Do you spend a lot of time and money going to networking events and participating on various social media networks? You probably think this is a good investment for your business. But how do you know? Have you ever calculated how much this is costing you and whether or not you are actually earning a return on your networking investment?
You may wonder, why is this important? Networking is essential to building business relationships. As with any marketing investment, you can easily overspend on activities that aren’t adding the value, but you don’t know that until you do careful analysis. What is the best way to estimate the costs of networking and how this is translating into real profits?
How can you calculate the cost of networking?
It can be tricky to evaluate the total cost of networking. Most people only factor in the cost of a networking event or figure that if the event is “free” it doesn’t actually cost anything. What they fail to do is to calculate the true costs associated with participating in networking activities. There is the cost of gas to get there, parking fees and most importantly, don’t forget to factor in your time. Any time you spend networking is time that you are not spending on your other business activities and potential lost opportunities. When all said and done, you could be investing $200 – $300 or more per event.
This is the same thing with social media, which is considered to be a low cost investment. Are you using your time wisely? There are zillions of options to reach people on social media, but to be truly effective at social media, you must spend your time in the right places. If your target market is senior citizens, it is unlikely they will be spending a lot of time on Twitter.
So, first identify where your potential customers hangout online and interact in those places. You can easily get sucked in and find yourself spending way too many hours on social media with no true return. Try setting a timer and spend a specified amount of time each day or week dedicated to strategic social media. Track your time so you can get a sense of how much time you are actually spending on social media to best understand if this is profitable for you.
How much business are you generating from networking?
Now that you have calculated the amount of time and money you spend on networking, the next step is to figure out how much business you are generating through your networking efforts. Depending on your sales cycle, you may want to evaluate this for each networking event. Or it may make more sense to calculate what you are investing in total each month or every 3-6 months.
For example, if you are a caterer and you went to a networking event and spent the equivalent of $100 on time and dollars and meet someone that hires you to cater an event worth $500, then you have an ROI of 500%. In other words you made 5 times what you invested for that event. It may also make sense for your business to calculate on a monthly or bi-yearly basis because you may have met someone at the event, follow-up with them a few times, but they may not actually hire you for another 6 months. You are still building the relationship, which is valuable, but you aren’t realizing an immediate return.
Networking is a very lucrative investment if done strategically. Networking is also expensive, so it is advantageous to calculate your total cost of networking to fully understand the value to your business.
Take the next step!
For ongoing strategies and helpful processes to ignite your networking efforts, check out the Network PRo Toolkit!