Charities are facing increased scrutiny on how much value they are getting from their software investments. We show you how you can prove their worth.
Adopting a new software system begs a difficult and potentially awkward question: how do you know that the usually significant investment required to adopt new software will turn out to be worth it? An effective way to evaluate and compare investments is by measuring their ROI – return on investment – which is calculated by the net gain that an investment brings, divided by its cost. Put simply, if a software system will save you £500 in a year, and costs £1000, then the ROI over one year is 50%. But here’s the problem: while a traditional business is all about making money, a charity or non-profit’s goals are different. While many of your activities may revolve around fundraising, you may have other goals such as raising awareness in an issue, increasing community involvement, encouraging volunteering, and so on. That means that while measuring the software ROI on a fundraising platform for charities may be relatively straightforward by looking at the extra amounts raised and the cost of the software, it can be much more difficult when the "net gain" in question is not a monetary amount, but something harder to quantify like greater community involvement. The good news is that while it may not be possible to give a precise figure for the ROI of some types of software for charities, that doesn’t mean it isn’t possible to prove that this software does offer a significant ROI, and is therefore worthwhile. Here’s how: 1 - Have goals for your software. One useful way to prove the ROI of a software system is to establish exactly what benefits you want it to bring to your charity, and show that the software does indeed provide those benefits at a cost which is worth paying.
It is important to include all the benefits that the software brings, and these can be hard benefits such as increased leads generated or increased funds raised, as well as soft benefits such as improved staff morale or improved brand perception. 2 - Use key performance indicators (KPIs). Another way to prove ROI is to choose relevant things to measure to show that your software is doing what it is supposed to. For example, event organising software may enable a staff member to arrange an event in one day, when before it took five days. Using time spent as a KPI, you can show that the software saves the staff member 32 hours per event. 3 - Find ways to evaluate benefits. In the example above, event management software for charities may save 32 hours, but it may cost £1000. So how do you work out what 32 hours saved is worth in monetary terms? In fact there are a number of ways to do this: one option is to simply work out how much it costs to pay the staff member for 32 hours. Another may be to look at how much money that staff member could likely raise if they were to spend 32 hours contacting donors to raise funds. 4 - Use relevant timescales. Don’t forget that some software investments bring benefits very quickly, while others may involve some disruption initially, or bring benefits which take time to be realised. Long term benefits may be difficult to estimate accurately, but just because software offers no ROI in the short term it doesn’t mean that it cannot be justified in the medium or longer term. The concept of a "payback period" – how long it will take to recoup your investment through the benefits it provides – can be useful to give some perspective to longer term software investments. 5 - Ensure your software ROI estimates are credible. You can only use ROI usefully if your estimates are accurate. As well as the benefits, don’t forget to include all the software costs, including installation fees, data migration costs, additional hardware purchases, maintenance fees, support and training costs.