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Return on Investment (ROI) for Public Libraries

Modified: 2009/08/17 11:33 by John Felton
Welcome! This wiki is designed to collect research on determining the value or economic impact of public libraries in the communities they serve. If you have found some useful resources on this topic or closely related to the topic (like ROI analyses for other non-profit entities), please add your sources in the appropriate category. Thanks!


What is Return on Investment (ROI)?


Investopedia defines it like this:

"A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio." For instance, a financial investment that requires $100 to purchase and yields a return of $150, would have a ROI of 50%.

RoiFormula

Expressed in Library terms, the formula might look like this:
libroinew

ROI can also be expressed as "value derived per dollar invested." For example, "For every dollar I invested in HighYieldStock, I made $1.25 in profit." Or, for every tax dollar expended for public library service, the community receives $5.00 in value.

For a recent, real-life example, the results of a study at San Francisco Public Libraryreleased in January, 2008, indicated that for every dollar invested in the library, $3.34 in value is returned to the community. A report on the "Economic Impact of Public Libraries on South Carolina"published in January, 2005, concluded that for every $1 the state invests in public libraries, the return is $4.48.

Besides the purely economic aspects of valuation, both the corporate and non-profit sectors are also beginning to measure intangible benefits, such as the social and cultural advantages of an institution's presence in a community, using SROI, or 'Social Return on Investment'analyses. For example, one of the criteria the Places Rated Almanac uses to determine rankings is the presence and quality of community's public library. What is that worth in terms of economic development?

Why Should I Care About ROI?


•This quote from an article by Karen Coyle explains why this topic should concern libraries.

'I must admit that I shudder when I see an article carrying the bleak headline "Public Library Circulation Decreases, Expenditures Rise.' Nowhere does the article even hint that circulation is no longer the best measure of the value a library delivers, nor that a number of those public libraries are more than making up for lower rates of circulation by delivering online services that greatly expand the amount of information available to its community. We do ourselves a disservice when we measure today's libraries against yesterday's services. With the vast digital resources that we make available to our users, the access to full text materials that are never "not on the shelf," the ability to search through huge bibliographic databases quickly and to download the results, there should be no question that libraries are worth every penny of the investment that goes into them." --from “Technology and the Return on Investment” by Karen Coyle, Digital Library Consultant, Journal of Academic Librarianship, September, 2006, v. 32 n. 5, p. 537-9.

•It's no longer enough to simply take quantatative measurements of your library's activities. You now have to answer the question, "So what?"

•Have any of the financial decision-makers in your community challenged you to prove the value of your library and why it should be funded?

•Using business and management concepts and language to describe library services could help you connect with people making your funding decisions. Speaking their language will give your funding requests more credibility. Start using terms like "ROI" and "C/B" (Cost/Benefit) with your community leaders and see if you don't get more attention.

•Demonstrating the economic benefits of the library to the community can be a powerful advocacy tool.

•Ultimately, the goal is to provide a justification to your community for continuing to invest in a good, healthy public library.

Have Other Libraries and Institutions Conducted ROI Studies?


Statewide studies of library Return on Investment include:

•Colorado: Public Libraries - A Wise Investment
•From Florida: (7MB File) Taxpayer Return on Investment in Florida Public Libraries
•Indiana State Library: The Economic Impact of Libraries in Indiana
•Pennsylvania: Taxpayer Return-non-Investment (ROI) in Pennsylvania Public Libraries
•South Carolina: The Economic Impact of Public Libraries on South Carolina
•Vermont: The Economic Value of Vermont's Public Libraries 2006-2007

Local and Regional Studies include the following:

•Seattle: (3MB File)The Seattle Public Central Library: Economic Benefits Assessment
•San Francisco: One Dollar In, More than Three Out! New Study Asserts the Economic Value of the San Francisco Public Library System
•Pittsburgh: Economic Impact Study: Regional Benefits of Carnegie Library of Pittsburgh
•Southwestern Ohio: Southwestern Ohio’s Return from Investment in Public Libraries
•Mid-Hudson Library System, New York: Return on Investmen: Economic Impact of Libraries
•Suffolk County, New York: Placing an Economic Value on the Services of Public Libraries of Suffolk County, New York


Okay, so how do I conduct a ROI study?


There is no standard blueprint for determining the value a community receives from it's public library. Some calculations were made by simply assigning a value to goods and services received from the library based on average costs of the same products in the commercial sector. For instance, figures on the average cost of a hardcover book, the price of renting a DVD from a video store, the charge for using a computer at an Internet café, and others were used to determine the value of analogous public library services.

In other instances, study techniques have included surveys of actual library users in the community to determine their “willingness to pay” (WTP) for an alternative good or service if the library service were no longer available. Analyses of use statistics collected by the library are often used in both methods to compute total economic value. Some of the data you will need have already been collected in your annual Bibliostat Collect surveys.
There is a significant advantage, however, in using the second method, as you are then collecting data for your study in the context of what matters to the people you want to reach in your community. It takes more time and effort, but conducting surveys in your community gets you in touch with your users and will ultimately give your study more credibility.

How do I promote the results of a ROI analysis?


Publicizing the results of a study that shows the economic benefits of the public library can become the basis of a valuable and extensive promotional campaign. Your study results should be at the forefront of all of your publicity materials.
  • Create an Executive Summary of your report and make it widely available, especially to financial decision-makers in your community.
  • Design and produce an attractive brochure with key results displayed.
  • Put the information on the front page of your web site.
  • Design a series of bookmarks with each one focusing on one or two results and distribute them inside and outside the library.
  • If you have a regular column in the local newspaper, reserve a section of that space to illustrate one study result every time your column appears. Spread out your message to keep it prominent.


For more information about ROI for Libraries, contact Mary Jo Ryan or Sam Shaw.

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