April 26, 2017

Bcorp

The business model of the future. What’s next for Do Good + Do Well companies?

Double or even triple bottom line companies. Most people are familiar with the them thanks to the TOMS shoes phenomenon. The buy one, give one business model that does well ($) and does social good at the same time. For each pair of shoes you buy, TOMS gives a pair to someone in need. The new BOGO – exchange get for give.

Secretly, I can’t say I’m in absolute love with the actual shoe design but I do love them and proudly buy the shoes because it makes me feel good to support the company. And let’s be honest – it’s a pride thing to flaunt your “giveback-ness” on our feet. Vibrant conversations with complete strangers have been sparked due to the charitable tokens on my toes. Then there are Warby Parker glasses. Even better, they’re on your face versus your feet. They make for great first impressions – hello giving, caring bright eyes, nice to meet you. Wink.

So what’s next? How can we continue to innovate this “do good, do well” economic model in order to use business as a lever for changing the world? I spy an answer to this question.

Before you start your company or non-profit, please consider this option. (Or at least read the bullet points below. I won’t be offended if you skim or skip to the magic bullets. I actually think in bullet points so more power to you.)

I’ve come across a few companies that have taken the “for profit, for purpose” one step further. They’re integrating a solution to a social problem into the product. For example, ArtLifting helps the homeless and disabled sell their artwork so they can put a roof over their heads. Brilliant concept given the problem and solution are so tightly integrated into the company’s sellable product. The challenge has become the core component of the company and solution. Research has shown these homeless artists don’t want to be a charity case, they don’t want a handout. They just want an opportunity to change their life. Having a job restores their dignity.

So, why wouldn’t someone just start a non-profit or charity? What’s the difference?

With non-profits, there’s a finite amount of resources. Think of a bucket that has a certain amount of money inside. Once you use that money, you’re done. You have to go out and ask for more. Fundraise. Sometimes this means filling out 14-page grant applications for a $5k grant that take a year to process. Slow moving. There are so many non-profits that are fighting for this money but it’s incredibly limited.

With a for profit + for purpose company, you’re growing your bucket of money and self-sustaining. You have the potential to grow and scale your business with infinite potential resources because you’re generating revenue while also giving back and making a social impact. With ArtLifting, the homeless artist receives 55% of the profit, 44% goes to the company and 1% goes to shelters they work with. They license the art, print the art on tangible items and sell the original art as well as prints. ArtLifting is what’s called a b-corp, a Benefit Corporation.

What’s a b-corp? Just like an s-corp, it’s a legal business structure that allows the government to classify your business type. The main difference is that with a b-corp, you have a legally-binding social mission so the company can protect both bottom lines – financial and social.

Meaning, if you’re filing as a b-corp and you have investors, they can’t push the company away from the social mission in order to maximize profit. The company can protect their social bottom line so it’s not compromised for financial success. If investors want to shift direction or strategy in order to make more money but that will jeopardize the company’s social impact, the company can legally push back and lean on the b-corp status. There are many companies out there that have a give-back component but they don’t file as a b-corp. You don’t have to be a b-corp. As of now, there are no tax benefits to b-corps. (Not yet at least!)

PROS to For Profit + For Purpose Business Model:

  • Your product and message IS your marketing. By simply existing, your customers are your sales people. It can become a movement. (TOMS shoes, example). Example: ArtLifting didn’t spend a penny on marketing to get started.
  • You know those millennials that everyone has an opinion about? They are conscious consumers – meaning they care where they spend their dollars, even it it means paying more, and this trend is transcending the millennial generation.
  • Legal protection (b-corps explained above)
  • You can make MORE impact as a for-profit company.
  • This allows people to start for-profit companies that serve as wage-earning, full-time jobs vs. starting a charity that’s a side hobby. Because this economic model is generating revenue, it can be a “day job” where you focus all of your time and energy.
  • You’re doing good and doing well. (Aka – have cake & eat it too. Yummy.)

CONS:

  • Skepticism – Anytime there’s something new, people will develop innovation allergies. Some people have concerns about exploitation and companies using a social mission in order to get more profit. (When actually the impact has more potential as a for-profit entity.)
  • Lack of education – The business model simply isn’t well known yet. This fuels skepticism and many people are not aware they have this option when starting a company or business.

To learn all there is to know about this business model, listen to Liz Powers, co-founder of ArtLifting, explain her journey and the details of getting started. She bootstrapped her company starting with $4k and personally living very lean in her 20’s. She quickly grew the business to six figures in revenue before receiving funding from investors like Blake Mycoski from TOMS shoes.

Do good, do well. Do double bottom line. For profit + for purpose. For sure.

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