I have been a business owner for 5 years now, after 16 years of corporate life. One exciting aspect of being a business owner is that you suddenly have all these extra hat’s to wear. No longer is it sufficient to be an expert in XYZ, but you also need to be able to do the budgeting, people manage, develop systems to ensure quality customer service, and of course sales and marketing.
What I quickly discovered is that there are no shortages of opportunities for you to spend your advertising dollar. Online, the starting point is usually Google Ad-Words, but you don’t need to stop their – Facebook, Yellow Pages Online, Linked-In, and then you have all the various special interest sites and blogs which you can sponsor directly.
Out in the touchy feely real world, you have trade shows, local news papers, radio, direct mail, give aways, client hospitality, and an endless array of sporting clubs and schools looking for donations and sponsorships.
I can tell you, we have tried most of these, and most have provided disappointing results. Frustrated by the lack of bang for buck, I decided I needed to get more hard-nosed. I developed a worksheet that I now fill in for every piece of marketing activity that we do. I simply list at the top all of the costs for the marketing activity, right down to things like the cost of the letterhead paper and envelopes for mail outs. In the bottom portion of the sheet I record what leads come from the activity, and whether any revenue ultimately flowed.
From this information I then calculate the Return on Investment (ROI) for each and every marketing activity we undertake. This information is of enormous benefit as you can quickly identify marketing expenditure that is not paying its way, and either terminate it or change it. Similarly, you can quickly identify what is working and do more of it
The best result I have so far got was an ROI of 52. This means that for every dollar we spent, we made $52. Thinking I had struck the holy grail of marketing, I of course repeated the marketing activity. The result? ROI = zero – a one hit wonder unfortunately.
Measuring ROI has been enormously helpful for our business and I would encourage all business owners who do not already do so to get onto it. After all, if you could find something in your business where for every $1 you spent, you got $2 back, wouldn’t you do that every day of the week.
About the Author:
Paul Benson is the principal of Guidance Financial Services Pty Ltd, a boutique financial planning practice which specialises in the unique advice needs of business owners and the self employed.