How Small Companies Should Give to Charities

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Wynne Odell’s brewery invites customers to join employees on volunteer outings. Odell Brewing

Lots of small companies support charitable causes. For many of them, though, the desire to do good raises tricky questions.

What charity should they give to? What kind of support should they give? Should employees get involved? What could go wrong?

We posed these and other questions to entrepreneurs and charity experts. Here’s what they said:

What kind of charity?

Besides having meaning to an owner and employees, the cause should be related to the business. Customers would likely appreciate a pet-supply distributor’s supporting an animal shelter, for instance, but might be perplexed if it donated to the opera. It’s also easier to create business opportunities if the company’s cause is related: The pet-supply firm could contribute leashes and flea spray to the shelter, which in turn could acknowledge the company in its mailings to animal lovers.

As part of its philanthropy, San Francisco-based Tutor Corps, which offers tutoring services to high-school students, sends tutors to teach underprivileged students at a vastly reduced rate at a nonprofit youth center, says founder Jesse Roselin. That goes over well with the schools that refer students to the company, says Mr. Roselin. Those schools “may be more open to us because we’re ready and willing to work with all students” and not only affluent ones able to pay Tutor Corps’s full fee of $115 an hour, he says.

Experts and entrepreneurs recommend that business owners ask workers for ideas on causes to support, to gain the backing and gratitude of employees. They also suggest that owners stick with organizations in their own backyard, since their efforts will be more visible to customers and employees.

Staying local also opens up more ways to be involved. Some firms organize employee outings to volunteer on company time at a nearby soup kitchen or youth center. It’s also easier to donate goods or provide pro bono services to a local organization.

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Odell Brewing lets customers know the charities it supports. Odell Brewing

Why not just write a check?

Owners can do that, but hands-on, face-to-face involvement can have even more impact, especially if a business can’t afford to make large cash contributions.

“It’s fine to just write a check, but volunteering and personal involvement provide a greater connection,” says Russell Hodge, managing partner of philanthropy advisory Hodge Group in Dublin, Ohio.

Should customers be involved?

Businesses can engage customers in ways that both inform them of the firm’s involvement and further the cause.

New York-based online fashion retailer Modavanti.com gives 2% of each sale to one of three organizations and allows the customer upon checkout to choose which group will receive the donation, says founder David Dietz. Modavanti also lets customers send in any used clothing, which the company donates to a charity, in exchange for up to $60 of merchandise credit.

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Odell Brewing Co. in Fort Collins, Colo., invites customers to join employees on volunteer outings, allowing customers “to connect with us on a values level as opposed to only seeing the brand on the shelf,” says chief executive Wynne Odell.

What are the pitfalls?

Businesses should be ready for sticky situations. Some employees, for instance, might not want to volunteer. Since volunteering is, after all, voluntary, workers shouldn’t feel stigmatized for not joining in. “It’s a matter of framing it so employees feel engaged and have opportunities” to take part, says Kris Putnam-Walkerly, a philanthropy adviser in Cleveland.

Similarly, customers may disagree with a business’s cause. Owners should simply say that the company feels strongly about the cause and leave it at that.

Owners should also prepare for raised eyebrows from investors. Told that Modavanti gives 2% of sales away, potential investors have asked, “ ‘What’s wrong with you?’ ” says Mr. Dietz. He tells them that “customers want to shop their values” and are more likely to make repeat purchases when they’re able to do so. Then, Mr. Dietz adds, “the [skeptics] start to say, ‘That makes sense.’ ”

What happens if a business can’t meet its commitment?

If business slows down and a company can’t afford a donation it has pledged, owners should work around it. They could make a smaller contribution, increase their volunteering or promote the charity more prominently on their website. “It’s important that you not disappear,” says Fern Portnoy, a philanthropy adviser in Palm Beach, Fla. “That creates ill will, which your business doesn’t need.”

Ms. Lee is a writer in Palo Alto, Calif. She can be reached at reports@wsj.com.