In this step you will:
- Calculate the value of the changes across multiple dimensions of value in dollars terms
- Compare to the investment
| For this step: | |
| Resources required: | Refer to the attribution values defined in Tool 4b and the well-defined dollar measure identified in Tool 3a to translate, into dollar terms, the value of change. Calculating the overall value generated is done through a simple formula; a calculator is helpful to work out the figure. |
| Expected outcomes: | Determining the overall ROI of the project. |
| Tools: | Translate Benefits into Monetary Equivalents (Tool 6a), Calculate ROI (Tool 6b) |
Understanding the Limitations of ROI
Return on Investment (ROI) is a valuable metric to quantify the economic benefits of stewardship initiatives. However, it has limitations and cannot fully capture the breadth of a program’s impact. Stewardship extends beyond financial gains, encompassing cultural, social, and ecological dimensions that are difficult to quantify in monetary terms.
For example, the cultural enrichment derived from preserving traditional practices and safeguarding sacred sites significantly contributes to a community’s identity and well-being. Similarly, the ecological benefits of responsible resource management, such as increased biodiversity and improved water quality, often elude conventional ROI calculations.
Stewardship also provides long-term benefits—community resilience, stronger social bonds, and sustainable practices—that may not align with short-term ROI assessments. These advantages unfold over time and extend beyond immediate fiscal returns. Thus, while ROI offers a snapshot of economic returns, it is essential to complement it with a more comprehensive approach that values both the qualitative and quantitative aspects of stewardship. This broader perspective helps communicate the multifaceted advantages of stewardship initiatives to stakeholders.
Process
1. Translate benefits into dollar values (Tool 6a)
To calculate ROI, benefits (or costs) must first be expressed in monetary terms. For instance, park fees can serve as a basis for translation:
A. Defining the Direct Monetary Benefit with an Attribution Factor
In this example, the Direct Monetary Benefit is improved recreational experiences, measured through park day fees. If 40% of the park’s $250,000 revenue increase is attributed to a CBWM program, this equals an additional $100,000 in annual revenue.
B. Translating Swing Weights to Dollar Values
Using Tool 5b, the improvement in recreational experiences is assigned a value weight of 20. The $100,000 revenue increase corresponds to this weight, meaning each value point equals $5,000 ($100,000 ÷ 20).
C. Calculating Dollar Values for Other Criteria Using Swing Weights
- Peace of Mind: With a value weight of 100, each value point is worth $5,000, resulting in a perceived benefit of $500,000.
- Ecological Health: A value weight of 80 translates to $400,000 ($5,000 × 80).
2. Combine scores to determine the program’s total value (Tool 6a)
By summing the monetary values of the benefits:
- Peace of Mind: $500,000
- Ecological Health: $400,000
- Park Fees: $100,000
Total Perceived Benefit: $1,000,000
This figure combines objective data (e.g., park fee revenue) with subjective valuation (e.g., swing weights). While not definitive, it serves as a guideline to translate intangible benefits into monetary terms, aiding communication and decision-making.
3. Calculate the Return on Investment (Tool 6b)
ROI measures the financial return on an investment relative to its cost, providing insights into the efficiency of the investment. The formula is:
ROI = (Net Profit ÷ Cost of Investment) × 100
- Cost of Investment: $100,000
- Net Profit: Total Perceived Benefit − Cost of Investment = $1,000,000 − $100,000 = $900,000
Substituting these values:
ROI = ($900,000 ÷ $100,000) × 100 = 900%
In this scenario, a $100,000 investment in the CBWM program generates an ROI of 900%, indicating a $9 return in perceived value for every dollar invested.