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Sticky money - evaluating the local impact of the co-operative pound provides guidance for co-operatives on using the LM3 tool to evaluate their local economic impact using the Lincolnshire Co-operative Society as a case study to illustrate the process.
Over summer 2012, Lincolnshire Co-operative used the Local Multiplier 3 (LM3) methodology to measure the local economic impact of its operations on Lincolnshire. This process was sponsored by Co-operatives UK and externally assessed by K2A.
LM3, which stands for Local Multiplier 3, is a tool that enables organisations to measure the impact they have on a local economy by tracking where the money they receive is spent and re-spent. This methodology is publicly available as The Money Trail, a handbook published by nef in 2002 and authored by Justin Sacks of K2A.
There are three measurements to complete LM3:
- Round 1: Calculate your organisation’s turnover less VAT
- Round 2: Calculate how your organisation spends its turnover in the local area
- Round 3: Survey suppliers and staff to calculate how much they spend in the local area
These figures are transformed into a ratio to show how the income your organisation receives generates income for local businesses and people thereafter. This guidance and case study walks through these steps based on the direct experience of Lincolnshire Co-operative Society with some of their workings to illustrate the process.