Entrepreneurs as Philanthropists: How They Give
The average household donation of an entrepreneur is more than four times that of a non-entrepreneur, according to a new report released by Fidelity Charitable.
With more than 27 million privately-held businesses in the United States, business founders, owners and investors make up much of the economic fabric of the country. However, little is known about how entrepreneurs approach giving.
The Entrepreneurs as Philanthropists report, based on a 2018 survey conducted by Artemis Strategy Group, an independent research firm, explored the giving habits among 3,000 adults in the U.S., including 708 current or former business owners. It provides insight into the qualities and approaches that distinguish entrepreneurs in their philanthropy—from how much they give to how they integrate giving into their businesses.
Key insights include:
Simply stated, entrepreneurs give more time and money than non-entrepreneurs.
- On average, the median annual gift for entrepreneurs ($3,600) is 50 percent higher than non-entrepreneurs ($2,400).
- Two-thirds (66 percent) of entrepreneurs volunteer two or more hours a month, compared with just more than half (55 percent) of non-entrepreneurs.
Entrepreneurs unquestionably identify more strongly with charitable giving than non-entrepreneurs across a range of dimensions. From describing charitable giving as a core part of their identity to rating charitable giving as highly important compared to other financial priorities, giving is generally more central to entrepreneurs’ mindset.
- Nearly half (47 percent) of entrepreneurs consider themselves philanthropists, compared with less than a third (30 percent) of non-entrepreneurs.
- Six in 10 (59 percent) see giving as important relative to other financial priorities, compared with nearly half (48 percent) of non-entrepreneurs.
- Three-quarters believe volunteering has an impact on their professional success, compared with only three in five (63 percent) non-entrepreneurs.
Entrepreneurs’ approach to philanthropy reflects the hands-on approach they have used in building their businesses; they place more emphasis on being personally involved in giving, deciding how funds are used, and the ability to demonstrate leadership through their volunteering.
- Six in 10 (59 percent) business owners say owning a business has influenced the way they approach their personal charitable giving—and that number rises to 68 percent for owners whose businesses generate $1 million or more in annual revenue.
- Sixty-one percent of entrepreneurs want to be personally involved in charities, as opposed to just making financial contributions.
- Entrepreneurs are significantly more likely than non-entrepreneurs to take a venture approach to giving—although notably it is still a minority.
Entrepreneurs are more likely to have had a discussion about philanthropy with a financial advisor and to have engaged with more sophisticated approaches to charitable giving, including direct donation of appreciated stock. They are also more likely to plan for legacy giving.
- Nearly three-quarters (73 percent) have had a conversation with an advisor about giving, compared with just half (52 percent) of non-entrepreneurs.
- Nearly half (47 percent) are planning to leave a charitable legacy gift, compared with just a third (34 percent) of non-entrepreneurs.
Charitable giving is on the mind of many of those considering selling their businesses or passing along a venture to a family member. However, many of these plans are not yet firm, indicating a need for additional education so entrepreneurs can maximize what will be, for many, a once-in-a-lifetime opportunity.
- Three out of 10 (29 percent) current owners plan to sell or pass the business to a family member in the next five years, including nearly 40 percent of entrepreneurs running businesses with revenue of at least $1 million annually.
- Two-thirds (69 percent) of entrepreneurs planning to exit their businesses in the next five years have philanthropy in mind as part of their exit strategy, while an additional 17 percent say they haven’t yet thought about it. Just 14 percent say definitively that they are not planning to give anything to charity as a part of their exit.
The study also analyzed a subset of 288 entrepreneurs across three generations and found the following with regard to millennial entrepreneurs (born 1980-2000), Gen X entrepreneurs (born 1965-1979), and Baby Boomer entrepreneurs (born 1946-1964):
- Millennial entrepreneurs want to be hands-on and involved. Ninety percent value charities with meaningful volunteer opportunities, and more than half say that volunteering is a chance to learn new skills relevant to their profession, compared to a third of Gen X and only 20 percent of Boomers.
- Younger entrepreneurs see charitable giving as a way to build their reputation, with 84 percent saying they value giving as an opportunity to demonstrate leadership in the community. Seventy-four percent value having their contributions recognized publicly, compared to only 19 percent of Boomers.
- Effectiveness really matters to older entrepreneurs. More than 80 percent of Baby Boomer business owners prefer to give to smaller nonprofits where they know their dollars will have a big impact.
- Sixty-six percent of Baby Boomer entrepreneurs give to a limited number of specific causes, displaying a more focused approach to their philanthropic efforts compared to the 57 percent of Millennials who support a wide variety of causes.
- Gen X entrepreneurs are focused on their local communities. Ninety percent value charities that benefit the area where they live, compared to 79 percent of Boomers.
- Similar to Boomers, Gen X entrepreneurs tend to focus their giving on a narrow set of causes and prefer to support well-established nonprofits. However, more closely aligned with Millennials, Gen X likes to be hands-on, with 61 percent preferring to be personally involved with the charities they support.
Please visit Fidelity Charitable to read the full Entrepreneurs as Philanthropists report and the Entrepreneurs’ Philanthropy Across Generational Divides Analysis.