In talking with Dr. Muhammad Yunus at Grameen Bank, he challenged us to think more about the idea of a social business that Bart Victor had brought up in class this past mod. These types of businesses would be a hybrid of both for- and non-profit business models, where the bottom line wasn’t just judged on increasing shareholder value, but would also include some measure of social value-added as well (similar to the idea expressed by Savitz and Weber in their book The Triple Bottom Line). Yunus then went on to advocate the idea that a whole new way of valuing companies would need to be created, and possibly a new forum for exchanging shares of these social ventures.

This got me and a few other folks thinking. Most of the Owen students have completed Corporate Valuation, a class that focuses on estimating the value of a firm looking at multiple-based valuations and discounted free cash flows. If these social ventures are essentially pursing zero NPV projects (projects that neither make nor destroy value for the firm over the life of the project), metrics such as return on assets or investment won’t work. Other multiples or the DCF wouldn’t necessarily take into account the social value that is produced. So, how do you value that “goodness”?

Can you assign a dollar value to it in terms of increased productivity (new jobs or consumption)? Health improvement as measured by additional hours worked or costs avoided? And as a few folks on the trip have brought up, who would then check and verify these values to hold the social businesses accountable? I’d through it out to you for your ideas. Can this kind of valuation be done? And what would it look like? As a good MBA, how can we put it in Excel?