Return on Investment Nelson Soler MBAMSEDFPASFP Understanding our

Return on Investment Nelson Soler MBA/MS/EDFP/ASFP Understanding our Nonprofit Framework Importance of ROI Calculating ROI Framing the ROI Message Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 1

Module 1 n Introduction q q q About the Instructor The Framework Small Group

About the Instructor, Nelson Soler n n MS Int. Business MBA – Finance BA – Economics BS – Electrical Engineering q q q Nonprofit Certificate Real Estate Broker Economic Development Finance Professional n ¼ of career in Corporate q q q n n ¼ Nonprofit Sector ¼ Government q q n Banking International Mining Utility County University System ¼ Entrepreneur Nelson Soler© 2010 for UWM School of Continuing Education

Exercise n Break in groups of three and try to answer these questions: n What makes your organization unique? What are your organization three biggest outcomes? How your organization impacts your stakeholders? n n Nelson Soler© 2010 for UWM School of Continuing Education

About the Subject n n Can be technical and application specific Difficult to cover in one interaction q q n Continued discovery and exploration is needed Requires a culture shift Fairly new to the Nonprofit sector – about 7 years old q q Embraced in Europe and Canada Key organization in the US Nelson Soler© 2010 for UWM School of Continuing Education

Module 1: Framework. Nonprofit Reality n n n Too Many Increased Regulation Higher Competition Funding q n The Nimble Nonprofit Shift on Focus (More like a business) q q Demand for Accountability and Transparency Imperative of Sustainability Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 6

Too many

Funding is shrinking

Good intentions are no longer enough I t c a p m 63% of donors want to know how their donation was used

Transparency

Donor Base Expectations Shift 72% Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015

Module 2 Importance of ROI as a tool Nelson Soler© 2010 for UWM School

n n n 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 14

All these questions are directly or indirectly referring to your Return on Investment!

Exploring the Business Definition n Return on investment (ROI) is the benefit to the investor resulting from an investment of some resource Measure of profitability Measure of efficiency

Calculation n For profit world is very simple Benefit from Investment over the cost n ROI = (Gains – Cost)/Cost n ROI = (Impact – Cost)/Cost ***Social Impact

Importance of ROI for Nonprofit Programs n n Key to Evaluation and Measurement Needed for q q q n Sustained funding (public sector and some foundations) Social impact quantification New funding (private individuals, corporations) Important for Organizational Branding and Communication q q Compelling Messaging Takes the subjectivity out of our work Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 18

Challenges for ROI measurement in the Nonprofit Sector n Nonprofit traditional culture n Capturing true costs n Actual Calculation What other challenges you feel can potentially arise? Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 19

Other Challenges Nelson Soler© 2010 for UWM School of Continuing Education

Nonprofit world Benefits Costs n n tangibles and intangibles n Outputs q n n n Labor Materials Overhead q Social Impact n Volunteer Labor Costs you incur weather or not you run the program Other Costs q Cost of using your own money (cost of capital)

Measuring Social Impact source: socialvalueuk. org

Calculating ROI n Resources n http: //nonprofit. about. com/od/foundationfundi nggrants/ss/Using-Sroi-To-Show-Your. Nonprofits-Impact. htm Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 23

Module 3 n Linking ROI to Evaluation and Program Measurement Nelson Soler© 2010 for

M 3: ROI and Evaluation Lets visit our evaluation models n Linear n Open

Open System Model Actual Outcomes Needs Program Objectives Inputs Activities Nagajaran and Vanheukelen 1997 Output

Open System Model Program Effectiveness Cost Benefit Needs Actual Outcomes Relevancy Effectiveness cy a u eq Ad Program Objectives Inputs Activities Technical Efficiency (aka Productivity) Cost Effectiveness Nagajaran and Vanheukelen 1997 Output

Check point n What value you notice in applying the different models? n Where

Where does ROI fit? Outcomes Outputs • Quantitative • Qualitative Nelson Soler© 2010 for

Where does ROI fits? n You may be already calculating it but you are unaware you are n Concepts q q q Social Impact Effectiveness and Efficiency Cost-Impact Analysis Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 30

Nelson Soler© 2010 for UWM School of Continuing Education

Examples of Outcome: n n n Entrepreneurial Training Program Need: Wealth Accumulation Model: Education + Entrepreneurship leads to economic empowerment Goal: Recruit 30 low income aspiring entrepreneurs q q Assessment – Financial and Business Training – 8 months Coaching Provided seed funding Nelson Soler© 2010 for UWM School of Continuing Education

Example: Ent. Training Outcomes Outputs n n n 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 n n 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 n Job Creation q Agency 1 FT job + 2 part-time jobs became FT n n q Direct Impact: 45 K +32 K +28 K = $105 K Indirect Impact: 105 *1. 25 Local Factor =131. 5 K Entrepreneurs n New q n 297 K Established q q Total Impact 906 K 96 K of dollars were additionally infused in the economy Nelson Soler© 2010 for UWM School of Continuing Education

ROI n Dollars Infused in the Economy q q q n (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 q Our local tax base was increased by 15% Nelson Soler© 2010 for UWM School of Continuing Education

Other Job Related n Job Retention or Underemployment q n Two subcontractors were employed and their capacity was increased q n 2 unemployed now employed and were able to use the project experience to find a job 35 K & 40 K 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 n n Output Educate 100 families to deal with the stigma of disabilities

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 38

Effectiveness and Efficiency n the degree to which something is successful in producing a desired result; success n the ability to accomplish an output with the least resources Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 39

Cost-Benefit Analysis Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 40

Check Point n Have you applied any of these concepts? How? n Do you

Module 3 - ROI and Sustainability Fundraising and Sustained Funding n n n Trends Need for articulating social impact Transparency Accountability SUSTAINABILITY Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 42

Understanding your “Donors” n n n Traditional Feel Good Tax Saver Impact Seeker Entrepreneur

Motivation Pyramid Connected Concerned Capacity Kay Sprinkel, Beyond Fundraising

ROI Message n Articulation of value 1. 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 n Social Impact per Dollar Invested Local Economic Impact Return per

Exercise n Think of two to three outcomes and restate them as benefits Nelson

Examples http: //nghp. org/vision. html University of Minnesota Extension http: //www. extension. umn. edu/youth/research/y outh-programs/docs/economic-returnafterschool-programs. pdf Nonprofit Roundtable of Washington http: //www. nonprofitroundtable. org/storage/doc uments/beyondcharity. pdf Nelson Soler© 2013 for UWM School of Continuing Education

Module 4 n Framing the ROI Message Nelson Soler© 2010 for UWM School of

Branding and Communications Framing the ROI Message n n Unique Proposition to our Communities Stakeholder sustained engagement New Stakeholders involvement Employee Empowerment Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 51

Messaging n n Clients Stakeholders/Investors/Funders q q n n Public v. Private Politicians and Policy Makers Regulators Community at Large – Citizenship of your Organization Nelson Soler© 2010 for UWM School of Continuing Education

Exercise n Crafting a 60 second message Multicultural Entrepreneurial Institute Inc. , Nelson Soler

Message delivery n Traditional q q q n Reports Presentations White Paper Non-Traditional q

Resources Some non academic sources to generate discussion: n http: //www. volunteerhub. com/blog/return-on-investment-for-nonprofits/ n http: //philanthropynewsdigest. org/off-the-shelf/roi-for-nonprofits Example of federal agency requirement: n http: //www. fgdc. gov/grants/Report. Formats/ROIReports Academic: n http: //mdi. missouristate. edu/assets/mdi/Training_ROI_Non_Profit_Secto r_dissertation. pdf n http: //scholarworks. umass. edu/cgi/viewcontent. cgi? article=1021&contex t=gradconf_hospitality Book: n ROI for Nonprofits: The New Key to Sustainability n By Tom Ralser, 2007 Multicultural Entrepreneurial Institute Inc. , Nelson Soler (c) 2015 55