250% return?! Who’s going to believe that?

By Lucy Heady 1 March 2010

How much value does your charity represent for society? 100% of its running costs? 200%? 2,000%? More and more charities are producing figures that show their ‘Social Return on Investment’ (SROI) ie, how much value they provide for the amount of money put in. These figures are routinely hundreds, if not thousands, of per cent and I meet people all the time who are becoming cynical about these figures.

NPC has long been a believer in the value that charities can deliver. One SROI analysis, Valuing potential, found the charity Columba 1400 had a return on investment of 250%. Our recent report on youth offending, Trial and error, highlighted that the charity Dance United has a potential return of 215% considering only costs saved to the tax payer. The returns are almost certainly higher than this once we include the value to the young people of having the support they need to move away from a life of crime.

People become sceptical when they hear of charities offering returns out of all proportion to what is offered by high street banks. But the return calculated in an SROI isn’t simply about financial returns, it’s about the value that is created for society.

The high returns demonstrated by charities seem less incredible when we consider the other everyday services and products whose value vastly outweigh their costs. Take, for example, aspirin. Two aspirin tablets cost about 4 pence but the benefit to stopping a headache is huge. Even if I was feeling really miserly, I reckon I would probably stretch to £1 to cure a headache. That’s a 2,500% return right there.

Due to competition driving down the cost of services and products, we routinely pay less for things than we would be willing to pay. Charities like Columba 1400 and Dance United work with those who are costing society the most and it should be no surprise that they offer value for money by turning these people’s lives around.

(Declaration of bias: NPC is part of the Measuring Social Value project funded by the Cabinet Office and the SROI Project funded by the Scottish Government).