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This model measures return on investment from three distinct perspectives. First, it examines the financial
value created (or cash generated) by the social purpose enterprise. This model also examines social
savings resulting from the increased tax revenues and the reduction in use of public assistance programs by
target employees. These savings are compared to the total investment in the social purpose enterprise to
determine the return on investment.
A completed SROI Excel Model Spreadsheet for Enterprise ABC is available. This shows you an example
of how the spreadsheet can be used.
Further Information
Given the small number of staff members here at REDF, we request that before you contact us
directly with questions that you first consult the following SROI publications on our web site at:
http://www.redf.org/pub_sroi.htm
Ø To understand how and why SROI is calculated the way it is, please review our SROI
Methodology Paper at:
http://www.redf.org/pub_sroi.htm#methodology
Ø To get a brief conceptual understanding of SROI, please review the Overview of SROI at:
http://www.redf.org/download/sroi/red.overview.pdf
Ø To learn how to interpret SROI results, please consult the Guide to SROI at:
http://www.redf.org/download/sroi/red.guide.pdf
If upon review of these sections you still have questions, please feel free submit an information request form at:
http://www.redf.org/form.htm, or email us at info@redf.org.
Ø Gray shading indicates cells where it is OPTIONAL to enter information. You will be able to calculate
SROI results without these numbers. However, you will not be able to calculate some of the
supplementary information without them.
Ø Blue Text shows cells in which you have input data.
Ø Black Text signifies cells where calculations are performed. You do not need to do anything with these
cells. However, you can look at the formulas within them to better understand how SROI metrics are
calculated.
Ø Purple Text denotes cells that include information pulled from other parts of the model. You do not need
to do anything with these cells. However, you can look at the formulas to better understand where the
data is coming from.
Ø Red Text indicates an error. Read the specific message for details.
♦ Allworksheets are protected – this means that you can only input data in designated areas. You cannot
accidentally change a formula in the spreadsheet
Ø However, if you wish to adjust the formulas you can unprotect each sheet (Tools à Protect Document à
Unprotect Sheet). No password is required. Changed formulas will not yield the intended SROI results.
Ø If you need to do additional calculations, add new sheets to the model. If you change existing sheets
you may accidentally compromise the integrity of the model.
♦ Further instructions on how to input specific types of information is included on each input page. If this
information is not sufficient, review the SROI Methodology Paper for additional detail.
Guidelines:
The- data input on this page provides the backbone of the model. The information will be used to determine discount rates and terminal periods.
The- glossary of the SROI Methodology Paper (found in the appendix) gives more precise definitions of the financial, economic and industry data.
Financial,
- economic and industry data from Enterprise ABC is included for your information. Consider the following as you enter your data:
- The financial data for Enterprise ABC is from 1999. This data provides a baseline but more current information will yield better results.
- The industry data reflects the restaurant/food service industry. Your data should reflect your specific industry.
It is
- critical that each of the inputs described on this page are input into the model as accurately as possible.
However,
- it is not necessary that you have a detailed understanding of these numbers -- if you can obtain the correct numbers, the model will do the rest of the work.
All information in shaded blue boxes must be completed in order to calculate SROI metrics!!
Social Purpose Enterprise Background
Name of Business:
Name of Parent Organization:
Economic Data
Tax Rate: 15% - Use the tax rate most relevant to the population you employ.
Wage Growth Rate : 1.50% - Consider economic projections for wage growth.
Guidelines:
- Information from the "Total Historical Investment" row will be used to calculate the "Investment to Date" later in the model.
- The "Parent Agency" line accounts for all funding provided by the agency itself (i.e., from the agency's reserves).
- The "Historical Funder" lines represent external sources of funding.
- If you have more than 2 sources of external funding, click on "Add a Historical Funder" for additional rows.
- You can also consolidate funders in a single row if you have information in that form.
- Try to project back as far as possible -- ideally this should reflect ALL investment in the enterprise from its start.
- If you do not include any investment you will receive an error message and you will be unable to calculate SROI metrics.
- The "Investment in the Enterprise" should reflect money used for the enterprise -- not grants used in other ways for the parent agency
Guidelines
- Notice the unique format of this income statement -- expenses and revenues are separated depending on whether they are related to the business or to the social mission. REDF calls this True Cost Accounting Analysis. See Chapter 2 of the SROI
Methodology Paper for further information.
- The historical data (in the shaded gray area) should be based on actual numbers. Although it will provide a baseline for your future projections, it is not required for the calculation of SROI metrics.
- See Chapter 3, Figure 3-3 of the SROI Methodology Paper for more information on making projections.
- Net Income before S&S, as well as social expenses, will be used in calculating SROI values later in the model.
- The terminal value should represent the "steady state" of the business. Assuming the business continues indefinitely, the business should perform at that level.
You must enter data in all blue shaded cells -- even if the value is zero!
Historical Performance
(Optional) Projected Financial Performance (Required) Terminal
-1 0 1P 2P 3P 4P 5P 6P 7P 8P 9P 10P Period
Sales
Cost of Goods Sold
Business Related
Gross Profit 0 0 0 0 0 0 0 0 0 0 0 0 0
Gross Margin #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Operating Expenses
Depreciation
Net Income Before Subsidies and
Social Operating Expenses (S&S) 0 0 0 0 0 0 0 0 0 0 0 0 0
Subsidies/ Grants
Parent Agency 0 0
Social Mission
Historical Funder A 0 0
Related
Historical Funder B 0 0
New Funder
Total Subsidies and Grants 0 0 0 0 0 0 0 0 0 0 0 0 0
Social Expenses
Guidelines
- The "Projected # of Target Employees" should include the total number of target employees -- regardless of whether they are full time or part time.
- The "Change in Annual Income" should reflect the average difference between each target employee's income at the time of hire, to his or her income one year later.
- When calculating "Criminal Convictions Savings", consider the following:
- The cost of conviction is the weighted average cost of carrying out the sentence (probation or incarceration) -- other costs are excluded.
- Consider the following in the "Calculation of Average Social Cost Savings Per Employe" table:
- The "Total decrease" in annual visits or annual costs reflects the sum of usage for all target employees. These values are not averages.
- Cost savings values should be relevant for your geographic area and the time period of your analysis.
- The "# of Target Employees Responding" provides the basis for averaging the cost savings.
- See the appendix of the SROI Methodology Paper for more information on specific sources of cost savings data.
You must fill in all blue shaded cells -- even if the value is zero!!
Projected Number of Target Employees
Terminal
Year 1 2 3 4 5 6 7 8 9 10 Period
# of Target Employees
Average Cost of
X % of People =
Yearly Cost Conviction
Sentence
Incarceration x = $-
Parolee x = $-
$-
Cost of Conviction $-
# of Target
Total decrease Total decrease Average Cost
(increase) in
annual visits
X Cost Per
Visit/Use = (increase) in
annual cost
÷ Employees
Responding to = Savings per
Target Employee
Question
Comments
- Not all financial information needed for valuation is included on the income statement.
- Current long term debt should be debt solely for the enterprise -- not debt used to finance other activities of the agency.
- Investment in working capital can be easily calculated based on information typically found in a business balance sheet.
- If a balance sheet asset (like Accounts Receivable) increases, you must have invested cash in the business to support that increase.
- If a balance sheet liability (like Accounts Payable) decreases, you must have invested cash in the business to support that change.
- Therefore, to calculate the "investment" (or cash required) you will have to compare the current year to the previous year.
- If your enterprise does not have a separate balance sheet there are two ways to estimate and project this information:
- Estimate values based on experience and an understanding of the industry (Accounts receivable and accounts payable may be estimated based on a % of sales. Inventory can be based on COGS.)
- Sometimes amounts spent for inventory can be extracted directly from the accounting system.
- The SROI Methodology Paper gives further information on techniques for projecting capital expenditures and investment in working capital.
You must input data into all blue shaded cells -- even if the value is zero!!
Current Long Term Debt
SROI Results
For detail on how these metrics were calculated, see the Calculation Worksheets.
0
SROI Metrics Index of Return
Enterprise Value #DIV/0! #DIV/0!
Social Purpose Value #DIV/0! #DIV/0!
Blended Value #DIV/0! #DIV/0!
Terminal
1P 2P 3P 4P 5P 6P 7P 8P 9P 10P Period
Net Income Before S&S $- $- $- $- $- $- $- $- $- $- $-
Add Back Depreciation $- $- $- $- $- $- $- $- $- $- $-
Less: Investment in Working Capital $- $- $- $- $- $- $- $- $- $- $-
Less: Capital Expenditures $- $- $- $- $- $- $- $- $- $- $-
Business Cash Flow $- $- $- $- $- $- $- $- $- $- $-
B) Determine the Present Value of the Terminal Value C) Calculate Social Purpose Value
Enterprise Cash Flow for Terminal Period $- Terminal Value #DIV/0!
Terminal Value #DIV/0! Sum of PV of Cash Flow #DIV/0!
Present Value of Terminal Value #DIV/0! Social Purpose Value #DIV/0!
Avg. Social Cost per Employee #DIV/0! Income Growth Rate 0.0%
Avg. Change in Annual Income per Employee $- Tax Rate 0%
1P 2P 3P 4P 5P 6P 7P 8P 9P 10P
Time 0 1 2 3 4 5 6 7 8 9
Present Value of Cash Flow #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
B) Determine the Present Value of the Terminal Value C) Calculate Social Purpose Value
Social Cash Flow for Terminal Period #DIV/0! Present Value of Terminal Value #DIV/0!
Terminal Value #DIV/0! Sum of PV of Cash Flow #DIV/0!
Present Value of Terminal Value #DIV/0! Social Purpose Value #DIV/0!
Investment to Index of
Value / Date = Return
Enterprise Index of Return #DIV/0! / #DIV/0! = #DIV/0!
Social Purpose Index of Return #DIV/0! / #DIV/0! = #DIV/0!
1P 2P 3P 4P 5P 6P 7P 8P 9P 10P
Time 0 1 2 3 4 5 6 7 8 9
Present Value of Contribution to Parent #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Present Value of Investment Required #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
1P 2P 3P 4P 5P 6P 7P 8P 9P 10P
Time 0 1 2 3 4 5 6 7 8 9
Present Value of Social Savings & Taxes #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
1P 2P 3P 4P 5P 6P 7P 8P 9P 10P
Time 0 1 2 3 4 5 6 7 8 9
Present Value of Social Savings & Taxes $- $- $- $- $- $- $- $- $- $-