Teaming up with For Profits: A Winning Combination (Part 2)
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Last month, we discussed why every not for profit should consider partnering with a for profit company. We’ve seen the success ourselves. But as we mentioned, with any partnership, there’s always a bit of risk that comes with it. What’s that risk?
As a not for profit, you must ensure the for profit company has the best interest of your organization in mind. When a for profit company teams up with a not for profit, the conditions of payout can end up being much different than in a philanthropic exchange. Sometimes, a for profit will press to have its name or products appear prominently in the not for profit’s media outreach efforts. When the not for profit organization becomes an advertiser for a company, the public perception could be that it has essentially “sold out”. This erosion of public trust can be extremely detrimental to a nonprofit organization.
We’re not trying to cause fear! Just caution. There are several steps a nonprofit organization can take to protect itself when considering a partnership with a for profit corporation. First and most importantly, it is fundamental to thoroughly evaluate a potential for profit partner’s reputation. Examine its record for telling the truth in its ads, verify all statements and figures released to the press and check that in the past, allocation of funds has been as promised to partners and the public.
Important considerations to revisit when entering into a relationship with a corporation include:
- Your name is your most valuable asset, and it should not be underpriced
- Cause-related marketing is a business deal, and differs from philanthropy
- Ensure that payment and use of your name are on your terms, and control all uses of your name – All promises should be in writing
- Federal and state regulations may apply to cause-related marketing transactions so ensure you’re in compliance with all applicable laws (State laws may pose a particular challenge, as solicitation campaigns must abide by the laws in every state where funds will be raised)
- Check every deal you make with an accountant and an attorney
- You bear most of the risk, carefully consider the financial cost of the relationship
- Establish an organization-wide policy for cause-related marketing ventures, and build on it as your organization gains experience
Beyond taking these preventive steps, it’s important that you’re properly covered should you become involved in litigation for breach of contract or breach of duty. A Directors’ and Officers’ (D&O) insurance policy serves this purpose and it’s fundamental for all nonprofit organizations. Volunteer statutes don’t suffice to fully protect the organization from liability.
For more information on D&O insurance, check out our free Assurance University Replay Webinar, Directors’ and Officers’ (D&O) Liability.
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