return on investment nelson soler mba/ms/edfp/asfp understanding our nonprofit framework importance...
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Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Return on InvestmentNelson Soler MBA/MS/EDFP/ASFP
Understanding our Nonprofit Framework
Importance of ROI
Calculating ROI
Framing the ROI Message
Module 1
Introduction About the Instructor The Framework Small Group Exercises
Nelson Soler©2010 for UWM School of Continuing Education
About the Instructor, Nelson Soler
MS Int. Business MBA – Finance BA – Economics BS – Electrical
Engineering Nonprofit Certificate Real Estate Broker Economic
Development Finance Professional
¼ of career in Corporate Banking International Mining Utility
¼ Nonprofit Sector ¼ Government
County University System
¼ Entrepreneur
Nelson Soler©2010 for UWM School of Continuing Education
Exercise
Break in groups of three and try to answer these questions:
What makes your organization unique? What are your organization three biggest
outcomes? How your organization impacts your
stakeholders?
Nelson Soler©2010 for UWM School of Continuing Education
About the Subject
Can be technical and application specific Difficult to cover in one interaction
Continued discovery and exploration is needed Requires a culture shift
Fairly new to the Nonprofit sector – about 7 years old Embraced in Europe and Canada Key organization in the US
Nelson Soler©2010 for UWM School of Continuing Education
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Module 1: Framework-Nonprofit Reality
Too Many Increased Regulation Higher Competition Funding
The Nimble Nonprofit Shift on Focus (More like a business)
Demand for Accountability and Transparency Imperative of Sustainability
Too many
Demand for funds continues to increase
Funding is shrinking
Good intentions are no longer enough
Impact
Outcomes
63% of donors want to know how their donation was used
Transparency
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Donor Base Expectations Shift
72%
Module 2
Importance of ROI as a tool
Nelson Soler©2010 for UWM School of Continuing Education
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Have you heard these phrases?
Do more with less? Why is your overhead and/or indirect cost too
high? What value will I get for making this donation? Or
How will the money be used? Why should I donate to you versus another
organization that do the same? Have you quantified social impact? What are your measurements? Or what is your
evaluation plan?
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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All these questions are directly or indirectly
referring to your Return on Investment!
Exploring the Business Definition
Return on investment (ROI) is the benefit to the investor resulting from an investment of some resource
Measure of profitability Measure of efficiency
Calculation
For profit world is very simple
Benefit from Investment over the cost
ROI = (Gains – Cost)/Cost
ROI = (Impact – Cost)/Cost ***Social Impact
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Importance of ROI for Nonprofit Programs
Key to Evaluation and Measurement Needed for
Sustained funding (public sector and some foundations)
Social impact quantification New funding (private individuals, corporations)
Important for Organizational Branding and Communication Compelling Messaging Takes the subjectivity out of our work
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Challenges for ROI measurement in the Nonprofit Sector
Nonprofit traditional culture
Capturing true costs
Actual Calculation
What other challenges you feel can potentially arise?
Other Challenges
Nelson Soler©2010 for UWM School of Continuing Education
Nonprofit world
Benefits
tangibles and intangibles Outputs
Social Impact
Costs Labor
Volunteer Labor Materials Overhead
Costs you incur weather or not you run the program
Other Costs Cost of using your own
money (cost of capital)
Measuring Social Impact source: socialvalueuk.org
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Calculating ROI
Resources
http://nonprofit.about.com/od/foundationfundinggrants/ss/Using-Sroi-To-Show-Your-Nonprofits-Impact.htm
Module 3
Linking ROI to Evaluation and Program Measurement
Nelson Soler©2010 for UWM School of Continuing Education
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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M3: ROI and EvaluationLets visit our evaluation models
Linear
Open Model
Open System Model
Nagajaran and Vanheukelen 1997
Needs
Objectives Inputs Activities Output
Actual Outcomes
Program
Open System Model
Nagajaran and Vanheukelen 1997
Needs
Objectives Inputs Activities Output
Actual Outcomes
Program
Technical Efficiency (aka Productivity)
Adequacy
Rel
evan
cyE
ffectiveness
Cost Effectiveness
Cost Benefit
Program Effectiveness
Check point
What value you notice in applying the different models?
Where does ROI fit?
Nelson Soler©2010 for UWM School of Continuing Education
Where does ROI fit?Outputs
• Quantitative• Qualitative
Outcomes
• Economic Impact• Social Impact• ROI
Nelson Soler©2010 for UWM School of Continuing Education
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Where does ROI fits?
You may be already calculating it but you are unaware you are
Concepts Social Impact Effectiveness and Efficiency Cost-Impact Analysis
Nelson Soler©2010 for UWM School of Continuing Education
Examples of Outcome: Entrepreneurial Training Program Need: Wealth Accumulation
Model: Education + Entrepreneurship leads to economic empowerment
Goal: Recruit 30 low income aspiring entrepreneurs Assessment – Financial and Business Training – 8 months Coaching Provided seed funding
Nelson Soler©2010 for UWM School of Continuing Education
Example: Ent. TrainingOutputs
Interviewed and assessed 86 of 290 applicants
Selected 30 28 individuals finished all
components Provided 1200 hours of
one on one coaching Provided $96,000 for start
up funding
Outcomes Identified the needs of
low income entrepreneurs in inner city
11 entrepreneurs established new enterprises creating 26 jobs
15 entrepreneurs grew their enterprise creating 38 jobs
Agency capacity was increased
Nelson Soler©2010 for UWM School of Continuing Education
Translate to Value Job Creation
Agency 1 FT job + 2 part-time jobs became FT Direct Impact: 45K +32K +28K = $105K Indirect Impact: 105 *1.25 Local Factor =131.5 K
Entrepreneurs New
Total Impact 297K Established
Total Impact 906K
96 K of dollars were additionally infused in the economy
Nelson Soler©2010 for UWM School of Continuing Education
ROI
Dollars Infused in the Economy (Benefit –Cost)/$437.5 $1535.5- $437.5/$437.5 = 2.5 times or 250%
For each dollar infused, we created 2.5 of local economic spending
Tax Base Increased Our local tax base was increased by 15%
Nelson Soler©2010 for UWM School of Continuing Education
Other Job Related
Job Retention or Underemployment 2 unemployed now employed and were able to
use the project experience to find a job Two subcontractors were employed and their
capacity was increased 35K & 40K
Three participants realized the world of entrepreneurship was not for them. This save the economy XXX dollars
Nelson Soler©2010 for UWM School of Continuing Education
Exercise
Output Educate 100 families
to deal with the stigma of disabilities
Outcomes ?
Nelson Soler©2010 for UWM School of Continuing Education
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Social Impact
Benefits
JOBS Created Employer attitudes towards disabilities changed
Tax Base Increased
Statue, Ordinance Change Incentive for Employer to hire individuals with disabilities
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Effectiveness and Efficiency
the degree to which something is successful in producing a desired result; success
the ability to accomplish an output with the least resources
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Cost-Benefit Analysis
Check Point
Have you applied any of these concepts? How?
Do you feel you can apply these concepts?
Nelson Soler©2010 for UWM School of Continuing Education
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Module 3- ROI and SustainabilityFundraising and Sustained Funding
Trends Need for articulating social impact Transparency Accountability SUSTAINABILITY
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Understanding your “Donors”
Traditional Feel Good Tax Saver Impact Seeker Entrepreneur
StakeholdersInvestors
Motivation Pyramid
Kay Sprinkel, Beyond Fundraising
Connected
Concerned
Capacity
ROI Message
Articulation of value1. Determine the motivation of your stakeholders
2. Develop programs with measurable outcomes
3. Translate outcomes into benefits
4. Demonstrate effectiveness using investment terms
5. Communicate results regularly
Adapted from Tom Ralser, ROI for Nonproftis, 2007
Outcomes to benefits
Societal costs avoided
Value of jobs created
Value of increased skills in the job pool
Value of adequate parental care
Value of increased productivity
Nelson Soler©2010 for UWM School of Continuing Education
Some ROI Terms
Social Impact per Dollar Invested Local Economic Impact Return per Dollar Spent
Cost Savings to Society
Nelson Soler©2010 for UWM School of Continuing Education
Exercise
Think of two to three outcomes and restate them as benefits
Nelson Soler©2010 for UWM School of Continuing Education
Examples
http://nghp.org/vision.html
University of Minnesota Extension
http://www.extension.umn.edu/youth/research/youth-programs/docs/economic-return-afterschool-programs.pdf
Nonprofit Roundtable of Washington
http://www.nonprofitroundtable.org/storage/documents/beyondcharity.pdf
Nelson Soler©2013 for UWM School of Continuing Education
Module 4
Framing the ROI Message
Nelson Soler©2010 for UWM School of Continuing Education
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Branding and CommunicationsFraming the ROI Message
Unique Proposition to our Communities Stakeholder sustained engagement New Stakeholders involvement Employee Empowerment
Messaging
Clients Stakeholders/Investors/Funders
Public v. Private Politicians and Policy Makers
Regulators Community at Large – Citizenship of your
Organization
Nelson Soler©2010 for UWM School of Continuing Education
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Exercise
Crafting a 60 second message
Message delivery
Traditional Reports Presentations White Paper
Non-Traditional Social Media E-brochures
Nelson Soler©2010 for UWM School of Continuing Education
Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Resources
Some non academic sources to generate discussion: http://www.volunteerhub.com/blog/return-on-investment-for-nonprofits/ http://philanthropynewsdigest.org/off-the-shelf/roi-for-nonprofits
Example of federal agency requirement: http://www.fgdc.gov/grants/ReportFormats/ROIReports
Academic: http://mdi.missouristate.edu/assets/mdi/
Training_ROI_Non_Profit_Sector_dissertation.pdf http://scholarworks.umass.edu/cgi/viewcontent.cgi?
article=1021&context=gradconf_hospitality
Book: ROI for Nonprofits: The New Key to Sustainability By Tom Ralser, 2007
Resources
http://www.neweconomics.org/issues/entry/social-return-on-investment
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Multicultural Entrepreneurial Institute Inc., Nelson Soler (c) 2015
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Questions
[email protected] 414-383-4633