There are major benefits to expressing the monetary value of your social enterprise activities. This is especially true when communicating with an audience focused on the financial bottom line of an investment. Increased credibility for your enterprise and improved communication with your investors – not to mention the potential to attract new investors – are just a few of these benefits. However, there are also some roadblocks that can happen along the way.
In part three of our series, we’re investigating these roadblocks, and helping you determine whether pursuing a monetary analysis is right for your enterprise.
What are the Benefits of Monetizing Value?
Assistance from investors is often financial, therefore expressing the result of their investment in dollar amounts provides a direct connection between their investment and the value your work brings. When you do this, you speak their language and help them really understand the significance of your services.
Determining the dollar value of your services can also help with management decisions and other internal operations because it gives you a new perspective on your enterprise and the value that it creates.
Financial Proxies
Sometimes it’s not possible to determine the exact monetary value for a specific activity. If this is the case, financial proxies are an excellent tool in helping you estimate these values.
Financial proxies are pre-calculated estimates of financial value that can be used for accurately estimating Social Return on Investment (SROI), a method for determining financial value. These financial proxies are always evolving, and can be accessed through various databases such as the SROI Edmonton Financial Proxies Database.
Review the resources at the bottom of the page to learn more about financial proxies and SROI.
What to Consider When Deciding to Monetize Value
It can be a difficult to pursue a monetary analysis of your social enterprise, especially if what you’re attempting to measure is qualitative in nature. Before you get started, make sure you consider the following:
Do you have the resources and information to support the analysis?
When completing a monetary review of your value services, it’s recommended to seek outside assistance to ensure your data remains credible.
The organizational information needed to support the analysis may also be challenging to develop and/or access. Ensure you have solid accounting practices and monitoring systems in place that collect data related to your social and environmental outcomes.
What will you gain by trying to monetize your value?
Will your stakeholders be able to interpret the information? Would this information be more credible if you were to demonstrate your value in other ways?
To what extent can your social benefits be associated with public (tax-payer) cost savings?
If there are limited public cost savings, the monetized social value may not be that impressive with no reflection on the actual social value.
For instance, if target employees in an employment development enterprise no longer receive social assistance as a result of being employed, they will have a much higher social dollar value than target employees that maintain disability payments while being employed.
Are you likely to have significant economic impact within a geographic community?
If not, estimating the local economic impact may not be a convincing way to express your value.
Remember! Monetization in order to demonstrate value is most effective when combined with methods of describing and quantifying value. A compelling story, backed-up by need-to-know facts is a winning combination for creating a persuasive argument when demonstrating the value of your enterprise.
Here are a few tools to refer to when pursuing a monetary analysis:
The Social Costs Worksheet
This Demonstrating Value worksheet is designed to help you identify and measure social costs, the additional costs incurred above and beyond normal business expenses due to the social, environmental or cultural mandate of the enterprise.
Financial Intelligence Guide for Social Enterprises
This Demonstrating Value resource introduces financial management fundamentals that will help you successfully measure your financial performance and grow your social enterprise.
Social Return on Investment (SROI) Ratios
SROI is a framework that analyzes and places a dollar value on the activities of a social enterprise in order to develop a value that represents the benefits of the social enterprise. This method provides a consistent approach for various social enterprises to understand social value.
The following resources are helpful for learning more about SROI:
Expanded Value Added Statement (EVAS)
The Expanded Value Added Statement is another way of incorporating an estimate of “social value” into traditional accounting. The EVAS measures the wealth of an organization by combining financial and social data to provide a complete picture of the social and economic impact.
For more information about this method, consult the following resource:
- Quarter, Jack, Laurie Mook & Betty Jane Richmond. What Counts: Social accounting for Nonprofits and Cooperatives. Upper Saddle River, New Jersey: Prentice Hall, 2003.
Canadian Resources:
- Canada SROI Network tools and resources
- Database of Financial Proxies
- The Roberts Enterprise Development Fund (REDF) SROI case studies. This resource has similarities to the Demonstrating Value Social Costs Workbook. To access this resource, you must have an account with REDF.