Win-Win-Win: This Best for Communities Honoree Just Gave Itself Away
This post was originally published on B Lab's Best for the World publication on Medium.
One of the Best for the World lists that requires the most explanation is our Best for Communities list. While our Best for Workers and Best for the Environment lists don’t require much more than the title to explain, Best for Communities is more of a head-scratcher — what makes a company good for its community?
There are multiple pathways to being Best for Communities. Some build supply chains designed to alleviate poverty around the world; others work closer to home by prioritizing vendors and employees in their region to help build their local economy. Others make formal commitments to charitable giving, doing more than just writing a check if there’s extra money lying around at the end of the year. All of them use their businesses to benefit everyone around them— not just their employees.
One of our Best for Communities honorees, Impact Makers of Richmond, Virginia, recently took a step that exemplifies what it means for a business to be a force for good in its community. Impact Makers has gifted complete ownership of the company to two local nonprofit foundations.
That’s no small gift. Impact Makers, an IT company, is worth around $11.5 million. 70% of the company is now owned by The Community Foundation, with the remaining 30% going to Virginia Community Capital. Both are located in and serve the Richmond community.
The meaning of this restructuring might not be immediately apparent, given that Impact Makers always has been committed to giving 100% of its profits to local non-profit organizations over the life of the company—around $1 million in total. Moreover, the value of the company isn’t currently liquid. However, this is a long-term play, with implications that go far beyond yearly profits.
When we spoke to Eve Gravely of Impact Makers, she told us there were two aims in mind when gifting the equity to the non-profits. “Right now, the money is not liquid. It’s our company’s value. We’re creating funds with these two non-profits with the goal of inspiring other Virginia companies to add their profits into these same funds.” Those funds will focus on supporting local non-profit organizations and social enterprises.
The value of Impact Makers won’t remain illiquid forever, though — the end goal is for the company to be sold over the next decade or so, with the money from that sale going into those non-profit funds.
Normally, the idea of a company like Impact Makers being sold would be greeted with grief. After all, the company has been generating income for community organizations for years, and selling the company might bring in a one-time lump sum of money while simultaneously causing that year-in-year-out source of income to dry up under new ownership. But Impact Makers has already thought of that, and come up with a solution — they’ve reincorporated as a benefit corporation.
Benefit corporations (a legal structure available in 27 states and the District of Columbia) allows the directors of a company to take all stakeholders of a business into account — not just maximization of shareholder value. To wit: a benefit corporation’s directors can’t be sued for choosing to prioritize paying living wages or reducing energy usage over quarterly earnings. One of the other primary upsides to becoming a benefit corporation is that it allows a company’s mission to be preserved over time, even through a liquidity event…such as being sold. That means new owner will not be able to automatically strip away Impact Makers community commitments; moreover, the sellers will be able to choose a new owner based not just on who is the highest bidder, but on who will continue Impact Makers’ mission.
Through the unique combination of non-profit ownership and benefit corporation status, Impact Makers has created a win-win-win: continuing to pass along all profits to community organizations, using the company’s value to start long-term charitable funds, and preserving their mission for foreseeable future. Best for Communities indeed.
This community commitment doesn’t come at the cost of doing brisk business, either. In 2014, Impact Makers made the Inc 500 list (a list of the fastest-growing private companies) for the third year running, with a sales growth of 1,204% over those three years.
“I think some people, when they first hear that we donate 100% of our profits, they think, ‘Oh, I could never do that.’” said Gravely. “I think the extent that we go to puts people off sometimes, because they don’t see how it could be a sustainable business model.” But she actually credits Impact Makers’ charitable model with much of their success.
“It’s meant that everyone wants to work with us,” she said. “It’s such an exciting story to tell. We have a lot of people who want to partner with us. We get amazing support from people who believe in what we do.” She also credits their mission with attracting employees who are attracted by the prospect of earning a market-based salary while also doing pro bono work and getting paid time off for volunteering.
Using business as a force for good isn’t new to Impact Makers — they were a Founding B Corp, one of the first companies to get certified as a B Corporation. “We’ve had so much national exposure that I never saw working at similar-sized IT companies,” Gravely said. “Having the resources and the community and the support of being a B Corp is great. You don’t feel like you’re alone out there — you’ve got people to rally around you.”
Impact Makers certainly isn’t alone. The B Corp community in Richmond is thriving, with many appearing on the Best for the World lists. One of those honorees is Virginia Community Capital, the for-profit community lending subsidiary of the non-profit foundation that now owns 30% of Impact Makers.
“We are excited about this transformational, generous gift,” said Jane Henderson, Virginia Community Capital’s President and CEO. “VCC is looking forward to launching and leveraging the Impact Makers’ Social Enterprise Program, as it will enable us to cultivate and expand social enterprises, such as B Corps. This will ultimately help us enhance lives and communities across Virginia through debt, equity, and grants as we grow this innovative program.”
With this restructuring, Impact Makers has shown exactly how a company can benefit its community: by becoming a well-oiled machine that generates support for community organizations, creates great jobs, and plans for the long term.