The gold standard for venture capitalist is a 10 times return on investment. What this means is for every dollar invested you get $10 back. The Santa Cruz California Workforce Investment Board (WIB) beat that goal with a $50,000 investment in ‘Layoff Aversion.’
Working together, Davis Lundberg and the staff at the Santa Cruz County WIB, and Teresa Thomae and her group at the Central Coast Small Business Development Center (SBDC) have shown how a small investment in layoff aversion can pay off in a big way.
What the WIB did was establish a working partnership with the SBDC. Through a $50,000 contract the WIB engaged the SBDC to help small businesses in their community weather the economic down turn and avoid the need for layoffs. From the project inception in January 2010 to today it has preserved 87 jobs, preventing the need for an equal number of layoffs.
A few weeks ago I posted a blog entitled ‘Imagine that, a program that pays for itself,’ in which I outlined a simple mathematical formula to identify ROI with respect to unemployment insurance. As a reminder, that formula is:
Average National UI Weekly Benefit X Average Weekly UI Duration = Value of Saved Job
We conservatively estimated average duration at 18.8 weeks nationally, but in many areas this number is SIGNIFICANTLY higher—perhaps as high as 30 weeks or more. And while the average weekly benefit amount would vary nationwide, using this average gives us a good benchmark at $309.60.
So, to the math—simple enough that even I, as a psychology major, can figure it out: $309.60 X 18.8= $5280.48 per job. Santa Cruz saved 87 jobs. A bit more math: $5280.48 X 87=$506,381.76.
So, what does this mean? It means that for a $50,000 investment the Santa Cruz WIB saved the UI fund $506,381.76. This alone beat the 10X ROI standard. And this is just the immediate ROI for UI funds. The WIB reports that the project has also saved local businesses and help garner over $1million in loans and equity financing.
Just another example of practitioners solving problems!. And another example of the power of partnerships. You can’t do it all on your own, and you shouldn’t try. Using your networks and developing new ones can create solutions for your customers that benefit everyone. One of the most critical aspects of successful ‘Rapid Response.’