We were having an interesting conversation last evening at a networking event about the struggles of small and mid-size businesses, especially when it comes to the “business” side of business so to speak. By that, I mean the parts required to actually run things. We won’t get into the burden of complying with regulations, reports, and so forth or the woes of labor issues if there are employees. Our discussion was centered on how difficult it can be to really understand what it costs to run a business and how to determine if money spent on marketing is worth the price paid.

Let’s start with business costs because items like lease and utilities are easy to see, but there are all the small things that can be over-looked like office supplies, association fees if applicable, etc.,. There are an amazing number of businesses that don’t think about that kind of thing as business costs. Being able to analyze marketing is especially difficult because owners who depend on customers often forget to ask new customers how they came to hear of them. Continued customer loyalty will be largely dependent on their perceived value, but that initial visit has to be for some reason and finding out what that reason is can be helpful. That leads into how to evaluate marketing successes and that is usually very difficult unless it’s a case of having run something like a special with a coupon (if that’s applicable to a business) and people bring that in. One of the tools with Social Media is that whether you agree with it or not, there is quite a bit of data that can be “mined” about visitors to a site and so forth. Unfortunately that can also be time-consuming and confusing unless you know how to do the analysis. As far as print and something like radio goes, that’s also hard to measure because you don’t know how many people actually look at an ad or hear a spot on a radio. Sponsorships for events is something that I’ve posted about. In general it’s really hard to measure the value of sponsoring local events because there may not be any immediate pay-off. But, and especially if it is a small town or neighborhood situation, the goodwill you generate will usually come back around to you later.

So, if you are in business for yourself, take a little time to think about how good a handle you have on costs and if someone you know is thinking about going into business, it’s a good topic to discuss. What it comes down to is that having a written business plan is one of the best approaches to use. More about that in a future post.