Improve Impact completed a cost-benefit analysis of the business training program provided by SBS to better understand program impact. This was done by calculating the ratio of the full organizational budget to the change in average annual income earned by program graduates. This descriptive cost-benefit ratio demonstrates that minimal investment leads to life-changing financial stability for Street Business School program graduates.
Cost-Benefit Analysis
COST-BENEFIT RATIO CALCULATION
This cost-benefit calculation examines the total investment to operate SBS over a three year period of time against the change in average annual income earned by projected entrepreneurs within 18 months of entering SBS training. While many cost-benefit calculations look at direct costs versus outcomes, this analysis takes the full organization’s budget and compares it to the outcomes generated by those investments. It is expected that a cost-benefit ratio which only includes direct program expenses would result in an even higher return.
The investment in SBS to reach one woman with entrepreneurial training is $107. With the training a woman is able to increase her annual income, on average, to $613, within 12 months of graduating.
1 $3,673,437 is the total SBS expense from July 1, 2017 – June 30, 2020 (Phase 2 Expansion) as reflected in organization 990s and financial reports.
2 SBS assumes that 75 percent of certified Lead Coaches within NGO partners will implement SBS, and each will train 220 beneficiaries, on average, within four years. Entrepreneurs include all of those projected to be reached by 2024 by the NGO partners trained between July 1, 2017 and June 30, 2020. 221 Certified Lead Coaches trained between July 1, 2017 and June 20, 2020 * 75 percent implementation rate *220 entrepreneurs reached within 4 years.
Cost-benefit ratio = 1 : 5.7
Every $1 invested in Street Business School generates $5.70 worth of increased income for an entrepreneur within 18 months of completing the training. This cost-benefit ratio demonstrates that SBS is a highly cost-effective intervention. For a total cost of $3,673,437 invested in the organization over a three-year period, an additional $20,938,590 in increased income is estimated, resulting in the average entrepreneur lifting her family above the global poverty line.
This ratio reflects increases in the income of entrepreneurs for only one year. No assumptions are made about increased income in future years, which would result in an even higher ratio.
This ratio also does not capture other social benefits experienced by entrepreneurs. For example, research shows that with an increase in girls’ educational attainment and gender equity in the workplace, economies grow. Neither that nor additional benefits such as improved health, lower fertility rates, decreased dependence on other aid, etc. are included here. It is expected that a Social Return on Investment analysis would result in an even greater cost efficiency of the SBS program.