If you run a small business chances are cash is in short supply. Money simply doesn’t flow freely around a small business like it does with a large corporate firm. This means that most investment decisions should yield a high ROI, or you could run the risk of putting your company in danger. It often only takes a few bad investments to put a business in choppy waters, so understanding where the ROI is in social media can prove valuable.

Social Media ROI

The hottest topic these days is social media. Social media is known for it’s unusually high ROI (if you are able to measure it). If your SMB has an analyst, set him up with a social analytics tool. Have him use Radian 6 or Sprout Social to implement a way for you business to track some of it’s investment in social media. According to eMarketer.com, “businesses can be forgiven for not fully understanding the impact of their social media marketing programs. Analytics tools still need a lot of work. But not using analytics at all – that’s inexcusable.”

If you have a marketer who is strictly focusing on social media, you have them report weekly metrics from links (CTR, Open Rate, Conversions) and increase followers. This will give you a basic understanding of how to get something out of social media. So many businesses aren’t able to track their returns from social media and it frustrates them.

Tracking ROI all depends on your goals. Are you a new brand, wanting to get more followers? Or are you an established brand looking to track sales conversions from Twitter?   Your businesses level of maturity determines how your analyst will set up your social media metrics. Try this ROI Model out for Size: ROI = (revenue – investment) + customer engagement and idea generation / investment * 100.

While all the ROI methods available currently are great, the platform is still progressing. As new technology comes out of beta, we will see better analytics tools from Google to allow SMBs to track all facets of their social media efforts, “in many cases, social media will lead to transactions without ever referring the visitor to your site. A new customer may become aware of your brand and make their purchase decision through social media, but come through search or another source to make the purchase. When this occurs, there’s no record in Google Analytics of social media having any impact on the transaction,” according to Social Media Today. Investing in resources to track and monitor your social media campaigns can help you understand what works and what doesn’t. It also will give you a forecast for the future success of your business.

About The Guest Author: Matt Krautstrunk is a writer and social entrepreneur based in San Diego, California. He writes on topics ranging from marketing to VoIP phone systems for Resource Nation.