# Net Financial Benefit

Definition:
The Net Financial Benefit of a solution is the financial benefit that ReFED estimates a particular stakeholder (or all stakeholders combined) could acquire after incurring the necessary costs to implement the solution as well as any potential cost savings, added revenue generation, etc.
Master Net Financial Benefit Equation:
Net Financial Benefit = Gross Financial Benefit - Cost
(Note that all annual costs and benefits are calculated using Net Present Value over 10 years with a 4% discount rate.)

In ReFED’s data model, the following calculations are repeated for every sector, state, food type, and stakeholder before any aggregation is done.

Table 2. Calculations Performed to Estimate Net Financial Benefit of U.S. Food Waste Solutions

DATA ITEM

DATA SOURCE OR CALCULATION

EXAMPLE

Cost per Ton Diverted

Multiple data sources (See Appendix G for the data sources for each solution)

Estimated costs for each stakeholder involved in ‘__solutions_example_solution_name__’ in the __solutions_example_sector__ sector:

__solutions_example_sector__:
= \$137 per ton for labor Solution Providers:
= \$1,196 per ton to store food

Government:
= \$163 per ton for reduced tax revenue from donations tax deductions

Consumers:
\$0 cost

All Stakeholders Combined:
= \$137 + \$1,196 + \$163
= \$__solutions_example_us_dollars_cost_per_ton__ per ton

Gross Financial Benefit per Ton Diverted

Multiple data sources (See Appendix G for the data sources for each solution)

Estimated financial benefits for each stakeholder involved in implementing ‘__solutions_example_solution_name__’ in the __solutions_example_sector__ sector:

__solutions_example_sector__:
= \$163 per ton for cash tax savings from enhanced tax deductions as opposed to taking a regular loss deduction
+ \$45 per ton for waste hauling savings

Solution Providers:
= \$0 (most donations organizations do not charge businesses to donate food so they do not generate revenue)

Government:
= \$0

Consumers:
= \$4,432 per ton from the retail value acquired from donated food

All Stakeholders Combined:
= \$163 + \$45 + \$4,432
= \$__solutions_example_us_dollars_financial_benefit_per_ton__ per ton

Annual Solution Diversion Potential

See Diversion Potential calculations above.

ReFED estimates that ‘__solutions_example_solution_name__’ could divert __solutions_example_tons_diverted__ tons of __solutions_example_refed_food_department__ __solutions_example_cause_name__ annually in the __solutions_example_state__ __solutions_example_sub_sector__ __solutions_example_sub_sector_category__ __solutions_example_sector__ sector.

Annual Cost to Implement

= Cost per Ton Diverted * Annual Solution Diversion Potential

__solutions_example_sector__:
= \$137 per ton for labor * __solutions_example_tons_diverted__ tons diverted
= \$11,508

Solution Providers:
= \$1,196 per ton to store food * __solutions_example_tons_diverted__ tons diverted
= \$100,318

Government:
= \$163 per ton for reduced tax revenue from donations tax deductions * __solutions_example_tons_diverted__ tons diverted
= \$13,641

Consumers:
= \$0 * __solutions_example_tons_diverted__ tons diverted
= \$0

All Stakeholders Combined:
= \$11,508 + \$100,318 + \$13,641
= \$__solutions_example_us_dollars_cost__

Annual Gross Financial Benefit

= Gross Financial Benefit per Ton Diverted * Annual Solution Diversion Potential

__solutions_example_sector__:
= ( \$163 per ton for cash tax savings + \$45 per ton for waste hauling savings ) * __solutions_example_tons_diverted__ tons diverted
= \$17,406

Solution Providers:
= \$0 * __solutions_example_tons_diverted__ tons diverted
= \$0

Government:
= \$0 * __solutions_example_tons_diverted__ tons diverted
= \$0

Consumers:
= \$4,432 per ton from the retail value acquired from donated food * __solutions_example_tons_diverted__ tons diverted
= \$371,689

All Stakeholders Combined:
= \$17,406 + \$371,689
= \$__solutions_example_us_dollars_financial_benefit__

Annual Net Financial Benefit

= Annual Gross Financial Benefit - Annual Cost to Implement

__solutions_example_sector__:
= \$17,406 gross financial benefit - \$11,508 cost
= \$5,899 net financial benefit

Solution Providers:
= \$0 gross financial benefit - \$100,318 cost
= -\$100,318 net financial benefit

Note: Notice that Solution Providers are not usually profitable for this solution. Since most donations organizations do not generate revenue from donated food, their costs are usually covered by grants so that they can remain operational.
Government: = \$0 gross financial benefit - \$13,641 cost
= -\$13,641 net financial benefit

Consumers: = \$371,689 gross financial benefit - \$0 cost
= \$371,689 net financial benefit

All Stakeholders Combined:
= \$5,899 + -\$100,318 + -\$13,641 +\$371,689
= \$__solutions_example_us_dollars_profit__ net financial benefit

Reminder: This example calculation is not the total net financial benefit potential for the solution. These calculations were repeated for every sector, cause, food type, and state before aggregating and summing the total net financial benefit for each solution.