How can you monetise your impact?

Many ventures find it helpful to express their outcomes/impact in monetary terms, and put a dollar figure against their impact. This can be a very powerful way to persuade social investors of your impact. 

This kind of analysis is sometimes referred to as ‘Social Return on Investment’ (SROI). It’s a way of converting social impact into monetary terms to show that the benefit to society from your project exceeds the cost of implementation, and by how much. 

Could you provide a similar kind of working to be able to express your outcomes in monetary terms? 

The kind of projects that are suitable for talking about ‘SROI’ and direct monetary comparisons typically involve measurable costs to the taxpayer (e.g. prisoner re-offending, health costs, carer costs) and/or impacts on livelihood (loss of income). 

However not all projects fall into this category. Many projects cannot and should not put a monetary value on their impact. An education project that is around improving a young person’s creativity or leadership skills, for example, has an impact that is not easily reduced to items as simply as improvement in school grades or improvement in lifetime earnings potentials, even if both of these are positive consequences of that intervention. 

As a social innovator, you will need to use your own judgement as to whether your project falls into the ‘monetisable’ category or not, or whether the monetary argument can be used to support your case without becoming the main case or only argument. Our purpose here is simply to make you aware that you have both options, and that SROI calculations can be particularly compelling if you are seeking to raise investment. 

Case Study

Let’s take the example of the SOS Project in the UK, which uses peer mentors to support people who have been to prison, thereby reducing rates of re-offending. 2 In the UK, it costs £70,000 a year to keep someone in prison. The rate of re-offending is 70% – in other words, 70% of people who are released from prison will re-offend within 3 years, and once again be back in jail. The SOS Project is able to lower the rate of prisoner re-offending from 70% down to 20%; it is one of the most effective interventions of its kind in the world. 

For every 100 former offenders who receive peer mentorship and support from SOS, 20 will no longer re-offend, compared with a national average of 70. SOS can therefore credibly claim to have prevented 50 individuals from going back to prison, at an annual cost to the taxpayer of £3million per year (50 x £60,000 per year = £3 million). Over the next decade, the impact on society would be £30 million. 

If the cost of supporting 100 clients is £500,000 per year for SOS, and they prevent 50 clients per year from re-offending, then SOS can claim that the leveraged impact of investing £500,000 in them is £30million over the course of the decade, a 60:1 level of impact. 

That’s an impressive statistic to be able to offer to potential investors. 

Of course, this monetary value is a very crude approximation of the true impact of this program. It doesn’t measure the improvement in the individuals’ lives, the families that are rebuilt, the crimes that are prevented, the improved safety of society and many other impacts that are either not measurable or excluded from this simple calculation. It also has a lot of assumptions built into it – the expected prison sentence, the time between being released from prison and being caught for reoffending, etc. But it is a start, and a helpful first approximation. 

Exercise 1

Go through each of the outcomes that you listed above. Can you convert this outcome into a monetary figure, even in a very approximate way? 

Remember how SOS did this calculation. They worked out the cost of keeping someone in prison for one year, and then calculated how many people they kept out of prison annually. They could therefore give a reasonable estimate of the immediate saving that they had provided to society and to the taxpayer. 

Can you perform a similar calculation for your outcomes? As explained above, not every venture can or should do so. Nor will this figure will be a complete summary of your impact. It’s simply one more way of demonstrating clear social return on investment (SROI) to investors. 

Other ventures might attempt to calculate their SROI as follows: 

Estimating average improvement in income or lifetime earnings as a result of your intervention. Then multiplying this figure by the number of people that you serve. 

Estimate a cost saving to society from the intervention (e.g. it costs £70,000 to keep one person in prison for a year, or it costs £20,000 per person in medical costs for diabetes sufferers, so every X number of people whom we can help prevent diabetes results in X x £20,000 in medical savings etc.).

Exercise 2

If you are able to calculate a monetary value for each of your outputs, take the ratio of each monetary value and compare it to your input cost. Obviously, to do this you need to know the details of your input costs. We will go into this in more detail in later modules. After you have completed those exercises, come back and calculate this. This gives an indication of your cost effectiveness, or Social Return on Investment. 

Suppose for example SOS needs £500,000 to create a £3,000,000 annual saving to society. This is a cost-effectiveness ratio or SROI of 600%. 

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