Expected Value Return on Investment (EV-ROI) Analysis Overview
This powerful analytical tool is at the core of all of our consulting services.
What is EV-ROI?
Expected Value-Return on Investment (EV-ROI) is a predictive model that combines a commonly accepted probability theory (expected value) with a common approach that businesses use to make informed financial decisions (return on investment). Expected value is the probability of an occurrence multiplied by the absolute dollar value of that occurrence.
Why EV-ROI analysis is crucial in today’s economy
The new demands on organizations for sustaining the work they do will require translating outcomes to impact, especially economic impact. The EV-ROI approach utilizes program outcome information and translates it into dollar cost savings and return on investment for a variety of stakeholders, including taxpayers and employers. The approach addresses the needs and challenges of practitioners (e.g., Federal program managers, nonprofit social service providers), funders (e.g., Congress, taxpayers, individual or corporate donors and philanthropic foundations), and other stakeholders (e.g., policy makers).
What does EV-ROI measure?
The EV-ROI measure relates the cost savings – (sometimes represented as future costs avoided) and/or dollar gains (e.g., tax revenue) realized due to the program’s interventions – to the financial cost of operating the program. In other words: “For every dollar placed into the program, how many dollars worth of benefits did particular stakeholders (e.g., clients, employers, taxpayers, etc.) receive in return?” We empower managers to represent and explain their programs’ value in future costs avoided and/or incremental revenues generated, as compared to the investment (i.e., program costs.)