Importance of networking in small businesses

Importance of networking in small businesses

A small business owner attends a function, talks to a few other small business owners and hands out business cards. None of them seem super excited, so the small business owner isn’t surprised when the phone doesn’t ring off the hook the next day. However, a few weeks later, he or she makes a big sale and discovers that the client was referred by one of the contacts from the function.

Another small business owner desperately needs to generate some extra income. He or she reaches out to a carefully cultivated network of other small business owners to announce a special discount on services just for those business owners. A few of them respond and the business owner is suddenly flooded with work.

Does this all sound to good to be true? Both scenarios are real and have been repeated more than once. The key to these business owners’ success was a good network of business contacts and it all relies on proper customer lifetime value.

Develop a Network of Business Contacts in Different and Related Fields

It can be tempting for a realtor to hang out with a group of other real estate agents or for a coffee shop owner to spend the majority of his or her time with other foodies. However, a smart small business owner will spend part of his or her time chatting with contacts in the same field and then will head out to network with people who have businesses in completely different fields.

Building a diverse network that includes contacts in both related and unrelated fields is essential because, while contacts in the same field may never need the small business owner’s services, they may refer clients that they cannot help. For example, another real estate agent may never come to a realtor and ask him or her to sell or list a property. However, a coffee shop owner may just need space for a second coffee shop. On the other hand, that real estate agent may just reach out to a realtor when he or she is too booked to accept a prospective client who is interested in buying in the area that the realtor specializes in.

How to Network Effectively

Effective networking means more than shoving business cards into people’s hands. Networking is about making contacts, but it is also about developing a relationship. To network effectively:

  • Take the time to ask what the other person does. This person’s expertise may come in handy at some time in the future.
  • Give the other person a business card and ask for one in return. Trying to track down a phone number or email address later on can be frustrating.
  • Occasionally offer advice or some other form of assistance to each contact. Someone who is truly helpful becomes more than just a name on a card. He or she becomes a guru to turn to when there is a problem to solve.

The next time someone offers an opportunity to network, accept that opportunity and show up with business cards in hand. This chance to make contacts can generate income for years to come.