Are you creating a business with a mission? Are you like me, in that we want our businesses to change the world while also returning a profit? This concept isn’t new, but it is growing with the onset of B-Corps and hybrid non-profit/for-profit organizations. These businesses can’t measure their success by their balance sheets alone. They need additional methods to ensure they meet both of their objectives: profits and achieving their mission. Often this is termed the “double bottom line” which is achieved by measuring their social value.
Measuring The Double Bottom Line
Consider a grid that evaluates these two bottom lines. When a business sits in the top right corner, its mission and its financial sustainability are maximized, while in the bottom left, the business has both low impact and low financial success. The goal for your business to have both high mission impact and high financial sustainability. So, you’re probably wondering, how can I measure that? How can I turn something like mission impact into a numerical measurement?
Though the theories of evaluation fill entire text books for business owners, The Roberts Enterprise Development Fund (REDF) has determined a clear way of calculating what’s called Social Return on Investment (SROI), or simply, a measurement of the double bottom line. The calculation is based on two parts: enterprise value and social purpose value. Together, they are called “blended value.”
Let’s take an example of a currently certified B Corps: Autonomy Project In. This company’s mission is “to supply high-quality garments to consumers that seek to make purchases that align with their values without having to sacrifice their own personal style, all while making a positive social impact on our earth and raising awareness about today’s most pressing global issues.”
Calculating the Blended and Social Value
In order to calculate their blended value, REDF would first take the value of their sales in apparel products, subtract the costs of goods and services sold and operating expenses. Their enterprise value is the result of that calculation.
Then, we can calculate their social value by adding any grants and gifts the organization has received and the increases in taxes, and subtracting any fundraising and grant writing costs. Then REDF adds social cost savings, which could include the value of awareness raised about fair trade and environmentally friendly clothing manufacturing practices. To finish off the social purpose value calculation, REDF subtracts the social operating costs, which could include the extra costs involved in providing fair pay to employees and using the highest quality materials when producing their clothing.
Finally, we subtract the debt carried by the social enterprise to obtain the blended value. The result is a financial means of measuring Autonomy Project Inc’s social value.
You can measure your business in the same way, using this simple formula to come up with your Social Value and Enterprise Value:
+ value of sales
– Cost of goods and services sold
– Operating expenses
+ Grants & gifts
– Fundraising and grant writing costs
+ Increases in taxes
+ Social cost savings
– Social operating costs
– Debt carried by social enterprise
= Blended value
For more ways to measure the bottom line and your social value, check out B Corporation Impact Assessment, REDF’s tools, and the Aspen Network of Development Entrepreneurs’ Metrics and Impact reports.