ROI.

It stands for Return on Investment.

At the heart of the reality TV shows Pawn Stars and Pickers is ROI.  You see it in every show.  They calculate, on the fly mind you, whether it is worth investing in the item based on what they think they might get from selling the item.

The more complicated the business or the more the money, the more ROI becomes a series of letters in a formula for the purpose of trying to measure success.  And, CEO’s like it.  ROI that is.

Chris Brogan tells us a story about the passion of Gary Vaynerchuk involving ROI.  Apparently, after being hounded by a business executive about what the ROI of social media is, Gary answered, “What’s the ROI of your mother?”

Look at it again.  What is the Return on Investment for your mother?  Think about from both angles.  You can’t measure all that your mother has done for you over the years, can you?  Look at it from your mother’s perspective.  She has invested a lot in you to see you become the person you are.  No amount of money can be put on that.

However, isn’t it interesting that when a young man makes it as a professional athlete, the first thing he does is take care of his mother?

That’s what Gary, and Chris, are saying about measuring the effectiveness of social media.  It can’t be measured in traditional business terms, and I buy in to that.

However, I have another take on the ROI of social media.

Before I answer that, answer this question to yourself.

What is the ROI of  NOT using social media?  Think about it.

Now, on to my answer.

The ROI of every business comes down to one thing, profit.  It is how much more you take in than you spent.  That’s profit and that is ROI.  Further, there are multiple ways of measuring profit.

It is measured in terms of clients.  It is measured in terms of sales.  It is measured in terms of invoices.  It is measured in terms of what you were able to buy with the leftovers, etc.  You get the picture.

There is really no formula for this.  It is, “at the end of the day, did you make more than you spent?”  At least, that is how small business owners look at it.  You look at a new car, and you see ROI.  You go out to eat, and you see ROI.  You buy a new pair of shoes, and you see ROI.  It is tangible.

Two of my clients have seen the ROI of social media.  One client invoiced 30% more in 2010 than the previous year.  Another client, a new start up, went from approximately 20 clients to about 70 in a few months from social media consulting that I did with her.    Social media helped each of them, but it was them who sold their services and had good customer relations.

There are metrics that can help you determine if you are gaining influence, followers, etc., and they are definitely worth tracking!  However, the true measure of ROI is sales.  What good is it if your Facebook page has 1,500 new followers if it doesn’t lead to a sale.

That is why it is important to funnel your audience to your product.

Therefore, isn’t it time to look at social media as a tool to help your business?  The issue isn’t that its a buzz or a fad, the issue is how people are buying now.  Ask someone under 40 years old how they find a business.

That is all you need to know.

Why wait? Get started today!

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