How to Prove Your Nonprofit's Impact With SROI
All nonprofits are data collectors. Successful organizations know how to turn that information into messages and images that win over supporters. One method they use is SROI.
What Is SROI?
SROI is the acronym for Social Return on Investment, a relatively new and interesting tool for communicating the value of your nonprofit’s impact on the community.
According to The New Economics Foundation, SROI “captures social value by translating outcomes into financial values.”
SROI has been most frequently used in Europe where it comes from the financial sector. ROI (Return on Investment), a performance measure used by investors, calculates “the rate of revenues received for every dollar invested in an item or activity.”
The SROI is similar to ROI but shows the double bottom line: the financial impact AND the social impact of your nonprofit’s work.
It’s that last bit—the social value—that’s most important. SROI helps you determine the cost of what would happen if your nonprofit did not exist.
How SROI Works
You use the following general formula to calculate SROI.
SROI = Tangible + Intangible Value to the Community
Total Resource Investment
How much does the problem you address cost society in financial terms? Using research results from the peer-reviewed literature, define values are defined for intangible and tangible costs avoided or benefits gained from your nonprofit’s work.
For example, researchers have determined the average cost of a single case of child abuse or the benefits obtained from one person leaving homelessness. You can use those figures to show costs avoided if your nonprofit prevents child abuse or helps one person regain permanent housing.
Then you place those values against the value of your nonprofit’s investment and outcomes. How much does it cost to run your programs? What outputs (number of people served) and outcomes (how their lives changed) do you capture?
You enter all of that data into a spreadsheet. Then using the calculation above, you do the math. You should have a group of knowledgeable professionals review your SROI to catch faulty logic or assumptions.
Once verified, just proceed to communicate your SROI to current and potential donors, grant makers, and other stakeholders.
Turning SROI into Talking Points
As esoteric as calculating the SROI seems, it's pretty easy to translate into ways to communicate your nonprofit’s value to grant makers and other supporters.
For instance, you can translate your SROI into messages like these.
- Every $1 invested in My Generic Nonprofit saves [insert SROI] in community resources.
- Program X is more sustainable/better/has a greater impact than other programs because of [insert SROI].
- If My Generic Nonprofit’s work prevents the loss of just one teenager to texting and driving, it saves our community [insert SROI] in health care and lost productivity [and other areas where social costs are avoided or benefits gained]. It also saves the life of one precious child [insert picture of precious child.]
Use the SROI as part of your persuasive, logical argument for funding. You can use images, graphics, or infographics to make your funding appeals dramatic. Use this messaging in reports, case statements, direct mail campaigns, media campaigns, and social media.
Here's how one nonprofit used SROI.
The Mentoring Partnership of Minnesota has been using SROI for years to build its case for support. For instance, here is what it said in one report:
“Social Return on Investment (SROI) studies conducted by the Wilder Research and the University of Minnesota found that the Mentoring Partnership has a $2.72 SROI for every dollar spent on programs, and comprehensive Youth Intervention Programs have a $4.89 SROI for every dollar spent.” - Mentoring Partnership of Minnesota
The organization has also translated that data into effective infographics over the years. They are used very effectively for grant makers and even, as with the one reproduced at the top of this page, for more general public use.
How to Improve Your Credibility with SROI
Why You Should Care about the SROI
In a world where the grant seeking competition has never been greater, calculating your SROI can give you a competitive edge.
How? It illustrates the four facets of your nonprofit that are important to any donor or grant maker.
- Your credibility – your nonprofit knows how to communicate impact
- Your capacity – to invest resources in calculating the SROI
- Your evidence – the SROI proves that you collect and manage data know how to interpret that information to sustain your work
- Your sustainability – the SROI is a phenomenal communication tool for fundraising (especially with donors or grant makers in the financial sector), as illustrated in the example from Minnesota
How will you use SROI to raise more funds for your nonprofit?