This is part of a series of articles written in partnership with the University of Minnesota Community Development. Look for more articles in this series in the coming months.
If you’ve ever wondered what goes into an Economic Impact Study (EIS)—or whether your organization even needs one—you aren’t alone. At the Bureau of Business and Economic Research (BBER), calculating the economic footprint of businesses, projects, and industries is one of our most frequent requests. But before diving in, it helps to understand what an EIS actually measures and what you can do in advance to make sure yours is successful.
What is an Economic Impact Analysis?
At its core, an economic impact study measures the ripple effect when money enters—or circulates within—a local economy. It starts with an input: a new business opening, an infrastructure project, or an organization’s annual spending. From there, money moves throughout the economy in three different pathways:
- Direct Impacts: The immediate spending, payroll, and job creation from the organization itself.
- Indirect Impacts: The business-to-business spending with local suppliers, vendors, and contractors.
- Induced Impacts: The household spending that occurs when employees spend their wages on local housing, groceries, and services.
When you add these three categories together, you get the Total Economic Impact—measured in terms of jobs, output, labor income, and tax revenue. For an existing organization, you can also frame this as a contribution analysis: What would happen to our local economy if this organization ceased to exist tomorrow? It allows us to quantify that for every $100 spent by an organization, another $50 to $90 circulates across supporting local industries.
Organizations pursue an EIS for many reasons: legislative advocacy, supporting grant applications and fundraising, meeting regulatory permitting requirements, guiding internal expansion decisions, or simply proving their value as a good community neighbor.
Over the years, working with clients across the region, a few consistent themes have emerged that separate a good study from a great one. Here are my six tips for a successful economic impact study.
1. Know Your Goal
Tip #1 is easily the most important: know what you hope to accomplish and how you intend to use the results. The worst outcome for everyone involved is completing a study, spending time and financial resources, and then asking, "What do we actually do with this?"
For example, when we worked with the Upper Midwest Film Office (UMFO), they came in with a very clear goal: to advocate for increased state legislative funding for the film rebate. This target helped guide our entire project. Whether your goal is legislative advocacy, fundraising, or comparing internal growth alternatives (like evaluating a regional sports complex versus a light industrial park), having a clear objective will help ensure the results serve your intended purpose.
2. Give Yourself Time
Adequate time is essential not only for analysts to build the economic models and draft narrative reports, but also for your team to thoughtfully deploy the findings. If your goal is legislative advocacy during a January session, you shouldn't wait until October to start.
Depending on complexity, an EIS typically takes anywhere from four months to over a year. The process involves several stages: scoping and contracting, internal data collection, economic modeling, report writing, and translating the findings into press releases, presentations, and infographics. Starting early ensures unexpected delays don't derail your final deadline.
3. Get Organized
We work with organizations across all spectrums of data readiness, but getting your financial and operational records organized early speeds up the study dramatically.
In our work updating an economic study for the Glensheen Mansion, we were amazed by the quality and quantity of the data they had available. They track event headcounts using manual clickers, all of their operational expenses were organized and documented, and they had compiled multiple years of visitor surveys. Because their team was data-minded and organized, we were able to begin cleaning and analyzing their data within days. While you don't need perfect data to do a study, gathering basic financials (revenue, expenditures, local vendor splits), employment figures (headcounts, FTEs, payroll), and visitor profiles ahead of time makes for a much smoother process.
4. Identify a Champion
Once your goals, timelines, and data are aligned, you need an internal project champion. When we conducted a study for the St. Louis County Depot in downtown Duluth, a major key to success was having two dedicated internal champions.
A good champion is someone who knows your organization thoroughly across various departments, acts as an enthusiastic cheerleader for the project's goal, has the internal standing to clear roadblocks, and possesses a sharp eye for detail when reviewing draft reports. They serve as the central bridge between your leadership team and the research analyst.
5. Mobilize the Team
While a champion leads the charge, complex studies often require a diverse team. When the BBER conducted an economic impact study for the Duluth Airport Authority, the project went beyond airport operations to include 18 business tenants across their physical footprint (including Cirrus Aircraft and the 148th Fighter Wing).
Success required mobilizing not just internal leadership, but also external business partners to participate in survey data collection. Depending on the scope of your project, bring together key stakeholders early—including leadership, finance, communications/PR, policy leads, and data specialists—so everyone understands their role in the study's success.
6. Think Like an Economist
Finally, approach your project with a curious, analytical mindset. When we conducted a study for Minnesota Power and Great River Energy on the Northland Reliability Project—a major regional transmission line—we knew that the study would face regulatory scrutiny from the Minnesota Public Utilities Commission. Therefore, we knew we had to be incredibly precise with all our assumptions. We worked closely with representatives from the two companies to talk through the project, clarify data sources, develop solid assumptions, and review the results.
Thinking like an economist means considering things like local vs. non-local spending, commuting rates, one-time vs. ongoing impacts, and many other details unique to the project or industry.
As analysts, we understand the economic modeling process, but you are the subject matter expert! Bringing your industry-specific knowledge to the table will produce a stronger, more accurate final report.
Final Thoughts
An Economic Impact Study is a powerful tool for quantifying the broader value your organization brings to its region. By knowing your goal, planning ahead, getting organized, appointing a champion, engaging your broader team, and thinking critically about your economic footprint, you will set your project up for success.
Learn More & Watch the Webinar
This topic was featured in a recent webinar co-hosted with the University of Minnesota Extension Community Development Exchange (CD Exchange), titled Demystifying Economic Impact Analysis: A Blueprint for Economic Developers. BBER Director Monica Haynes was joined by Samantha Hanson from Giant, a Duluth-based strategic communications firm, to discuss both the modeling process and how to translate results into powerful stories.
Watch the full webinar recording here (Link to video)