What is ROI, or Return on Investment? |  |
- What is ROI, or Return on Investment?
- “Must Read” Small Business News This Past Week
- The Blink Factor: Time Management Can Build or Break Your Business
- Read “Networking is Dead” to Make Profitable Connections
| What is ROI, or Return on Investment? Posted: 14 Jul 2013 05:35 PM PDT
ROI stands for “return on investment.” Often you see “return on investment” defined for an investment in a company or a business, say as a stockholder or angel investor. For instance, if you’ve invested in a startup — someone else’s or perhaps your own startup — you probably should calculate how much of a return you have gotten on your investment in that startup company. ROI Really Means: Are You Investing Your Funds Wisely?Return on investment tells you if you are using your money wisely, when you invest. One thing that professional investors do is evaluate the potential ROI in a startup, compared with other investments they could make. For instance, can you get a better return investing in your nephew’s Internet startup — versus investing those same funds in the stock market? Now, you may want to invest in your nephew’s startup just to help out your nephew — regardless of any ROI. In that case, you’re not really investing based on ROI. Your motivation is to help out a family member. But professional investors and non-family members will most likely be looking for the ROI. As a startup entrepreneur, it’s going to be up to you to paint a picture of the potential return, calculate it realistically — and ultimately make sure there actually is a return on investment. Fred Wilson, the well known investor in tech startups, has a helpful spreadsheet and accompanying explanation, on how to calculate a return on investment. Get Used to Calculating ROI for ExpendituresHowever, ROI doesn’t need to be limited to measuring a return on investment in a new company. Apply the ROI (return on investment) analysis more broadly to each expenditure. Ask yourself: if we spend that amount, will we really get a return, and how much can we expect to get? As a business owner, when you discipline yourself to think about each expenditure in terms of what you get back from it, it will help keep your business profitable. For example, if you are investing in a new advertising initiative, evaluate the results of that initiative in terms of “ROI.” Calculate how much you’ve spent on the marketing, and try to calculate the return. Calculating expenses is usually the easy part. Calculating the return just from that initiative can sometimes be the hard part. Let’s take an easy example. If you’re selling with e-commerce, it’s usually not hard to calculate ROI on pay-per-click ads. With the right tracking technology, you can determine what you spend on pay-per-click ads, and the exact sales you get for those expenditures. If only all businesses were that simple! Unfortunately, they are not. In many businesses, it’s much harder to track exactly what triggers a sale. That’s because buyers often don’t make a buying decision based on a single factor or activity, such as clicking a pay-per-click ad. You’ve probably heard the old truism that it takes a minimum of 7 marketing “touches” to get to a sale. That means it’s going to take multiple marketing activities over time to convince a buyer to buy — not just a one-time click. Before deciding to buy, a buyer may click on a search result, AND see a full-page magazine ad, AND read a blog post written by a company executive or about the company’s products, AND view some online banner ads AND enjoy the vendor’s Facebook updates — together all of those could have an impact. They could cause you to put that company at the top of your list, when you’re ready to buy. ROI will be much more challenging to calculate in many industries and businesses. If It’s So Hard, Why Bother Calculating ROI?Just because it’s challenging, that shouldn’t be an excuse to throw in the towel. You should still attempt to calculate ROI. Even if you can’t attach a precise dollar number to a marketing activity, you may be able to determine that in general sales went up after you initiated a certain marketing campaign. You may be able to collect anecdotal stories or testimonials that a particular sale came as a direct result of a particular marketing activity (that’s why you should always ask new customers how they learned of you). Track your expenditures in as detailed a way as possible. Identify expenses related to certain activities, or certain products or services you deliver. Use –really use — analytics tools. And calculate as best you can the value your business gets specifically after certain activities, or that certain products or services bring. This overview at the Marketo blog outlines different methods of calculating a return on marketing, for instance. It points out the level of detailed analysis you need to get into. The more data you collect and analyze, the better you will get at figuring out ROI. And the better you will get at spending your money wisely in your business. ROI, Shutterstock The post What is ROI, or Return on Investment? appeared first on Small Business Trends. |
| “Must Read” Small Business News This Past Week Posted: 14 Jul 2013 12:30 PM PDT
In case you missed it, here is the “must read” small business news from the past week. Highlights include a new e-commerce tool from mobile payment company, Square. You can also read about a startup that offers you a new resource for video chat — and another offering a way to digitize your snail mail. The Small Business Trends editorial team collects the news that will help you grow your business, and puts it in perspective. Read on. E-CommerceE-Merchants Get Boost From Square Market. Square, maker of the pocket-sized credit card reader, has launched a new e-commerce site giving each user a free online store. Is your business represented in the new Square Market? Where do your best e-commerce customers come from? If you answered social media, some recent data collected by Custora will surprise you. Learn more about the customers that bring your online business the greatest lifetime value. Online marketing is an art. Meet Christine Goldbeck. In 2008, Goldbeck opened a brick and mortar art gallery in Middletown, PA. But today her website, ChristineGoldbeck.com, accounts for a large amount of her saless. Goldbeck’s experience can show local small business owners what online marketing can do for their bottom lines. StartupsSpreecast offers video chat in your Web browser. Online video chat options include Skype, Google Hangouts, GoToMeeting and more. So what makes Spreecast so different than the rest? Start with the fact that it’s not part of another service and requires no software to download. Outbox digitizes your physical mail. A growing startup has a new solution for dealing with your snail mail. They’ll pick it up from your house or mailing address and turn it into digital form for easier management. This service is only available in two cities so far. Let lawyers bid for your business. UpCounsel takes the principle used by TaskRabbit and applies it to the legal profession. Instead of hiring people for errands as in the case of TaskRabbit, UpCounsel lets you post your legal needs. Latest TrendsYour customers are using fewer PCs. A decline in the number of PCs shipped over the last five quarters marks the longest slump in the industry’s history. But what does this decline signal for small businesses whose customers find them primarily online? A new survey tells us what women want. At work anyway. And the answer, based on data collected by LinkedIn, is balance and control. Check out this overview from Rieva Lesonsky. Small business owners healthy but uninsured. Small business owners are in better shape, health-wise, than those who put time in for an employer. That’s a good thing, says Scott Shane, Professor of Entrepreneurial Studies at Case Western Reserve University. Because they’re also more likely to be uninsured. ResourcesCorporate document templates for free. CorpNet’s got them. Resources include Meeting Minutes Templates. These will help you prepare corporate documents to adopt or amend bylaws, appoint directors, select an accounting period, appoint officers to your board and more. Google AdWords Unveils Image Extensions. If seeing is believing, then a new Google AdWords feature will increase the persuasiveness of your ads. Here’s more on the new Google AdWords upgrade. Facebook rolls out Graph Search to all U.S. users. But the benefit of the newly tweaked service to small businesses remains to be seen, says Small Business Trends founder Anita Campbell. Here’s an overview. EntrepreneurshipThinking of buying a franchise? Keep these 11 important considerations in mind. The Young Entrepreneur Council suggests you do your homework when selecting the franchise that’s right for you. Avoid mistakes by evaluating your options carefully. The business world is increasingly global. Tessa Farnsworth Curry, managing editor and regular contributor of a site about women in business, is on an adventure. Living and working in Peru for the summer, Curry tells us what she’s learned about the importance of a global perspective. Failing your way to success. No one likes failure, entrepreneurs perhaps least of all. However, as entrepreneur Ivan Widjaya explains, failure is absolutely necessary for future success. Ivan gives an example from the NBA and teaches us more. Competitive intelligence. Brent Leary interviews John Clark, CEO of RivalIQ, about using business intelligence to your company’s advantage. Multiple channels and an unending flow of information provide both more opportunities and more challenges. Continuing EducationBizapalooza is coming. A free online conference aims to improve your small business bottom line. It’s the brainchild of Ivana Taylor. If you can’t make the live webinars, you can always watch the archives later on your own schedule. Sign up! Shutterstock sends you back to school. The popular stock photo site introduces Skillfeed. It’s a set of video tutorials. The aim is to improve users’ skills in Web development, graphic design, photography, video, mobile development, 3D/motion design, and audio. Books and E-BooksApple and the small e-book publisher. A U.S. District Justice recently agreed with the U.S. Justice Department that Apple was guilty of violating federal antitrust laws. For all the small e-book publishers out there, the decision and its fallout may affect your strategy for the future. A book about using big data for your business. There is more information available to your business today than ever before. That means more data to make your business competitive. But it also means more opportunities for error. Pierre DeBois reviews Number Sense: How To Use Big Data To Your Advantage by Kaiser Fung which explores both issues. Newspaper, Shutterstock The post “Must Read” Small Business News This Past Week appeared first on Small Business Trends. |
| The Blink Factor: Time Management Can Build or Break Your Business Posted: 14 Jul 2013 09:00 AM PDT
Once upon a time, we were building a website for a client who wanted to save time and money by supplying their own photographs rather than paying for stock images or a professional photographer to do custom work. Being agreeable – the customer is always right, right? I said sure. This was a decision I immediately regretted when I saw the images the client provided. They weren't horrible, exactly, but they weren't anywhere close to being good, much less good enough to be used for marketing purposes. So I called the client and said that if we wanted to go forward with the images, I'd need to have a member of our team edit them so they'd look better. They agreed and my team put their Photoshop skills to work. Transforming those substandard images into pictures we could use took two hours. This infuriated the client. "There's no way a little thing like that should have taken so long" they protested. Do you know what happened? We'd run right into the Blink Factor. The Blink FactorHave you ever heard the phrase, "Time flies when you're having fun?" It turns out that time can move pretty quickly in a number of situations. You may have experienced this yourself when you've sat down to work on an administrative task connected to your business, such as ordering some inventory or looking over employee time sheets. A task that you thought would only take a few minutes winds up consuming over an hour – perhaps even an entire afternoon. How does this happen? Cognitive researchers, the folks who study how we take in and process information about the world we live in, have identified two distinct processes people use to estimate how long it will take us to complete a given task. When we estimate how long it will take us to perform a physical task, such as walking to the corner store for a cup of coffee, we're using implicit time processing. When we estimate how long it will take us to perform a mental task, whether it's tedious in nature, think data entry, or creative, think writing copy or programming a website – we're using explicit time processing. While people tend to be fairly consistently accurate when using their implicit time processing skills, there's a pervasive universal tendency to underestimate when we use our explicit time processing skills. We think mental work takes less time than it actually does whether we're doing the work ourselves or someone else is doing it. The Blink Factor is the disparity between how long a mental task takes to complete and how long we, or more importantly our customers, think it should take. Obviously, the Blink Factor can introduce an uncomfortable amount of tension into an otherwise good working relationship. There are two elements to beating the Blink Factor. Beating the Blink Factor: Know YourselfData is your friend. As a business owner, you should be tracking how you use your time. Being able to look at objective records that detail how long it takes to perform given tasks will enable you to provide more accurate time frame estimates to your clientele. Don't guess. Know. Using a simple online tool like Toggl or the time tracking features in project management software like Basecamp can provide you with objective, reliable data that will make it easier for you to accurately project how long a task will take. Beating the Blink Factor: Communicate With CustomersKnowing how long a task will take is only half the battle when it comes to beating the Blink Factor. You need to let your customer know how long the job will take as well. Managing expectations is essential to customer satisfaction. That's why we now put a detailed cost breakout into every proposal, sharing how long each element of our process will take to complete and what that will cost. The time to discuss whether your team works fast enough should happen before the job begins – not while the project is in process. Having an accurate time frame discussed and agreed upon gives us a base line to come back and refer to in case the Blink Factor threatens to disrupt your project. Integrating time tracking into your daily routine will deliver significant rewards in terms of customer satisfaction. That's how you beat the Blink Factor. Time Flies Photo via Shutterstock The post The Blink Factor: Time Management Can Build or Break Your Business appeared first on Small Business Trends. |
| Read “Networking is Dead” to Make Profitable Connections Posted: 14 Jul 2013 06:00 AM PDT
I've given them all a custom link so that I could see the results of our promotional effort. So who do you think has the better conversion rate? The big companies with the large lists or the slightly smaller folks with the more modest lists? While you think about that, let me tell you about a book I’ve been reading; Networking is Dead: Making Connections That Matter. The book is by Melissa G. Wilson (@MGWilsonAuthor) and Larry Mohl (@lmmohl). I received a review copy a little while ago and I have to admit that the title took me aback. ”How can networking be dead? It’s the oldest, best way to build referrals and get new customers!” I simply had to see what the authors’ point of view was and to possibly find a better way to build a more engaged and profitable customer base. Ten Lessons That Will Take You From Irritable to Irresistible Maybe this is the point in the review where I tell you that this is one of those “business fable” books. That means if you like books like The EMyth, or Built to Sell, you will eat this book up with a spoon. I think that the genre of book is important here because the authors seek to teach you the principles of building meaningful relationships by actually building a relationship with you through the story. The book follows a cast of three characters: Lance and Meredeth (the students) and Dan (the teacher) as they explore this ten-step process. Lance and Meredith are looking to grow their business network and are introduced to Dan, the business connection coach by their yoga instructor. Dan has a firm opinion that networking is a bad word. Dan’s opinion is that building your business by referrals isn’t just about collecting business cards or a social network following, but casually culling your existing relationships and judiciously nurturing the right new relationships. Dan serves as the expert guide through these ten powerful lessons. Each lesson is highlighted as a chapter and at the end of each chapter is a lesson summary. You will definitely appreciate that because you are likely to get so engaged in the story that you forget that it actually has a purpose — to help you grow a profitable business through connections that matter. Let's get on with a few of the lessons I thought were truly outstanding. Why You Connect is More Important Than What You Want Out of the Connection This is the first lesson in the book and it comes at you fast. It's the first chapter in the book and the lesson is actually woven into the story in a rather subtle way. Lance and Meredith (the two business folks) are meeting for coffee with their yoga instructor who is introducing them to Dan. You may not have caught on to the lesson, but the authors allude to it; people are drawn together by their shared commitments to what truly matters to them. In other words, people with like values and beliefs are more likely to be friends. There's a cliche for that — "Birds of a feather, flock together." What the authors are trying to point out is that many of us have gotten a little too focused on targeting specific industries and collecting quantities of followers, friends and business cards. What really counts in business is the strength of the relationship and that strength comes from shared values and commitments. Focus on Quality Rather Than Quantity You will get nothing but agreement from me on this point. And I'm sure you've heard this before. But what I really liked about the authors' approach in this book is the critical way they teach you to look at each of your contacts. The authors tell you to separate them into three groups: Givers, Takers and Exchangers. You can guess what those categories mean:
A New Way to Profitably Grow Your Business Through Relationships Networking is Dead is not only a fun summer read, it will have you step into autumn with a new, more powerful way to build great relationships. You'll find yourself working less on building referrals and working more with people you love to work with, who also love to work with you. Which Promoters Connections Convert Better? Now let’s get back to the question I asked you to consider at the beginning of my review — which lists got better responses to the promotion sent out for the event? Was it the list from the big brands or was it the lists from the small experts? If you read carefully, you’ll guess that the smaller experts who were more engaged with their lists had more than 200 times the response rate of the big brands. The lesson here — the big brands have big lists, but small relationships with those lists. You can actually be more successful by having a smaller but more engaged list. Once again, it isn’t about quantity but quality. And you can put that idea to work in your business today. The post Read “Networking is Dead” to Make Profitable Connections appeared first on Small Business Trends. |
As I write this review I have a very interesting experiment going on. I’m promoting a rather large event with a varied group of organizations; some are large brands with humongous email lists and some are not-so-large brands with smaller lists.| You are subscribed to email updates from Small Business Trends To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
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