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What percentage of income should we give to charity, reinvest in the biz, and use for our expenses?
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3 Answers
(1) You should pay all your bills.
(2) You should re-invest as much back in the business as is required to sustain its continuing operating as a market-competitive, going concern.
(3) From whatever is left, you should invest as much in charity as your shareholders/owners feel is appropriate. Frankly, for myself, I don't believe in corporate-directed charity unless the corporation itself is a charity (i.e. the primary mission of the organization is charity work). Rather, I believe companies should pay out whatever the remaining profits are to the shareholders/owners and leave it to them to fund whatever charities they want at whatever level they want. In other words, if the purpose of the company is to make money for its shareholders/owners, then it should focus on that and then leave the charity work to the shareholders/owners themselves with the profits generated.
Always start by determining your "fixed overhead costs", instead of thinking in terms of percentage allocations to operate your business. A percentage allocation is not relevant. Once you have determined your fixed costs then analyze your discretionary spending and make a projection - based on your historical pattern and including an amount for likely increases in spending going forward. For example if your average spend on marketing over the last 3 years was $500.00, then use that number as the basis for determining a future spend number for that category. Do this for every expense category. You should also do this for your fixed costs if you think there are likely to be increases going forward e.g. office space rent.
Once you've added up both your 1) fixed overhead costs and 2) discretionary expenses, you will then have a read on what's remaining for reinvestment and charitable.
Reinvestment in your business should take precedence over charitable as this can be anything from new, more efficient equipment to continuing education for your professional development, all things that will ultimately add to your bottom line.
10% to charity. I recomment choosing 1-3 organizations yearly to provide your time and talents. When others come to you for money or time, ask them to send you information about their organization for next year OR say "no" you know you won't be providing them with money.
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