Legacy to Consequence: How Business Owners Can Reframe Philanthropy

Key Takeaways

Successful business owners don’t suddenly become philanthropic. Generosity is a habit many engaged in long before achieving success.
As wealth and liquidity increase, so do the options for executing on philanthropic goals, shifting from charitable donations and community sponsorships toward solving larger, more complex problems.
The most effective philanthropic plans align self-knowledge, family involvement, and multiple types of capital deployment, creating meaningful impact while preparing future generations for stewardship.

A desire to imbue wealth with meaning takes many forms. Most business owners are actively engaged in their communities long before achieving success. Healthy communities support thriving businesses and vice versa.

Wealth alone does not make someone more philanthropic. For many, giving back is an act that has always been a part of their lives, something that has become more accessible thanks to their hard work. "People don’t usually become charitable only because they now have money," says Jim Benedict, Head of Business Owner Solutions at PNC. "In most cases, they've been giving throughout their lives. They simply have more resources and more options later on."

Engaging with community often changes as the business owner transitions from running daily operations to serving in an advisory capacity to full succession/exit. Our Business Owner Survey results clearly show that many owners plan for a meaningful next act, which starts with building a legacy and often evolves to solving problems of consequence.

Motivation Shift

It’s natural for business owners to care about their legacy in regard to their family, community, and society at large. Philanthropy is a powerful tool for remembrance, which is why many get involved in endowments, foundations, or offer gifts that carry a family name into future generations.

"Legacy is about being remembered. Consequence is about solving problems and having a meaningful impact on other people's lives. One can do both," says Avery Fontaine, Head of Purpose at PNC Private Bank.

As part of moving from legacy to consequence, many begin asking questions, such as: “How is my philanthropy making a difference? Am I moving the needle on the issues I care about most?”

Such introspection was clear in our Private Bank Business Owners survey earlier this year. We found that success drives business owner’s view of philanthropy, growing from a passive transactional approach to a structured, active discipline.

Increased financial capacity creates more opportunities to deploy capital and solve problems. " Many recognize that stacking philanthropic vehicles and for-profit strategies together allows for both legacy-building and problem-solving activities that complement one another,” says Fontaine.

Helping to solve the problems that are important to them may take on even further urgency if an owner is moving through a succession or exit. Philanthropy can be a powerful tool when a company is behind it, but a sale or ownership change often allows individuals to utilize tax-efficient charitable planning techniques while redefining their personal role in the community and the impact they hope to create.

Centering on Purpose

It can be daunting to explore one’s philanthropic motivations simultaneously with a business exit or succession event. Considering a few key questions can help map the level of urgency and engagement needed at each phase.

Why are you engaged in community now? Is it fun? Why is it important to be involved?

What impact do you seek? What kinds of interactions do you enjoy most – board service/volunteering, granting to nonprofits, finding new solutions to old problems, etc.?

How involved do you want your family to be in your efforts? How do you like to engage – as a leader, anonymous supporter, advisor, expert, or a combination?

"The most successful families often involve their children in charitable decisions early, helping them understand values, stewardship, and the impact money can have," says Benedict.

Indeed, according to our survey, Lower Middle Market business owners involve their family at almost double the rate of commercial business owners due to their desire to transmit business value and carry on their work.

Family Matters

Know thyself. As wealth and influence pass from one generation to the next, clarity, understanding and acceptance of family history, personalities, goals and belief systems allow families to transcend potential conflict and work together. Uniting around a common view or goal doesn’t require total compliance. “Family alignment is rarely 100%. If it is, someone is likely withholding their opinion,” says Fontaine. "We take our families through an exercise that helps recall the awe and wonder of their history and current success. It’s one of the most effective ways to begin or reignite a family’s community involvement".

All ages are welcome. Children may be encouraged to research charities, present their recommendations, evaluate results, and participate in family discussions about where resources should be directed. Besides helping to teach the value of money, these types of conversations ensure purpose is at the heart of a family’s life, optimizing impact for all involved and reinforcing positive experiences that last for generations.

"There are many ways to leave a legacy and be remembered. Philanthropy is one. The daily habits that build a life of meaning often have positive consequences beyond our lifetime," says Fontaine.

Philanthropy Planning Checklist for Business Owners

As your business grows or approaches a transition, consider the following:

Define Your Why

Be mindful of your motivations and belief systems.
Engage family members as early as possible if desired.
Create a clear impact statement that reflects your values and goals.

Evaluate Your Giving Strategy

Consider tax-efficient philanthropic planning before a major liquidity event or business sale.
Understand the asset types and vehicle choices you have currently. Enlist the right team to help examine sources and uses.
Explore vehicles such as donor-advised funds, charitable trusts, private foundations, 501c4 or LLC structures.
Make sure your wealth advisors have the expertise to guide you.

Educate Your Family

Include spouses, children, and future generations in charitable discussions.
Encourage family members to research and advocate for causes they care about.

Learn from Experts

Seek guidance from nonprofit leaders and subject-matter experts.
Focus on understanding the problem before funding solutions.
Balance accountability with trust when evaluating charitable organizations.

Measure Impact

Establish realistic goals for the change you hope to create.
Track progress through a small number of metrics. Do not over-complicate the process.
For larger impact projects, partner with nonprofits, other families, municipalities and corporations.
Reassess your approach regularly as your wealth, priorities, and community needs evolve.

Philanthropy and Impact

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