Ever thought of starting your own business? I’m sure many of you have, but did you consider, in your business plan, to have no ownership and give away all of your profits? Yeah, I said it: a for-profit company that gives away all of its profits. Sound crazy? Sound good? Well it does to Michael Pirron, CEO of Impact Makers, and their business model just may create a major shift in the way people attack some of today’s most pressing social issues facing our communities.
You may think this sounds like a bad deal, giving away all of your profits, but upon further reflection, with few business categories thriving/growing/building in the current economic climate, perhaps a little shaking up is just what is needed. Impact Makers looks to do just that – turn the consulting industry on its head – and gain some serious attention in the process.
Based in Richmond, Virginia, Impact Makers offers traditional business consulting services at market rates, pays competitive salaries, and gives all the profits to nonprofit partners that are chosen by a non-partisan, volunteer Board of Directors (Impact Makers’ current partner is Rx Partnership, a nonprofit that has provided thousands of low income and uninsured Virginians with free medication, by creating a streamlined process that connects pharmaceutical companies to free clinics and community health centers).
As a founding member of B Corporation, Impact Makers is arguably the most unique member in a very eclectic group – of all the B Corporations, Impact Makers is the only one with no stockholders. Their philosophy, “More Services, Higher Quality,” creates a very innovative capacity building model – Impact Makers focuses on consulting and providing revenue for their nonprofit partners, so their partners can focus more time on service to the community and less on fundraising.
Many nonprofits are forced to spend a large portion of their time raising money, while large corporations spend a lot of resources on CSR policies and foundation spends – with Impact Makers, they get quality IT and management consulting services, and at the same time, relief from fundraising and/or foundation augmentation. And, in addition to financial support, Impact Makers also donates consulting services to their nonprofit partners to increase efficiency and value, all of which creates what they call a “double-leverage” benefit.
I recently caught up with Impact Makers CEO, Michael Pirron, for a quick chat:
Brian Thurston: First of all, congratulations on the Business Week readers’ poll. How did that come about?
Michael Pirron: Business Week’s editorial staff contacted a number of thought leaders in the social enterprise space for nominations, and a few of these thought leaders had heard about Impact Makers from conferences or from recent publicity and nominated us. We were selected in a judged competition as one of 25 finalists, and then won the #2 spot based on reader online votes.
BT: This model is a true innovation in terms of tackling the “triple bottom line.” What was the motivation?
MP: I had spoken early in my career with many others who wanted to give back to their community, but found it hard to do so. People who want to give back, but are professionals, have few choices. One thing you can do is take a third, or two-thirds of your salary, and go work in the public sector – what many refer to as an “ethical discount” in your salary, to work in the nonprofit world.
BT: That is often a tough sell.
MP: Right, and a lot of people can’t afford to do that, regardless of their interest to align their work with a social mission. A second option is to work really hard, make a lot of money, and retire early… to then go work in the nonprofit world. A third option is the Bill Gates or Warren Buffett concept: make a lot of money and create a foundation so you can give it away to the social sector. A fourth option would be to try to find some work- life balance, where you work but do something in the community in your off hours, or write a check here and there.
BT: Which is probably the most realistic, and maybe the most common, option for a lot of people.
MP: Sure, maybe. But this option is also difficult – a mere 40-hour workweek is a rarity these days, and with the current economic climate, family and other commitments, it’s really hard to find the time and the money to commit to the causes you care about.
BT: So where does Impact Makers fit into this equation?
MP: Impact Makers selfishly solves this dilemma for me. I can work in the nonprofit world without taking a cut in salary. I can transform my skills, experience, and training into a direct community impact through the work I do every day. I believe this concept will appeal to others too.
BT: What are some of your biggest obstacles?
MP: Scalability is the biggest issue – we have to grow a bit in order to grow a lot. The biggest mistake I made in the founding of Impact Makers is not starting this with one or two other principals to help grow the business. I have been selling and delivering a book of business as largely the sole executive of the company – with one or two others we could scale much faster.
BT: What is the biggest advantage of your model to your clients?
MP: Our model allows our clients to receive top quality services, but at the same time to double-leverage their consulting/contractor budgets to make social impact. Specifically, by hiring Impact Makers they get their already budgeted services delivered and at the same time augment their philanthropic giving to the community.
BT: Can you provide an example?
MP: A good example is Freddie Mac in the 1990′s – they had about $1 billion profit and put $100 million into their foundation (costing shareholders $100 million). In those same years they spent about $800 million a year on IT contracting services with vendors. Imagine if companies structured like Impact Makers won that $800 million portfolio of business – at a 15% profit margin, that would put $120 million into the community, which is $20 million more than their entire foundation. We would not want to replace corporate philanthropy with our model, rather, we want to augment it. In this case, Freddie Mac would have a total social impact of $220 million and cost them nothing additional.
BT: Have you found any pushback from larger competitors?
MP: So far we are not big enough to be a threat to the large players. But imagine if our model started to give us a competitive advantage in the market. Regionally, other players would have to show social impact to compete, and then maybe that would spread statewide and possibly nationally. If that created a new infusion of corporate consulting dollars to the nonprofit sector that would be an amazing accomplishment!
BT: Definitely. So what are some goals for 2009 and beyond for you guys?
MP: Scaling our business and our impact. We came close to winning a large Virginia government subcontract of $10 million – $15 million over 5 years. This single contract would have let us scale our business considerably, and at the same time would have made us one of the largest contributors to the social sector in central Virginia!
BT: The “double leverage”.
MP: Right. From this single contract we could have doubled the dollars that the Virginia free clinic system got from the Commonwealth of Virginia, and it would have come from budgeted expense dollars for contracts with the Commonwealth, rather than from the traditional grants given by Virginia to the free clinics. So, to answer your question, our biggest goal is to land one very large contract – this will immediately make huge social impact, give us immediate national news as a major innovator in the social enterprise space, and allow us to grow our business significantly.
BT: Thanks, Michael. It’s truly an inspiring approach. We appreciate you taking the time to speak with Triple Pundit, and good luck.
MP: Thanks Brian – I appreciate the time to speak with you and tell our story to the Triple Pundit readers.
Sold yet? Intrigued? Impact Makers currently focuses on IT and healthcare consulting, but as you can see, the model makes sense, and it could easily be transferred to any and all categories. The idea of being in business to create wealth for communities rather than stockholders is a bold one, and it’s going to take thought leaders and social entrepreneurs like Michael Pirron, and thousands like him, to continue growing innovation in business and technology in the right direction.
View a quick video animation of their approach here.