Ron Schultz owns two tea companies. Both make money. One gives it all away to charity.
There are Two Percent Clubs and there are Five Percent Clubs, select organizations of civic-minded corporations that contribute those percentages of their pretax profits to charity. Except for the fact that he would be the only member, Ron Schultz could start a One-Hundred Percent Club.
Schultz's company, Medicine for Children Inc., sells a special blend of tea called Christmas Spice. Last year was the fledgling enterprise's first selling season, but even so, it earned a respectable 20% return on sales of roughly $100,000. And, yes, it donated all of these earnings to one carefully chosen charity, as it plans to do this year, next year, and the years after that.
Reactions vary.
"A fascinating idea," observes Lucinda Lee of Flynn & Steinberg, the prestigious California accounting firm that has offered its services to Schultz free of charge.
"Novel indeed," says Ernest Acosta, a spokesperson for the Internal Revenue Service, which may be wondering how Schultz plans to get around the tax code's 10% ceiling on corporate charitable contributions.
"A very, very lovely gesture," opines a spokesperson for Thomas J. Lipton Inc., makers of Lipton tea, which competes with Schultz in roughly the same manner that General Foods competes with a specialty bakery. "But," he adds, with just a trace of condescension, "American business certainly couldn't survive by duplicating [Schultz] on a Xerox machine."
Ron Schultz himself scarcely expects American business to leap to imitate what he calls his "altruistic corporation." Still, it was his business experience more than anything else that led him to invent a new kind of connection between making money and giving it away.
The making part, of course, came first. Ten years ago, Schultz was nearing 30, and was disenchanted with his various careers in academia, pharmaceuticals, and the Army. Visiting Seattle, he noticed a lot of spice tea on store shelves. He knew there was nothing like that back in the San Francisco Bay area, despite the growing popularity of specialty coffees and teas.
Six weeks later, with $3,500 in savings, he opened a tiny store in a Los Altos, Calif., shopping center. There, amid a variety of gourmet foods, he sold his own newly mixed product, a tea he called TN Spice, packaged in a quaint brown bag. Within a month, the aromatic cinnamon blend had caught on, and in six months Schultz sold the store, moved to a windowless warehouse, and began to market his tea. Two years later, he incorporated the burgeoning company as Delphin Corp.
Competition was not far behind: Soon stores were filled with cinnamon spice blends virtually identical to Schultz's, most of them even packaged in similar brown bags. To survive, Schultz had to take an on-the-job crash course in business. Working 16-hour days, seven days a week, sleeping in his warehouse and eating from a hot plate, he learned about tax codes and sales representatives, about shipping and accounting. Obsessively scrutinizing all expenses, he shipped his goods in secondhand cartons and kept heating and telephone bills to a carefully monitored minimum.
For most of this time, Schultz was giving money away more or less routinely -- $5,000 or $10,000 a year to worthy causes of one sort or another. "Like most donors, I gave to someone I knew or liked," he says now. "To the Academy of Sciences because I got a degree in math and physics, to the mentally retarded, that sort of thing. Charities themselves never really excited me; they seemed mostly hype and PR." Four years ago, however, Delphin's sales hit the $1-million mark, and Schultz found himself able to give away some $30,000, considerably more than ever before. The relatively hefty donation, in turn, started him thinking. Perhaps he should know a little more about the organizations to which he contributed; indeed, maybe he should learn more about charities in general. He began to scrutinize nonprofit organizations, much as he had his own business, to see how efficiently they were using their resources.
Another idea was beginning to take form in his mind as well, something that had more to do with his sense of purpose in life. How, he wondered, would an entrepreneur provide money to charity? "I knew how to be entrepreneurial when it came to making money," he reflects. "Heck, a lot of people can do that. But an even greater challenge, it seemed to me, lay in being just as entrepreneurial in giving money away."
The answer, he realized, was to put the two together. "How would an entrepreneur invent charity?" he asked himself. "Hell, he'd make a business out of it, work for his money. He'd develop a product at fair market value, form a company, give everyone a salary, and use the money to do what he wanted." Since Schultz knew tea, he would go into the tea business again. But this time it would be with a wholly separate company, designed solely to provide money to the right charity.
It was pure, it was simple, and it was so unusual that when Hugh and Marty Downey got a call a year or so ago from a California businessman named Ron Schultz, they didn't exactly take seriously his offer of free money. For 20 years, the Colorado-based husband-and-wife team had worked nights, weekends, and holidays to send volunteer medical professionals and medicines to the Sudan, in northeast Africa. Their organization, Lalmba Association, was then operating on a budget of $120,000 a year, scarcely more than the average doctor might earn in the United States, yet it was treating from 4,000 to 8,000 people a month in three Sudanese refugee camps. Schultz learned of the Downeys' work through an acquaintance of theirs, who had read of him in a newspaper article and, on a hunch, had called him up. Schultz, in turn, called the Downeys. They, not surprisingly, wondered who the fellow on the other end of the line thought he was.
