving programs and are moving towards giving more meaningful gifts to a smaller number of nonprofits. The secret here is to know your number so you can quickly disqualify corporate prospects who don’t meet your giving threshold or the amount required to make the gift worth the staff time. Trust me on this, your gift officers will thank you.

Is this a new golden era of corporate philanthropy? Will a more modernized capitalism, as many have called for, make for a better society? I’m not convinced corporate consciousness is the only answer… I rather like the public and nonprofit sectors! But I do look forward to watching how the changes being made walk us towards a more equitable and brighter future – and knowing that the organizations I work with and love will be a part of it!

For Further Reading

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A few of our favorite things

Over the past week I’ve added more new links than I can count to our HBG Prospect Research Links pages. At the moment there are 5 regional pages, covering (mainly free) resources for the Americas, Europe and the United Kingdom, the Middle East, Asia Pacific, and the Baltics (which is a little slim, but we decided to make it public anyway. If you have any resources you’d like to share, don’t be shy).

We’ve also built a page for due diligence and data protection/GDPR resources. Also in the works is a resource page for off-shore sources of information. [Read more…]

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Back-of-the-napkin privately-held company value calculator

Coming up with the value of a privately-held company is one of the hardest balancing acts that prospect researchers do. No matter how hard we try, we will get it wrong around 100 per cent of the time. The only consolation is that it’s very likely that not even the owner of the privately-held company has any idea what their own company is really worth. The value is simply what someone else is willing to pay on any given day.

The Small Business & Entrepreneurship Council reports that the vast majority of companies in the United States – 99.7% of employers – are privately-held small businesses, and firms with less than 20 workers made up 89.4 percent of businesses in America.

That’s a lot of businesses that aren’t publicly-held, but when I talk with researchers about things that are hard to do, there are few who don’t express doubt in their ability to read and interpret SEC forms. Understanding them is important, but it’s not what a researcher is going to spend 99.7 percent of their time doing, and – to my mind – valuing privately-held companies is harder by about the same percentage.

Of special note is the fact that, according to a U.S. Small Business Administration report, women own 36% of all businesses and 20% of employer businesses. That figure continues to grow as entrepreneurial women, eager to sidestep short-runged corporate ladders, continue the trend of building opportunities for themselves. As these successful women become a larger part of our frontline fundraisers’ portfolios, understanding how to value their companies (and understand their philanthropic priorities) becomes increasingly important for us, too.

So, how do we value privately-held companies?

Normally when we want to value a privately-held company, we do one of a few things:

  1. We get lucky and find that an intrepid business reporter has valued it for us.
  1. We get lucky and learn that the owner has revealed the information themselves, either on their company website, or in a published interview, or in conversation with a fundraiser.
  1. We get lucky and see that Dun & Bradstreet has estimated a value for the company in its Business Information Report. (NB: this is a red herring. D&B estimates are to be trusted as much as an unsupervised Labrador with a coffee table full of appetizers.)

When none of those pans out, we start doing the hard work of estimating a privately-held company…

  1. We look for a comparable company or “comp,” which means that we try to find a publicly-held company that is in the same line of business with the same number of employees in the same geographical area with roughly the same sales. We then look at the publicly-held company’s market value, and…there you go. (Except there you don’t go, because finding apples-to-apples comps are as common as finding a lost Picasso print in someone’s attic. It happens, but not often.)
  1. We go through a highly scientific process to estimate value using betas, estimating revenue, expenses, etc. to come up with a value. To assist you in this venture if you dare, here is a 170-slide masterclass from NYU professor Aswath Damodaran walking you through four valuation examples. (It’s useful to know this, and I do highly recommend further education on how businesses work, and balance sheets, and P & L statements because you should know this, but we’re prospect researchers, not Goldman Sachs executives working out an IPO and we’re usually on a deadline.)

SO:

  1. Here’s my small business, private company, back-of-the-napkin estimating tactic to use if you don’t know the company’s sales. (If you do know its sales, stop now and go to the end of this article).

This technique won’t work for every company (the sole-practitioner attorney or the self-investing money manager, for example). But I think it’s a quick conservative baseline to use for companies with ~5-25 employees because we’re going to focus on how much a small company with employees has to generate annually in order to simply pay their bills. If they’re running a demonstrably successful company, then you can be sure they’ve got at least that much (and probably more besides). How much more you  want to add into the calculation based on your – and your frontline fundraiser’s knowledge – is then up to you.

First, you calculate Payroll

How many employees are there? Check the company’s website, or D&B (caveat: see above), or LinkedIn, or the company’s Facebook page.

What’s the average salary for people in that profession? Check salary websites or job descriptions on search & recruitment sites for ranges.

Now, take the employee number times the average salary = S

Multiply S times .3 to calculate benefits = B (benefits cost ± an additional third of an employee’s salary)

If this is a profession that frequently rewards employees with extras like bonuses or commission, multiply that average amount per employee to calculate Extras = E.

Add S + B + E = Payroll

Second, look at annual Costs

Ignoring things that a business owner would only have to buy once (like computers, desks and chairs, etc.) what does it cost to do what this profession does annually?

  • Insurance?
  • Rent/Mortgage payment/Upkeep?
  • Travel/Fuel?
  • Software fees? (Lexis? Bloomberg? Salesforce?)
  • Phone/internet?

Add these together to estimate Cost = C of doing business.

Add Payroll + Cost to calculate Total Expenses

This figure is what the owner has to come up with every year simply to stay afloat, so you know the company’s sales are at least its Total Expenses. (And so, to circle back to my comment earlier, if you know the sales figure, you can simply use that as a baseline to spitball the value of the company.)

Voilà, a back of the napkin company value.

Caveat caveat blah blah caveat

This isn’t perfect, I know that. But there are a lot of things we’re never going to know, like a privately-held company’s sales, its debts, and if the owner is offshoring profits.

But if we have a pile of profiles to work on and need to come up with a baseline estimation, I offer this rough estimate as a good place to start.

I’d love to hear if you have other off-the-cuff valuations that you use!

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Trouble in Paradise

Over a year ago, an anonymous “John Doe” sent an encrypted message to a newspaper in Germany called Süddeutsche Zeitung. The conversation unfolded like this:

That 2014 cache of data, the equivalent to about 38,000 average-sized books, make up what became known as the Panama Papers.

It’s a trove of documents obtained from the files of a Panamanian law firm called Mossack Fonseca, which helped create shell companies and other complex financial instruments in order to assist companies and individuals to evade paying tax in their home countries.

Journalists from nearly 100 news outlets around the world in a collaboration called the International Consortium of Investigative Journalists (ICIJ) worked together nonstop for months under tight security and complete secrecy. [Read more…]

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Broadening your alert horizon

By Lizard Fine Art (Own work) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

There’s such a great sense of accomplishment that comes with finishing a prospect research profile. You can dot the i’s, cross the t’s, hit ‘save’ and move onto the next assignment.

But if you think about it, that moment is really the starting line. What happens after that?

Well, an opportunity for us to have a conversation with the front line fundraiser assigned to that prospective donor, to begin with.

  • Did the profile answer all of your questions?
  • Is there any further work to be done?
  • What questions remain unanswered in the work that the fundraiser can discover on their next visit?

And most importantly, this signals the beginning – or deepening – of the relationship between your organization and the donor. The gift. Stewardship. Continuing engagement. [Read more…]

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International prospect research resources – United Kingdom

From a North American perspective, international prospect research just doesn’t get any better than the United Kingdom.

First of all, there’s no language barrier.

Second, the way information is gathered and distributed by commercial and governmental entities is relatively similar to ours, so navigating around information sources feels …familiar. Logical.

And third, many of the resources that provide information here in the US (like LexisNexis, Factiva, D&B, and Moody’s) also offer products and services in the UK, so there’s crossover. Some of the information we can already get through what we’ve already, well, got. [Read more…]

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Valuing Real Estate in the US West

Last week at the (sold out!) NEDRA conference, this week’s guest author Heather Willis spoke with her HBG colleague, Kelly Labrecque, on finding real estate values in the US west and east. “Country Mouse/City Mouse” was a big hit, and I asked Heather to share tidbits from her portion of the presentation with us today. (If you’d like to see the slides from their presentation, let us know!) And now, here’s Heather:

It’s that time of year again in the West; the snow is melting, tulips are flowering, calves are being born, and the birds are singing. It also means the year- end real estate market analyses, the new agriculture statistics reports, and the top ten landowners, have been published. Exciting right!?

Ok, you might not have the desire or the time to read through all of these reports when researching a prospect who owns a farm or ranch, so I will point out a few changes from last year and try to give you some insights into an extremely diverse and difficult group of prospects to research. [Read more…]

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Doing Your Due Diligence

By Silke Remmery (Newspaper) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

If you’re a major donor to a nonprofit organization in the UK or Europe, chances are good that someone has done background research on you to make sure you’re not an arms dealer or drug kingpin.

This is called due diligence research and it’s essential to protecting the reputation of the nonprofit. What the organization is doing is ensuring that there are no legal reasons why the gift may be contested or clawed back later. Or worse.

A nonprofit’s reputation is obviously important – if an organization becomes allied with …a despot, say, it risks years of damage and decreased support of every kind. They become that scarlet-lettered nonprofit that everyone remembers for being the de facto money-launderer for the drug ring. Not too many volunteer and trustee types (or donors)(or talented employees) want to be affiliated with that kind of organization.

Most organizations in the UK and Europe have a policy to do due diligence research at a relatively modest level (at least by major donor giving progam standards). The amount under consideration can be as low as £1,000 or €1,000.

Of course, we do due diligence research on this side of the Atlantic, too, but we are more likely to back into it. By that I mean that we’re not usually specifically looking for negative information to see if we want to be allied with a donor from the get-go. Many times the person or company or foundation has already been a donor at a certain level for many years, but now is interested in making a very large or transformational gift of some sort.

Sometimes the news just falls in our lap in the course of our usual prospect research. Like the time I discovered…well, never mind. Suffice it to say it was a yikes-bullet-dodged moment and the organization I worked for decided to let that relationship gently fade away into the night.

But let’s say you do need to do reputational research on a prospective donor. Where are the best places for you to go?

Some organizations decide to hire an outside firm that specializes in due diligence research. It can be expensive, but of course the avoidance of reputational damage is frequently worth the money.

Others ask their prospect research department (or HBG) to take a first crack at it to see if any immediate red flags appear. They can then decide how to move forward if worrisome details start to emerge, by either running the request up the flag to a due diligence firm or by deciding not to ask for the donation to begin with.

If you want to tackle the due diligence research yourself, here is a list of a few of our team’s favorite sources:

You’ll find tons more resources on our HBG Research Links page. What are some of your favorite sources for due diligence research?

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How much is that unicorn in the window?

This month we welcome HBG’s Angie Stapleton who has become quite the expert on tech startups. Angie navigates us through the terminology around startups, shows how and why unicorns fly so high, and gives us insight into what their value might mean for fundraising.

unicornWhen I was a little girl, unicorns were everything. I mean, if you didn’t have a Lisa Frank unicorn lunch box, hello, you may as well just go back home. Today, a new kind of unicorn reigns king… tech start-ups.

In recent years, tech firms with valuations of $1 billion have become all the rage, the Silicon Valley darlings, the UNICORNS of the investment world. In fact, investors have even come up with a new name for tech firms whose values rise above $10 billion… DECAcorns. I’m guessing this is because “unicorn” just didn’t encompass enough magic and whimsy. [Read more…]

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Hidden Treasure

World Finance KalendarLast week I had the pleasure of a long layover at Heathrow, so I wandered around trying on Barbour coats, admiring Chanel scarves, and disappointing bored shop assistants in the luxury shopping mall that masquerades as an airport terminal.

As I widened my circuit I passed one of the gates and noticed some neatly-arranged business-y magazines that didn’t look familiar under a COMPLIMENTARY! sign. My gimlet eye spied a cross-armed CEO standing proudly on the cover of one, and the words “Jockey Club” on the cover of another.

Well, well, what have we here? I thought, and sidled over. Picked up one, then the other, and dropped into the nearest seat to have a leaf-through. [Read more…]

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