As a small business owner, you likely get the majority of your leads from networking and referrals. And if you fit in with the other 95% of small business owners who do the same thing, you are always looking for networking tips for how to get more leads from these activities. It makes sense, small business owners typically have more time than money, and they choose to spend their time shaking hands rather than investing in marketing and advertising because it’s “free” and it works. But too often, small business owners never graduate beyond this mindset and remain comfortable generating leads, shall we say, the old-fashioned way. However, if you ever want to grow beyond a paycheck business – a business that actually requires more of your time and energy than an employer would but pays little (or no) more – you have to understand the true cost of networking, and how to better allocate your funds. Use these calculations to determine how much your networking is really costing you.
The True Cost of Networking
Let’s do some simple math together. If you’re like most business owners, you probably think that networking is free, or at most carries a very little cost to you, but nothing could be further from the truth. Your networking could actually cost more per lead than any other activity. Follow these steps to determine the true cost of your networking activities.
- Look at your calendar for the past two months and add up the number of hours you spent at networking events, including travel time.
- Divide your result by 2. This will give you an average of the number of hours you spend networking every month.
- Next, add up the dollar amount you physically spent on networking for the past two months. This includes membership dues, admission costs, and the cost of any food or drinks you paid for while you were there.
- Divide the result of question 3 by 2 to get the average money you spend on networking each month.
- Calculate your approximate, or your desired, hourly rate.
- Multiply your hourly rate by the result of question 2. This will tell you how much your time is costing you to do your networking activities every month.
- Add the result of question 6 to the result of question 3 to get a dollar amount for how much you spend on networking every month.
- Next, add up how many leads you receive per month as a direct result of your networking activities.
- Divide the result of question 7 (the amount you are spending on networking every month), by the result of question 8 (the number of leads you receive each month from networking).
The result of question 9 will tell you how much a networking lead actually costs you from a monetary perspective. Are you surprised? You can take it one step further by calculating the average number of leads it takes to make a sale, multiplying that by the cost per lead number you got from question 9, and comparing the result to the lifetime value of your average customer. You might find that you actually pay more to get a customer from networking than you actually get in business from them in return.
So What Is the Value of Networking?
Depending on what you identified during your math exercise you might be thinking that networking costs too much to really be worth it. However, networking still holds a tremendous amount of value if you limit it just to the activities that net you the greatest result. If you attend 5 networking functions per month for example, keep track of how many leads come from each group, and how many of those leads actually become customers. Track this for a 6 month period before eliminating any activity from your calendar. You may find that 1-2 groups provide you with the majority of your leads and customers each month and are well worth the time to keep going. If anything, maybe you want to invest more time in these groups by becoming a board member or participating in a way that gains you more exposure. The rest of your networking activities may merely be consumers of your time.
Time is the most valuable resource any of us possess and it is should be treasured and treated with a monetary value. If you are constantly giving your time to organizations and groups that net you nothing in return, or worse set you back, those networking activities are actually holding you back from building the business of your dreams and should be eliminated from your business development. You need to look at networking and face-to-face activities strategically. By no means should you eliminate them all, but spend the time to identify the opportunities that net you the most value and invest your time on those. By eliminating some of the more low performing networking activities you participate in, you will free yourself up to do more business, giving you more funds to invest in other marketing strategies that will net you greater results.
When you are ready to take your business to a broader audience, there’s no better place to do it than online. Need some strategy and direction on how to do it? Sign up for our Quarterly Marketing Consulting and learn how to strengthen your online presence on a regular basis.