What is Networking?
Quote: Power networking involves the development of a team of powerful, proactive referral partners capable of producing a steady flow of referrals for your business.
In this chapter:
o Examples of power networking
o Defining networking
o 7 Myths and truths about networking
Before we talk about networking, let’s take a look at some examples of the results that some have achieved by applying the principles of effective networking. The examples we cite are mostly from Local Business Network simply because these are the individuals with whom we have worked and whose stories we know. In most cases, you can replace LBN with the words “structured networking organization”.
We share these stories to help you understand how truly powerful networking can be for anyone who is willing to learn the principles of power networking and to apply them consistently. Many who do so achieve rewards totaling hundreds of thousands of dollars. For many, business from referral partners account for 25% to as much as 90% of their sales. We hope these examples will encourage you to read further and to consider seriously the principles we teach.
Website Design Firm Finds Structured Networking its Most Powerful Business Growth Tool
Steve Hyer started IGD Solutions, a website development firm, in 1999. In 2000, he joined Local Business Network, a structured business referral organization. Steve was not only new to business, but new to networking.
For the ensuing three years, LBN referrals accounted for an average of 38% of his business. In real dollars, that amounts to six figures each year. Forming strategic and referral partner relationships with members of his own chapter and with those in other chapters helped Steve create a continuous referral stream and thus a continuous stream of new leads and new clients. Steve found the regional mixers particularly helpful in finding and developing referral partner relationships with those in the technology field.
Steve writes that, “LBN is the single most effective method we have used to promote our business. The structure of meeting twice a month and really focusing on sharing referrals makes it extremely effective.”
From Corporate Cast Off To Successful Business Owner In 1 Year
Mark Raymond was laid off abruptly from his information technology job when his company was bought out. The IT market was slow and Mark knew he needed to find additional sources of income. He knew it takes time to grow any business.
Mark had an entrepreneurial background. He had owned a number of different businesses before, ranging from working as a disc jockey, to being a truck driver, to operating as a multi-media expert with auto shows. Fortunately, he had built a successful real estate rental business and owned more than ten properties. Still he needed to replace his IT income.
Mark joined Pre-Paid Legal Services as an Independent Associate. He focused on the sales aspect instead of building a team, but needed prospects and referral partners. His target markets were companies and small business owners, but he did not know where to start.
His wife, Tricia Raymond, a real estate agent, already belonged to a Local Business Network and she encouraged him to use the networking to promote his business. Mark only knows one way to go – full speed ahead. He became the President of his LBN chapter and aggressively built referral relationships.
Within one year of joining LBN, he sold over 400 Pre-Paid Legal memberships. Nearly half, 180 memberships, came directly or indirectly from LBN. Today he has a rapidly growing nationwide network of business associates helping to grow his business.
Sales Agent for a Title Insurance Company Receives over 60% of Her Business Through Networking Group Referrals
Sandra Maurer enjoyed networking, but didn’t realize how powerful it could be when she joined the Birmingham, MI chapter of Local Business Network. Her sales were strongly dependent on relationships with mortgage lenders, attorneys and real estate agents.
Sandra began visiting as many LBN chapters as she could to meet key referral partners and build relationships. She attended every regional mixer to meet other members and build more relationships. She became an extraordinary referral generator, giving as many as 50 or more referrals every month.
Within two years, the relationships she had built within LBN were generating over 60% of her income. When she changed jobs, she took those relationships with her and had an immediate sales base even though she was selling different products and services.
Accountant Gives and Receives Over $100,000 in Referrals Annually
Norm McKee is an accountant and business consultant. During his first year in LBN, referrals from LBN members accounted for about 25% of his business. The second year it grew to 40%. Partnering with other LBN professionals, he also began an employee benefits firm with the potential to generate even more profit than his already highly lucrative accounting practice.
Norm receives eight to ten new client referrals a month from his referral partners. He receives over $100,000 in referrals annually and gives at least that amount to his referral partners.
Norm says, “We selected LBN as our networking group because of the structured/instructional based program offered, providing all members with basic direction over their networking activities. We found LBN members to understand the importance of relationship marketing and how to utilize relationships to create a marketing avenue for their businesses.
Residential Cleaning and Janitorial Service Reports 90% of Sales Come From LBN Members or Their Referrals
Mary Youtz was downsized by a major software development firm. She had worked in the accounting department in a thankless job for a thankless boss. After being let go, she and her husband started their own business and elected to use networking as their primary means of promoting it.
After six months, the firm was in the black and 90% of sales had come through members of her Local Business Network. Mary immediately recognized the value of visiting as many chapters as possible and became a regular visitor to half-a-dozen chapters in communities near her place of business. She attended every regional networking event and built relationships with those in a position to send her referrals. She brought referrals to every meeting she attended.
Mary also grew personally. She had never been required to speak in public and initially expressed concerns about having to do a sixty second commercial at her local chapter meeting. She quickly outgrew her fear and even became a speaker at regional networking events. Her friends saw an extraordinary transformation in her self-confidence and demeanor. She recently took on a role as an officer in her local chapter.
And there are hundreds of additional stories but we don’t have time to tell them all. Here are some quick recaps of a few more.
o Jim Motley started a new computer repair business with $250,000 in sales his first year largely through referrals; doubled his business the second year; then doubled it again the third year.
o Jeannie Kime, a marketer of promotional items spent two years in another networking organization before joining LBN without much success, then tripled her business in her first year in LBN.
o John Gentilia of Perfect View Blinds reported 35% of his business from LBN referrals his first year, growing to 40% his second year.
o Doris Benson of Comfort Zone Heating and Cooling developed 100 new customers in her first six months in LBN.
o Ed Koerner, a mortgage lender, got 36 referrals in his first six months in LBN.
o Brian Jenks, a commercial lender, received referrals for real estate financing for projects of $12 million and $5 million.
o Sharon Quarters, a Realtor, received leads totaling over $2 million in her first three weeks in LBN.
o Attorney, Brian Rolfe got a lead for a $50,000 client within a few weeks after joining LBN.
o Julie Greene, a financial planner, reported commissions of $20,000 on leads from her LBN group and expectations that that number would double the next year.
We could go on forever with stories of these types, but the important thing to understand is that the principles of power networking work for any legitimate business person, representing a valid product or service that is being marketed to the general public or to other businesses. The question is not whether the system works, but rather whether you are willing to learn and to apply the principles of power networking.
What is Power Networking? Webster’s Dictionary defines networking as, “the developing of contacts or the exchanging of information in an informal network as to further a career.” In its broadest sense, practically any type of social interaction could be considered networking. Most business people are familiar with the informal networking that occurs in Chambers of Commerce and other business organizations. But in a business environment where increased sales are the ultimate objective and “time is money”, informal and unfocused networking is inadequate. It is necessary to move to the description and definition of a more formal and focused type of networking.
Development of Win-win Relationships – In his book, Endless Referrals, Bob Burg defines networking as, “the development of mutually beneficial win-win relationships.” Bob says that, “all things being equal, people will do business with and refer people to those they know, like and trust.” Networking therefore is about developing relationships with others who will do business with you and will send referrals to you because they know, like and trust you. Bob’s goal is to transform networking from an “informal process” to a “formal” process focused on generating referrals that result in sales and increased income.
Note that there is a requirement that the individual giving you the referral first know, like and trust you. It is necessary for you to allow others to get to know you, and they must like what they see and have trust in you before they will send you referrals. When building a referral network it is necessary for you to develop relationships of trust.
Selling Through Networking Partners – Power networking involves selling “through” those who are your networking partners not “to” them. There are two components of the business you derive from networking as Mr. Burg describes it, business from those you know and business from those they know. The latter is far more critical than the former, because the potential represented is hundreds of times greater – assuming every business person knows literally hundreds of people. The ultimate objective of formalized networking is not to sell “to” those who know, like and trust you, but rather to sell “through” them to the hundreds of people they know.
Power networking is therefore selling to people you don’t know with the help and cooperation of those you do know. It is “collaborative marketing” predicated on the assumptions that:
1. With minimal proper training you and a partner can effectively prospect for each other, and that
2. It is easier for each of you to prospect for the other within your sphere of influence than it is for the other person to prospect with those same individuals.
This definition points out another critical aspect of formal business networking. You must train others to promote your business for you. Clearly, however, in order to train others to promote your business, you must first understand how to promote it yourself. Effective networkers must not only understand who their prospects are and how to promote to them, but must also be adept at teaching others how to identify prospects for their products or services and how to create the opportunity to make a presentation to those prospects.
Referral Partners – But why would this person, your friend who is generating referrals for you, want to work so hard to promote your business to others? What is in it for him or her? Obviously, he/she expects something in return and although that reward could take any form, the ideal form of remuneration is the referral of someone who could use his/her products or services. This reciprocity must exist in order for formal networking relationships to endure. And this concept of reciprocity leads us to yet another definition of focused business networking: it is the creation of personal wealth through the capture and exchange of referrals. If you want to receive referrals from others, you must be willing and able to give referrals in exchange for those you receive. If you do not give in return, the relationship will not endure and you will no longer receive referrals.
We refer to these special types of relationships where referrals are exchanged on a regular and ongoing basis as “referral partner relationships”. They are the pot of gold at the end of the rainbow, the mother lode! One such relationship can result in hundreds and even hundreds of thousands of dollars of referrals. The majority of your business networking efforts should be focused on finding and developing these relationships. Several such relationships can result in a flow of referrals sufficient to satisfy your needs for the lifetime of your business.
Strategic Partners – Closely allied to the “referral partner” concept is that of the “strategic partner”. A “strategic partner” is an individual who offers a product or service complementary to your own and who is willing to work together with you to offer your products together or to collaborate on marketing efforts. By collaborating with a “strategic partner”, you can broaden the range of products or services you are able to offer your clients, thereby increasing sales or broadening your customer base or, you can leverage marketing expense through joint marketing efforts, thereby reducing marketing costs or creating the opportunity for marketing efforts you might not otherwise be able to afford. Because they are dealing with the same or similar customers to your own, “strategic partners” can also be “referral partners”.
Traditional Networking versus Power Networking – Traditional networking, a style of networking where you market yourself by allowing others to get to know you and hoping that at some point in time they will either use your products or services or will refer someone else to you, is being replaced by what can be called “power networking”. Power networking is a style of networking where you market your business through the development of powerful, proactive partners who market your business for you in return for your help in promoting their businesses. Structured networking groups, both formal and informal organizations designed to teach referral based networking and to assist in the development of teams of referral partners, have sprung up to assist in this process. In this book, we will explore the nature of structured networking groups and their role in helping you apply the principles of power networking.
Myths and Truths about Networking
Myth #1: Networking is just belonging to a ‘Good Old Boys Club’ and is solely for the purpose of camaraderie and fellowship.
Truth: With proper training, networking can be focused to develop business relationships leading to significant referral business, rather than just meeting other people over a social lunch or at the bar during ‘happy-hour’.
Myth #2: Networking is a waste of productive time.
Truth: Networking with the purpose of developing referral partner relationships can be far more productive than spending time selling. One effective referral partner can result in hundreds or even thousands of sales over the lifetime of the relationship.
Myth #3: Networking is only for aggressive, loud-talking salespeople.
Truth: In networking, aggressive, me-oriented people seldom succeed. They find it difficult to build respect and trust which are the underpinnings of any referral partner relationship.
Myth #4: Networking brings people together who are struggling and have no real influence in the marketplace.
Truth: Networking attracts both successful and experienced business owners and professionals, as well as relatively less experienced individuals. The important point to remember is that everybody has a database of contacts with whom you have interest in connecting.
Myth #5: Networking takes too much time with little or no result.
Truth: Networking is a highly leveraged activity as you meet a number of professionals in a very short time. Those you meet are attuned to the development of referral partner relationships. As illustrated earlier, the results can be extraordinary.
Myth #6: Networking is expensive.
Truth: Networking is one of the least expensive forms of marketing available. Local Business Network (LBN) charges around $30 per month for members. Many members can recoup their expense for an entire year with one good referral. For some, the benefit to cost ratio runs in the hundreds.
Myth #7: Networking is primarily for small, non-professional businesses.
Truth: Networking can benefit all types of businesses. Experienced professionals like accountants and attorneys, technology firms, small retailers, home based businesses and others are a few examples.
To summarize what we have learned in Chapter One:
1. Focused business networking involves the development of mutually beneficial win-win relationships called “referral partner relationships”.
2. These relationships are built on trust and involve collaborative marketing to those within each other’s sphere of influence.
3. To be effective, they require education and training on how to recognize prospects and generate referrals.
4. Referral partner relationships must be balanced and require both parties to consistently generate and exchange referrals.
5. Strategic partners are individuals who offer complementary products or services to customers similar to those you serve. Collaboration with them can broaden your product offerings, expand your markets, and create opportunities to leverage marketing expense.
6. Power networking refers to the marketing of your business through powerful proactive “referral” and “strategic” partner relationships.
7. Structured networking groups are designed to help you develop these partnering relationships.