What’s the ‘real cost’ of networking?
Networking is a critical element to your business and the marketing mix. Done correctly, networking can open up your exposure to an enormous potential of new clients, referral partners and strategic alliances within the industry. Done incorrectly, networking can be an enormous cost to your business and one which quickly creeps up without you even becoming aware of it, and the cost may not necessarily be one that can be seen in the financials!
There are many different types of networking opportunities out there from workshops and training events, to formal and informal referral groups, even breakfasts, lunches and dinners form a part of the networking sphere, and you need to find the type that suits your needs. Without reviewing the pros and cons of each networking type the only thing I will say is it is important to find events/ activities that suit your brand and your potential target market. You need to be meeting with people who can ultimately help you with your business by developing relationships to tap into their ‘sphere of contacts’ as you ‘don’t know who they know’.
Once you have determined networking is for you, how do you measure the return on such activities and what should you consider?
Some groups, such as breakfasts, lunches etc charge a membership fee to simply be ‘in’ the group. This can vary from hundreds of dollars to well over a thousand. Most will then charge a weekly fee for meals and room hire as well. On the flip side, some have no membership fee, but still a meeting cost – does this make them better? As you will see below, the real ‘cost’ isn’t actually the membership fee, it is your time. Membership fees are usually in place to secure committment from people to secure numbers and allow the group to function.
Time is the biggest investment you will make in networking. Typically a 1 hour meeting will take you at least 2 hours of your time as you travel to and from, arrival early, leave late etc. You may arrange to meet people outside of the meeting later on – again a time investment.
What is your time worth to the business?
This is an area a lot of business owners fail to consider. Your effective time may be worth $1-500 an hour or more to the business, depending on the return you can generate and the business you are in. This is not implying your rate is this high, but the value your time is worth to the business. So if this was the case, what may a typical networking event cost you?
Let’s look at an example
Weekly networking group:
- $1000 membership fee annually
- $30 per week = $1500 (assume a couple of non attendances for holidays)
- Your time @ 2 hours per week @ $100 /hr = 50 x 200 = $10,000
TOTAL COST = $12,500 p.a
Take out the membership fee, and the cost is still $11,500, so this isn’t the big investment IT IS YOUR TIME! Interestingly, if you were to remove the membership fee and weekly fee, even a so-called “free event” could be costing you thousands of dollars in your time!
Note. This is for a bare minimal commitment and doesn’t include additional time spent meeting people outside the group or other activities.
This is certainly not to scare you away from networking, as it is an enormously powerful tool to have access to in your business marketing kit, it is to ensure you are fully aware of the ‘hidden costs’ attending every event may have on your business, or the opportunity cost!
By effectively networking to build your business via referrals or JV opportunities, the actual business returns can now be offset against the cost of attending to determine the ROI. If you sell widgets for $500, the above example would need to produce orders for at least 61 widgets to cover the costs of attending (but this is only in sales not in actual profit margin). Like all activities you undertake, measuring ROI is a key element in determining its effectiveness.
Networking works if done well. It takes time, effort and committment with a razor-sharp focus on finding the events and groups that will meet your business needs. Take the time to find the right one for your business, but do be aware of the hidden cost of networking – your time!
P.S. As a believer in the importance and value of networking to business, I have established two groups with bring together business owners in different formats.
** The Gungahlin Business Over Breakfast group is a weekly referral based group located in Canberra – we welcome new members and visitors. Find Out More
Tony Ozanne is an experienced Business Coach and Strategic Advisor to small to medium businesses across Australia. With experience on both sides of the franchising spectrum spending 23 years with the world’s largest restaurant chain Yum Restaurants International. Using his vast experience in this sector Tony now helps business owners build systems, process and planning into their model. Tony runs a regular online program to fast track businesses via www.smallbusinessmba.com.au