Response to the news.com.au article
News Corp published an article today about Thankyou, and if you read it, you might have questions about our 100% model and how we’ve allocated funds to staff expenses, travel and entertainment.
First up, we know Thankyou supporters are across this, but if you’re new to the brand, we’re a social enterprise. This means we operate as a business that sells a product to make money. We don’t work on a donation or fundraiser-based model for income. If you want to make a donation, we always tell people to go directly to a charity. If you want to buy a good hand wash, well, that’s where we come in!
We’re comparable to any other brand you have in your pantry or bathroom — businesses that have teams employed to make the most money possible. The only difference is we exist 100% to help end global poverty. We’d love to provide you with the facts from our end because we believe everyone deserves all the information in these kinds of situations.
Our 100% model
We stand behind our 100% model, 100%.
We commit 100% of our profit to the end of extreme poverty.
This claim is built on three pillars:
The Thankyou Charitable Trust 100% owns all of Thankyou’s entities including Thankyou Group (which is the operating business that makes, markets and sells consumer product). No individual or external shareholder has ownership or can receive any profit dividends from any entity.
100% of profit from the Thankyou Charitable Trust is sent to our impact partners to fund sustainable development that helps end global poverty.
We run a sustainable product company
Thankyou Group operates as a product company, not a donation-based charity. The fundamental purpose of Thankyou Group and every product it makes is to generate as much money as it can for the Thankyou Charitable Trust, of which 100% goes to our impact partners. After allowing for all current and potential costs involved in running and growing the business, every cent left is distributed to the Trust.
The news.com.au article focused on Thankyou Group’s ways of working. Thankyou Group has expenses today and tomorrow that go towards creating great products and competing and winning against the biggest multinationals in the world. In essence, every cent of money left over after meeting current expenses and accounting for potential future expenses, is distributed out to the Thankyou Charitable Trust, which gives 100% to our impact partners.
We’re required by law to ensure we can meet our costs as and when they fall due, so we need to cover costs for today and tomorrow to remain solvent. Once we have weighed up all expenses, market conditions, risks, and the growth of Thankyou, the Thankyou Group board is then in a position to know how much can be distributed to the Thankyou Charitable Trust.
The article referenced an average of 67% dividend (after current and future expenses have been accounted for) that was given from Thankyou Group to the Thankyou Charitable Trust over the last four years.
It’s our aim to build a strong, sustainable business that can make a significant impact on ending global poverty. Everyday, Thankyou Group goes up against the biggest brands in the world and the financial health of the business is mission critical to that.
We’ve seen a few comments posted saying that if we have less expenses then our profit distribution figure would be higher, so we wanted to answer that. We make investments with our expenses so we don’t just survive against our competitors and the categories we operate in, but thrive and grow our profits.
For start-up businesses, this generally means expenses will be higher during formative years when the business takes on new ventures, expansion and invests in innovation. Given we’re still a young business, we're balancing this tension. We need to invest so we can scale and therefore make more impact, but we also make sure we give to impact every year, because it’s why we exist.
That's how we gave $7,000 in one of the very early years (which was a good effort at the time) and in FY16, we gave $1.6 million (one of our best years as a business). This was because we invested wisely and our profits grew.
The tough reality of business is some years you win, some you lose (and learn). As a team, we’re proud that every year Thankyou Group has been profitable, even when faced with tremendous challenges from all angles. For many start-ups, they will take on debt or issue shares to acquire the necessary capital to start and grow, and then run at a loss for many years. Because we don’t have investor shareholders, that makes our position acutely difficult. Yet, Thankyou Group still generates profit and, after funding the operation and growth of the Thankyou business, pays everything else out to our impact partners through the Charitable Trust. We think that’s something to celebrate.
Why our financials are redacted
The charities regulator, the Australian Charities and Not-For-Profits Commission (ACNC) is empowered not to include information on its public register if, amongst other things, the Commissioner considers that the information is commercially sensitive and has the potential to cause detriment to the registered entity.
Accordingly, the ACNC agreed that the financials for our trading entity should remain protected to stop major competitors getting access to how we run our business operations. With information like the low levels of cash reserves, due to our commitment to giving, our margins and how we run our business it is much easier for a competitor to make strategic decisions that could hurt Thankyou’s success in the competitive market.
We literally go into battle every day. Some days we win, other days we lose - these days are scary for a business of our size because we don’t have deep pockets as a safety net.
Because of this environment, the ACNC agreed to exercise its power not to include these aspects of our statements on the register.
The article mentioned that $4.56 million was spent on employee and personnel. This is not direct salaries and wages, but also takes into account all the costs involved in having employees. The cost breakdown for the employment and personnel line includes training and education, work cover insurance, contractors, fringe benefits tax, payroll tax, long service leave and superannuation as well as salaries. When you add all of these business-required costs to the total figure, you’ll see that the average of $97,000 per head claimed is not a direct link to wages, but all the expenses associated with retaining employees.
Thankyou competes against the largest fast moving consumer goods (FMCG) brands in the world in one of the hardest retail environments: mainstream FMCG. So to tackle this and make the most money and raise the most awareness for our mission to help end global poverty, it needs the best talent (like product development specialists, quality control and supply chain managers), the same as it is in the commercial sector. We’ve aimed to keep our total employee expenses in-line with the best performing businesses in Australia.
Historically at Thankyou we paid staff inline with charitable sector standards as set out by Pro Bono Australia; however, we were finding it difficult to retain and attract good talent, and also that the benchmarking for the charitable sector was not accurately representing some of the more commercial roles that were within our organisation.
Just recently, we worked with a professional advisor to re-evaluate employee remittance and benchmark against the 25th percentile of mercer data. As a result, the salaries of some staff were increased inline with the commercial sector, which represents the industry we operate in. Approximately 50% of the team including Daniel Flynn our managing director are still paid inline with charitable sector standards as set out by Pro Bono Australia.
Travel and entertainment for Thankyou covers flights, accommodation, parking, tolls, meals and car hire.
To be an active, growing operation that works with impact partners and product suppliers in several countries, we incur travel expenses. It is important that we conduct thorough due diligence on all suppliers, manufacturers, charity partners and stakeholders which is reflected in our travel and entertainment budget.
This covers team members’ travel interstate and international travel for range review meetings with retailers and suppliers, auditing and checks on manufacturing and print factories and charity projects we donate funds to, which is part of our partnership model and due diligence to ensure the funds are going where they are allocated and the project is sustainable.
In previous years, our entertainment and travel has grown as the business has grown, with the launch into New Zealand in FY18.
Like most organisations, we have an internal travel policy in place that states if employees are required to travel, they must complete a request form with sufficient lead time so as to avoid incurring unnecessary travel and accommodation costs.
Nearly $820,000 in office expenses across two years
This may sound high, so here’s some context.
The figure claimed in the article is for two financial years and covers the rent, cost of lights, power, heating, stationery, internet, postage, printing, and maintenance costs.
In an endeavour to keep our costs down, we’ve partnered with like-minded businesses (and really generous, kind people) who have believed in the mission of Thankyou and used what they had in their hands to support us. Our landlords rent the office space out to us at two-thirds of the market rate. Our rent plus outgoings is just over $280,000 and we sublet a portion of the office to make an income of $65,000 annually.
We’re really creative with the fit-out of our office. We made our boardroom table from pallets and recycled glass at a small fraction of what a fancy boardroom table would have cost us.
A few years ago we worked with Freedom Furniture who donated $10,000 in styling and furniture for our office too. We think the work our team is doing is important and needs an office space that gives them space to do their life’s best work but we always look for resourceful ways to do it.
$31 million in revenue and $658,000 given
FMCG is a high volume, low margin industry with a broad range of costs. These costs include product development, costs of goods, warehousing, shipping and logistics, retailer trading costs, promotional support in stores as well as all other operational costs to run a business (eg staff and marketing).
In the 11 years we’ve operated, we’ve had some profit results above the industry standards and we’ve had some under. The years that were reported on were some of the toughest trading years we’ve ever had, being a new entrant in categories and expansion in a new country. Because we exist to help end global poverty, we were really disappointed we weren't able to achieve a higher net profit in FY17 and FY18.
Cash kept in the bank
Cash reserves that are kept in the bank are there to stabilise the business and pay the bills. It’s the same way we as people like to have money in the bank to weather all expected and unexpected moments in life.
The $2.65 million mentioned in the article may sound like a lot, but for context, we had $7 million in trade and other payables which needed to be paid.
Any business that does not have cash in the bank is constantly putting themselves at risk. At all times we keep a responsible amount of money in reserves, as part of good governance and legal responsibilities.
Further information about Thankyou’s structure
Thankyou is made up of four entities – the Thankyou Charitable Trust, Thankyou Group Pty Ltd, Thankyou Future Fund Pty Ltd and Thankyou New Zealand Limited. We would like to unpack how each entity operates and the transactions that happen between them.
Thankyou Charitable Trust, Thankyou Group and Thankyou Future Fund are registered charities and submit all financials annually to the ACNC. All financials are independently audited.
The Thankyou Charitable Trust
This is a "traditional" charity with two points of difference. It runs at a very low cost (approx $500 registration fee each year) and doesn’t receive public donations. Its sole source of funds are the distributions it receives from the other Thankyou entities.
To be clear, each of the Thankyou entities can only engage in activities that serve the charitable purposes pursued by the Trust. Where funds are not committed to running the business, and growing the business, they will be distributed to the Trust.
This group operates and competes in the commercial sector and exists for one purpose, a world without poverty. It operates as any other business does, with marketing, administration, operational and staff expenses. We compete against the world’s biggest multinationals and sell products through mainstream retailers (Coles, Woolworths etc). We work to run the business as efficiently as possible so profit can be maximised.
Thankyou Future Fund
One of the challenges we faced at Thankyou is scaling and growing without access to external investors. This fund was created in 2016 as an internal investment vehicle to help fund the future growth of the business. In 2016 we launched a book called Chapter One to generate profits for the Future Fund that can be used to invest in the future of Thankyou.
Thankyou New Zealand
Like Thankyou Group, this entity operates and competes in the commercial sector and exists for one purpose - a world without poverty. It operates as any other business does, with marketing, administration, operational and staff expenses.
We have a quote by Dr Martin Luther King Jnr on our office walls that shows the heart of Thankyou and why every team member comes to work every day “All labour that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.” The work we do is important because it’s for some of the most marginalised people in the world. We believe it deserves the very best, so that’s what we’ll continue to give it.
Thanks for taking the time to read this and for your support of Thankyou. To date, we’ve given over $6.2 million to fund water, sanitation, food, child and maternal health programs to over 857,000 people in need in 20 countries, including Australia.
We believe this is just the beginning.
The Thankyou Team