Community organizations regularly approach local small businesses to help fund their events, fundraisers, and special gatherings in exchange for the PR they get in return.

Small business owners are usually good sports about sponsorships. Their willingness is based on the rationale that sponsorships bring new customers to their store. But the big question is whether or not sponsorships are actually effective in drumming up new business. Does your participation make a difference? Or is it just a big waste of resources that would be better spent building your business?

The truth is that unless you poll every customer walks through the door, it's going to be difficult to determine how effective your sponsorships are in bringing in new business. But regardless of how effective they are in bringing in new customers, sponsorships provide other benefits for your business.

• Creates customer loyalty - Individuals who approach your business about sponsoring community events are probably existing customers who regularly patronize your store. Your sponsorship builds loyalty with those customers and increases the odds that they will recommend your business to their friends. It might not seem like a whole lot of bang for your buck, but you might be surprised how quickly word gets out through a happy and satisfied customer.
• Sends a message- By sponsoring targeted events, you can send a message that your business is behind certain community-related issues. This can have a significant impact on the way the public perceives your company. For example, if your daycare center sponsors a child safety event, the public will take it as a sign that your daycare genuinely cares about children. If you play it right, you may even be able to get some exposure from the local media about your participation and your company's commitment to the welfare of children in your area. The next time people need daycare services, they are going to think your company - the company that puts kids first.
• Demonstrates civic engagement - Your involvement in community events demonstrates your concern for the community in which you live. Small businesses play an important role in the fabric of any community, large or small, and bear a portion of the responsibility for making sure the community remains healthy and whole. But doing your civic duty also has a favorable effect on your business. A healthy community is a prosperous community, and a prosperous community makes good business sense.
• Accomplishes good things - When all is said and done, your primary motivation for sponsoring a community event should be that it's the right thing to do. The vast majority of these events are run by nonprofits whose mission is to make the world a better place. Although these events will provide benefits for your company, the greatest reward is the knowledge that your small business has helped other people.