“You need to spend money to make money” or do you? Networking is an essential lifeline to a business but the question that I get asked most is how much of the bottom line should go towards it.
Networking can be a very cost effective method of obtaining clients however it requires time and commitment. Time is money!
I am a strong believer in networking as it has helped me to build my firm. I have used many methods depending on how much I was willing to spend at the time. A new start up company may not have as much money to allocate to getting new business as a large company with endless resources and all businesses are different so each should have a unique approach.
Throwing money at networking does not guarantee results but not spending enough will not give you the leads you need. It is a balancing act and important to determine your customer acquisition cost.
Your Customer Acquisition cost is an analysis of how much it cost you to get a particular client. More importantly, did you covered your cost to get this client with their order?”
If for example you spend $1,000 and you get 10 clients, it cost you $100 to get each client. If the client spent $100+ at your business, you have covered the cost of the acquisition. If not, then you have lost money on this transaction and need to reconsider your approach.
I am constantly trying new ideas for networking but also keep track of how much I spend and how much business I got from each activity. Networking is an important tool but the cost and time tracking, in my opinion, is more important. You don’t have to kill your bottom line to network.
Social media platforms such as facebook and twitter are excellent and free networking tools. This does no damage to your bottom line and has a very far reach. I found that once I created a facebook account for the firm, clients naturally signed on.
The only drawback with these avenues is that you need to update and post often. People need to see your business repetitively in order to remember you. Although there is no monetary cost to this networking tool, there is the cost of your valuable time spent updating and posting. Again, it is very important to measure how much time you spent and how many new clients you got.
Another great and relatively less costly option is to attend networking events. There are many out there that are early in the morning or late at night that do not disrupt your business. For a cost of a breakfast and minimal membership dues, you meet with other business people who may require your services. Also, these businesses have their own network of people they can refer you to. Again, remember to measure time, cost and acquisition.
With networking events, you meet many people so keep track of those business cards, they are potentially your new customers. You may need to incur additional costs taking these new leads out for coffee or lunch.
When I started my firm, I went through my phone book and offered any of my existing contacts that wanted to hear about my business, a free lunch. By doing this I got my first customers and even more referrals from the people I saw.
Another cost effective method is some good old fashion door-knocking around your office. People like convenience and face-to-face interaction.
Networking can require a large time commitment so evaluate the results of the time you spent. For example, if going to a networking breakfast in the morning for an hour gets you one lead and going door knocking for 4 hours gets you one lead, it cost you more time to acquire the clients door knocking and you might want to revisit your approach.
Putting that into numbers, if an hour of your time is worth $100, it cost you $100 to get the client from the networking breakfast and $400 to get the client door knocking. You now need to determine what they will spend at your business to determine the success of each approach.
Finally did you know that any networking costs you incur are fully deductible for your taxes?
The above information is for informational purposes only and therefore prior to making any decisions, please contact your Accountant for advice.