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ROI for non profit which is losing money?

Aditya asked on Jul 30, 2017 - 1 answer
Looking for solid partners.

Our client is a non profit considering investment in a new technology to prevent malaria in Africa. Should they invest in this new technology given the following information:

Every year malaria costs $100M to African Economy.

Current means used to prevent malaria 1: Mosquito nets- Annual Savings- $10 M, Annual Cost- $12M.

Current means used to prevent malaria 2: Mosquito spray- Annual savings- $15M, Annual cost $20M.

New Technology: Annual Savings- Don't Know, Annual Cost- $15M, One time setup cost- $25M.

Should our client invest in this new technology?

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Francesco
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replied on Jul 31, 2017
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Hi Aditya,

I would say you could structure the case with the following steps:

  1. Verify the objective: which is the target of the client? It is likely it will be either (i) maximize savings or (ii) maximize savings given a certain budget. This may create a critical difference on the best option
  2. Compute what is the saving of the new technology; it is likely the case will evolve as a market sizing one in order for you to compute such variable
  3. Find whether the third option is the most suitable to reach the objective identified in point (1)

Hope this helps,
Francesco

But in all the options, the client is losing money. How to account for that? — Aditya on Aug 01, 2017

Hi Aditya, in the last case it is not sure the client may lose money; even if that is the case, being a no-profit there may be other revenue channels (eg donations) that could support the company in the long term, while the goal of the projects may be different, as for point 1. above. Hope this helps — Francesco on Aug 03, 2017

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