If you we’re following me on Twitter earlier today, you would have been barraged with thoughts and ramblings about using Net Present Values to gauge how successful a program may be in non-profit world. (Now THATS blogging gold, I hear you say!).
Regardless, I thought I would give it a shot. Of course, Net Present Values are essentially the value of the cash flows that stem from money invested today. Simply, the NPV helps understand whether spending x amount on one venture is worth the expense now, for the future gain.
Of course, that’s pretty hard to quantify in NGO Land. Most programs we run here at WV are not set up to profit, and so the amount of cash flow generated from the activities is not the most appropriate measurement. So…what did I come up with?
Eyeballs (groundbreaking…huh). By valuing how much it costs for us to get our message across using different programs, we can give a rough estimate of how much cash we would need to bring in to break-even. By using that figure, we can then get a better feel for whether the funds we spend on one program will provide a ‘return’ on that investment (i.e – more people knowing/caring about poverty…in this case).
Anyways, I’m experimenting with it at the moment…any other thoughts about how to measure the effectiveness of proposed investment in different programs which collect no cash and by definition cannot be profitable?
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Just a quick update on this one. If you liked this post, you’ll love the one @fredwilson has just put up on his blog, about how to create true investment financial figures quickly.
See his post “How to calculate a return on investment” here – http://www.avc.com/a_vc/2010/01/how-to-calculate-a-return-on-investment.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+AVc+(A+VC)