Owning your impact: opening the door to social investment
When thinking about investment, most founders focus on the financial terms, but social investment includes another important element: impact reporting. In this guide, we address common questions social entrepreneurs have about measuring and reporting their impact to investors.
By Ilana Darrant, Impact Officer
For founders of social businesses trying to decide if investment is right for them, it makes sense to spend time upfront researching and considering the financial implications for your business. However, with social impact investment, it’s often not only financial terms that are included in an investment contract — your investment may involve some impact reporting requirements too.
Over the years, we’ve gained first hand insights across the Fund and from our founding organisations, Big Issue Invest and UnLtd, on the social entrepreneur’s perspective of measuring impact. There are some common questions and challenges that come up.
So, if you’re wondering what to expect from reporting your impact to an investor, here are a few points to keep in mind.
Own your impact
Imagine the situation: you’ve applied for social impact investment, completed the due diligence process, and been approved for investment. Before the money hits your bank account, it’s time to agree your impact KPIs: the metrics you’ll report on regularly for the duration of the investment.
When everything already feels so new, defining impact KPIs on top of everything else can feel daunting for some founders. But it doesn’t need to be! Because you know your business better than anyone else, we recommend you ‘own’ your impact. Instead of feeling pressured to provide as much impact data as possible, be guided by your priorities. Just because an impact investor suggests an additional KPI you could measure, doesn’t mean you have to agree! Your impact KPIs should be a short list of metrics that are most important to you in telling the world about the change you’re creating. One of our investees has these words of advice:
“Understand that collecting impact KPIs can be a time-consuming task, and unless already embedded you will probably overestimate what you think you can track. Keep it simple!”
One impact step at a time
Running a social business, especially in the early stages, means dealing with plenty of change as you grow and learn. Your impact measurement is the same — see it as something to work on over time.
This can include adapting your impact measurement as your product or service evolves, your customer base shifts, and you learn what does and doesn’t work for your organisation:
“Some of the KPIs that I had chosen in the beginning weren’t very practical. Additionally, a few of the KPI’s I had originally chosen were no longer needed due to a change in business direction.”
It can also mean improving the quality and richness of your impact insights over the long term. In practice, many early-stage social businesses start by measuring the impact services or products they are providing, and to who (their ‘outputs’). From there, the next step is measuring the changes that are happening for your impact customers as a result (your ‘outcomes’). This is where you can build real evidence of your impact on people and communities. The table below explains the difference in outputs and outcomes in more detail.
| Outputs | Outcomes |
|---|---|
| Measures a product or service your organisation has delivered | Measures the effect of your products or services on the people benefitting |
| Usually straightforward to measure | Can be more difficult to measure; they may take time to occur, or you might need to collect feedback from your customers to know about them |
| For example: - Number of employability skills workshops delivered - Number of unemployed people receiving 1-1 mentoring | For example: - Number of people entering employment - Number of people maintaining employment for 3 months or more - Number of people reporting increased life satisfaction as a result of employment |
You’re not alone
If you do pursue social impact investment, it’s important to keep in mind that the right impact investor is there to support you on all of this. Supporting social businesses such as yours to grow, become more resilient, and scale their impact is core to the mission of impact investors like us, at the Growth Impact Fund. We believe that’s best achieved through a combination of financial and non-financial support. So don’t hesitate to raise questions or ask for help on impact measurement. As an impact investor, one way we can help is using our knowledge to play the role of ‘critical friend’, offering guidance and encouragement on how to make your impact data collection more robust, so that you can build a more compelling narrative of your organisation’s impact.
After all, we’re all here for the same thing: to support your success and create more positive impact in the world.
Want to know more?
Growth Impact Fund** Portfolio Outcomes 2024/25** — See the KPIs the Growth Impact Fund portfolio report on annually as part of their investment, along with the outcomes they achieved in the last year.
New Philanthropy Capital’s** resource hub** has a wealth of guidance and tools on impact management, including how to build a theory of change and how to starting tracking your impact.
Big Issue Invest Fund Management (BIIFM) is the fund manager for the Growth Impact Fund, and the fund is addressed to professional investors only. Capital at Risk. BIIFM Ltd is authorised and regulated by the Financial Conduct Authority (FCA) FRN 610618.