Cost analysis: A straightforward way for nonprofits to communicate their value

Cost analyses are a type of analysis that allow you to assign a monetary value to some type of social good. It helps you complete the sentence, For every dollar invested in a program or service, you can expect this type of outcome or result.

Cost analyses are particularly useful when an organization is trying to make the case to funders, to stakeholders, and to policymakers about the value and the worthiness of investing in that program or service.

A good example of a cost analysis comes from the early education literature. There have been a  couple of different studies that have been done that have compared the outcomes of students who have attended high-quality early childhood education programs and students who did not attend high-quality early education programs.

Three preschool students read books at the Child Development Center at Langley Air Force Base, Va., Feb. 16, 2016.  Photographer: Kaylee Dubois

Three preschool students read books at the Child Development Center at Langley Air Force Base, Va., Feb. 16, 2016. Photographer: Kaylee Dubois

The body of research tends to show that those students who attended early childhood education programs were much more likely to succeed - they were more likely to have higher levels of education, to be employed, to be paying higher amounts into taxes, and less likely to be involved in social welfare programs, to be incarcerated, or otherwise to incur other costs borne by society. And when you add up all those different costs, the research studies have shown that for every dollar invested, you get 5 dollars, or 8 dollars, or 10 dollars, or 15 dollars back in a social good as a result of that investment.

So cost analyses do a great job of helping you articulate exactly why somebody should invest in a program or service, and what the expected result can be.

* * *

Are you interested in solving complex problems and securing funding for your nonprofit through data-driven decision-making? Contact us today at drew@commongooddata.com and signup for our newsletter

Andrew Reynolds