When most entrepreneurs start businesses, one of their primary goals is to make as much money as they can. Brian McHale and Morgan Fuchs want to make money, but they plan to give it all away.
The two surfing buddies started their company, Hive Lip Balm, in 2008 as a hobby and a way to give back to the community. Like Paul Newman's "Newman's Own" brand, the company plans to donate all of its profits to charity.
Their product is sold in 500 stores in 23 states, and Fuchs said they have given almost $16,000 to environmental charities such as the Nature Conservancy and the Ocean Conservancy during their four years of operation.
"You get a little desensitized working in the corporate world, and that was part of the reason why we wanted to start the business," said Fuchs, 37, of Medford, who previously did public relations at a tech company. "Business has a tremendous ability to generate revenue and we wondered if we could do the same model Newman did but do it in a different industry."
"Social entrepreneurship" is a growing trend, said Jim Freeley, a professor of management at Long Island University who teaches a class on how to start businesses that will benefit society.
A plan for successful giving
He cautioned that social entrepreneurs must be careful when creating their business models.
Giving profits to charity can help in the marketing of products, Freeley said, but it can be an impractical business model. Entrepreneurs need to have a viable business plan, independent of their altruistic mission.
McHale and Fuchs said marketing their lip balm on the "all profits to charity" feature initially helps, but they've learned that it won't generate repeat customers.
"The fact that we donate 100 percent of profits to charity, it gets our foot in the door, but what has people returning is the quality of the product," Fuchs said. "If you have a good message but a bad product, people don't come back for that."
McHale and Fuchs hit upon lip balm after first selling an organic surf wax. Surf store owners suggested they try lip balm instead to expand their market. The company's first account for Hive was with Hampton Coffee Company on the East End, and they expanded to beach stores and resort towns from there.
Fuchs is the company's only employee, and he has been on the payroll for only a year. McHale, 34, also of Medford, is still working a full-time job as an engineer and volunteers his time to the company. The two, who used their own money to start the business, said they are happy to nurture the enterprise as it grows slowly.
To create their lip balm, they experimented in Fuchs' backyard. They needed to hold costs down, but also wanted to use mostly organic ingredients, in keeping with their "green" mission.
"It took many hours sitting in front of a hot pot," McHale said. "We made a lot more trips to Michael's [craft store] than two guys in their late 20s should have."
They contract with a company in the Midwest to produce the lip balm, which comes in six flavors. It retails for about $3. Once the product was developed, "the challenge is creating a brand out of nowhere," McHale said. "We're doing things very grassroots. I'm actually impressed with what we've been able to do in four years."
Looking ahead for charity
While the pair say that getting accounts has not been difficult, they have had to consider travel costs. They started by visiting each store in person, but now try to keep overhead costs to a minimum, setting up accounts over the phone whenever possible. Most of the day-to-day operations are conducted over the phone from Fuchs' home.
"The first couple of years we definitely realized how quickly you can spend money, especially when it's coming out of your own pocket," Fuchs said.
At a glance
Name: Hive Lip Balm
Founders-owners: Brian McHale and Morgan Fuchs
Profits donated to date: $16,000