Does Your Small-Business Client Have Inventory to Unload?

Product philanthropy is a better option than liquidation — or a landfill.

By Gary C. Smith

Inventory management is a headache for many small businesses. Order too little and you disappoint customers. Order too much and you have a warehouse full of unneeded merchandise.

As a financial advisor, you may be hearing these woes from clients who are faced with overflowing warehouses or shelves and wondering what to do. Discount it? Sell it to a consolidator? Put it in a landfill? If you’re advising a client in that quandary, tell them about product philanthropy, also known as in-kind donation.

Product philanthropy isn’t just an inventory solution for large companies. Small firms benefit from it as well. Because your clients’ non-value-added product or inventory has value to somebody — whether it’s one box or several truckloads.

Your client could do the legwork to identify eligible nonprofits, but a gifts-in-kind organization will find homes for unwanted merchandise with qualified 501(c)(3) organizations including schools, churches, civic organizations and retirement homes.

ZIPIT of Peabody, Massachusetts, is a small company that sells colorful and clever bags, backpacks and pencil boxes worldwide. It made its first gifts-in-kind donation to NAEIR, the National Association for the Exchange of Industrial Resources.

NAEIR, in turn, will make those donated items available to civic organizations, churches, schools and other nonprofits without charge, helping them stretch their budgets and serve people of all ages.

In-kind advantages

These are the benefits of working with a gifts-in-kind donation organization like NAEIR:

  • Accountability. NAEIR keeps detailed records of merchandise donations and redistribution and a tracking report is available upon request.
  • Brand protection. Business owners don’t have to worry about brand devaluation or damage to suggested retail price. NAEIR’s proprietary allocation system ensures that products are distributed thinly across a closed market and only their members have access to the donated products.
  • Ease of donation. As soon as NAEIR approves a donation, (typically within 24 hours or less) the business owner can clear out excess inventory immediately and ship it to its 10-acre warehouse in Galesburg, Illinois.
  • Flexibility. A good gifts-in-kind organization will accept all sorts of merchandise from one small box to several truckloads. Upon approval, NAEIR accepts underperforming SKUs, discontinued models or colors, seconds, buybacks, returns — virtually anything it think its members can use.

Spread the word to nonprofit clients, too

NAEIR gives away $100 million a year to nonprofits, enabling them to stretch their budgets in an era of soaring inflation. Since its founding, NAEIR has received donations from more than 8,000 U.S. corporations and distributed more than $3 billion in products to nonprofits and schools. Members are never charged for the product and only pay a nominal handling charge. (So, if you have a client who runs a 501(c)(3), clue them in to product philanthropy as well!)

Additional Reading: Want HNW Clients? Go Beyond Garden-Variety Charitable Planning

In addition, companies and their employees benefit from the knowledge that they are helping someone somewhere. And it’s great for their corporate social responsibility (CSR) programs, too.

As NAEIR is a nonprofit, any donations made are tax deductible to some extent. If your client’s business is a registered C Corp, that donation may be quite generous. To encourage American businesses to help their communities, IRS regulations allow Regular C Corporations to take an above-cost federal income tax deduction for in-kind donations.

And even if your clients don’t qualify for the enhanced tax deduction — and smaller companies often do not — they can still deduct the items’ straight cost on their tax returns.

In short, NAIER and other in-kind organizations can help your clients eliminate excess inventory, clear precious warehouse space, avoid hassles with liquidators, reduce storage costs and focus on more profitable products.

Gary C. Smith is President and CEO of NAEIR, National Association for the Exchange of Industrial Resources, the largest gifts-in-kind organization in the U.S. Gary can be reached at 800-562-0955 or

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