Welcome to the very first IBPE Session exploring benefit corporations. In these sessions, we’ll be talking with thought leaders and innovators in the benefit corporation movement.
Our guest, Michael Pirron, is the CEO and founder of Impact Makers a competitive social enterprise firm and one of today’s fastest growing companies. We’re going to be discussing the unique characteristics of his firm, specifically the firm’s decision to reincorporate as a benefit corporation, and then some of the cutting edge financial methods he’s adopted to ramp up this social enterprise.
Prof. Daryl Koehn, Ph.D is the Wicklander Chair of Business Ethics and creator of the Benefit Corporation Gateway, an online resource that creates and collects information about benefit corporations so entrepreneurs, academics and the public can gain a complete perspective on this new and growing business type.
Daryl Koehn: Can you tell us a little about your business?
Michael Pirron: Let me start by giving a 10-second explanation. We are the Newman’s Own of IT consulting. We’re a for-profit company, where all profits go to the charity over the life of the company. And in fact all of our common stock is held by two public charities. So if we’re ever sold, all proceeds of that sale go to charitable organizations in the communities where we do business.
DK: How did you get the idea to found a company like this?
I said we’re the Newman’s Own of IT consulting for a reason. I went to the University of Virginia, as an undergraduate to get a business degree, but also a minor in sociology. [Laughs] Which is an interesting combination.
I was fascinated when we were assigned a Harvard business case on Newman’s Own. I found that really interesting, a really interesting combination of sociology and business together. And after I graduated from UVA’s business school and went to work with Andersen Consulting, which is now Accenture, and that case really stuck with me.
And I was very interested in that whole concept and didn’t realize there was a term for it called social enterprise. I continued to think about it and at the same time had this really interesting international career with Andersen Consulting. I was based in southern France and I was sent on projects all over Europe, the Middle East, India, Africa and found myself in South Africa during Mandela’s election, and various other places.
I realized I liked the work, I was good at the work, but the clients I worked with weren’t really values-aligned. And I also looked at the partners that I was working for, wonderful people, but I just didn’t want to be them. The culture of the company at Accenture, as a great of a company as it is, it was really a culture of money and alcohol. [Laughs] And that just wasn’t where I wanted to be long-term.
Newman’s Own is a business to consumer B to C and it’s a product. What I know is services and B to B. But what if you can build a Newman’s Own on an IT consulting framework? Because that’s what I knew. When I went to Northwestern’s Kellogg School of Management to get my MBA I actually wrote a paper on that concept of creating a Newman’s Own-modeled consulting firm. That’s where it continued to resonate with me over the years after I wrote that paper.
DK: Let me just make sure that our listeners and our readers understand: you are a for-profit company. You do not run a not-for-profit company. You’re a competitive company, but you choose to give your profits to select nonprofit partners. Is that right?
PIRRON: Yes, that’s right. We are…So, [Laughs] we, absolutely, we’re a for-profit company governed by a volunteer board of directors. The company gives and our board of directors chooses charitable partners. They have to be secular, apolitical, 501(c)(3), local, and helping people help themselves. Within that framework. The board also sets executive compensation, talks, approves major capital expenditures, et cetera, and represents community interests, right? So that’s kind of what the board does. In every way we’re a for-profit company doing IT and management consulting with about 20% state government and 65% healthcare industry, and then other for-profit entities. We do work not unlike the Accentures, the Deloittes, the PWCs. We’re competing with them.
DK: What are your revenues today?
PIRRON: We ended 2015 at $17.8 million and we just had our first $2 million month in February.
DK: Oh, congratulations! That’s fabulous.
PIRRON: Yes. So, it was me and a laptop in 2006 when I started it, and we’ve grown organically every year and have been in Inc. 500 four years, Inc. 500/5000 four years in a row. We’ll probably make it a fifth year.
DK: What’s your annualized revenue growth? If you look back at that period, roughly what have you been growing per year?
PIRRON: Well, we’ve had wild growth and then kind of a make-up year, and then another wild growth year. But I think it depends on from what, you know…I would say on average, 30 to 40% a year growth. We have a 53% growth from 2014 to 2015. We are expecting to be around, anywhere between 22 and 24 million this year, in 2016.
DK: That’s really great. I think that gives us some sense of your company’s success. It’s been really pretty explosive. For a social enterprise to have that kind of success is amazing.
What you did you specify in your charter as the benefit you were going to maximize, and why did you decide to incorporate in Virginia?
Note: For those new to the concept, a benefit corporation is a brand-new legal form available in about 35 of the 50 states that allows firms to be for-profit, competitive enterprises but not to be legally responsible for maximizing profits. They need to be focused on maximizing some specific or general public benefit they state in their charter.
PIRRON: The law says that benefit corporations have to maximize profit and must also take into consideration community, employees, environment, et cetera, when making operational or liquidity event decisions. So there’s still the requirement to maximize profit, but maximizing profit isn't the only requirement. At least in the Virginia legislation you can choose between pursuing a general or a specific benefit. We chose a general benefit of maximizing community charitable impact in our charter. That’s how we focused on our impact. We chose to be a benefit corporation.
DK: Were you involved in the B Corp movement?
Actually it goes all the way back to our founding. We were founded in 2006. The certified B Corp movement started started in 2007. We were one of the founding B Corps, one of the 82 or 83 founding B Corps the very first year. We’ve been a B Corp since then. We've talked about being in the Inc 500/5000. By pure financial metrics we’ve been successful. By pure capitalist metrics we’ve been successful. I’m also very proud to say that for the last three years in a row we’ve been Best for the World. So we’re not just a certified B Corp but we’re among the highest ranking and most impactful B Corps. And that was over 1600. And we’ve been three years in a row Best for the World.
From the very beginning we’ve been certified as a B Corp and been a part of the B Corp movement. I’m actually, personally, a B Corp Champion, now it’s called an Ambassador, where we assist in regional expansion the B Corp movement. I personally put forward the benefit corporation legislation in Virginia working with my local delegate. It’s the first political thing I’ve ever really done. Virginia was the third state tied with Vermont to pass the benefit corporation legislation.
So, when legislation was passed, we decided to become a benefit corporation. We had been incorporated originally. That was when we first started, and we’ve come a long way since then. We were originally founded as a non-stock entity with no owners, with the idea that if we’re ever sold, the proceeds would go to charitable organizations, but we didn’t really solidify what that looked like. And so we went through a whole reorganization, you know, to eat our own dog food, and put forward the benefit corporation law. We decided to become a benefit corporation and then solidify what our community impact looks like in our legacy.
DK: What are your thoughts on the future of the B Corp and benefit corporation movement?
PIRRON: Is it the future? I don’t know. I think it certainly is a good part of the future, and I think we’ll see more and more of this going mainstream. Do we have a Trifecta happening? We have conscientious consumers who are buying sustainable brands and more and more voting with their dollars when they products and services. You have especially millennials coming out of universities and MBA programs, more and more joining the impact or other sustainable business groups and wanting to do well and do good at the same time. So, the labor market’s demanding it. The consumer market’s demanding sustainability. And now you have the rise of impact investing, where investors are saying, “If you want my capital, you have to be a good company." And, not just be not a bad company, like SRI, but impact investing, where you need to show me how you’re a good company. And I think that it’s a really perfect storm that’s brewing. Whether it’s infecting corporate America through CSR requirements or whether there’ll be a rise in companies moving to becoming benefit corporations and B Corporations, I think the verdict’s out. But it is certainly a part of the future.
DK: Yes, that’s what we think too. That’s why we have this investment that my institute has made, having a benefit corporation gateway, we really want to be a fair broker: the good, the bad, and the ugly about the benefit corporation movement. So, you know, we’re supportive. We’re cautiously optimistic, but we think that the movement really has to innovate and it needs to be held accountable in its innovations, and that requires having a lot of information out there.
PIRRON: Can I make one other statement about Impact Makers?
DK: Oh, yes. Sure! Please.
PIRRON: I’m really proud of what we’ve done in cash and pro bono to date. From our inception to date, we’ve done just shy of $1.4 million in cumulative impact. And if you add that to our valuation, that will be a minimum of, let’s say $17 million. We’re already at $18-19 million if you add that up together of both realized and unrealized community impact. With a goal of by 2024 making over $100 million cumulative impact.