Home » Connectivity » Entrepreneurism: The Importance of Networking, Part 1

Entrepreneurism: The Importance of Networking, Part 1

July 21, 2011


I promised, in an earlier post, that I would write a blog about networking. I believe that networking is important, but only if it serves a purpose. What do you hope to accomplish? Are you looking for investors or customers or even employees? Obviously, the kind of networking you do and the type of events you attend differ depending on your objectives. One thing that you can do to improve networking is locate your business in the right area. Paul Tyrrell writes:

“The concept of the business cluster has become an increasingly important part of regional development and corporate strategies since 1990, when Michael Porter of Harvard Business School published The Competitive Advantage of Nations. In the book and subsequent research, Prof Porter found that as more companies of the same type cluster together in the same place, so they derive more benefits from their ‘colocation’. Companies have long recognised that siting themselves near to rivals could make life easier for customers, cut supply chain costs, and – most important – make it easier to recruit specialists.” [“The added value of a group,” Financial Times, 6 July 2010]

Of course, even if you establish your business in the ideal cluster area, you still must implement a networking strategy. Porter indicates that when he first tried to organize cluster groups, participating CEOs were skeptical about the benefits of networking. Only after they started talking did the benefits become obvious. Tyrrell included the following graphic with his article to show how clusters, companies, governments, and people interrelate.




Richard Florida, a professor of urban studies at the Rotman School of Management in Toronto, told Tyrrell, “Governments can help clusters become the ‘go to’ destinations for particular industries, but it takes time. And it takes sustained investment in great universities and in people and, of course, in the physical fabric of the place.” For individuals and their companies, establishing a great networking strategy takes the same kind of sustained investment.


Mike Southon believes that another way to make good connections is to establish your bona fides in your selected industry. [“Make the right connections,” Financial Times, 31 January 2011]. He continues:

“Daniel Priestley, a successful entrepreneur who has built several multimillion-pound businesses in events marketing and public relations … has identified five ways you can help to establish your reputation in your chosen industry. First – and most importantly – identify your own micro-niche. The more specialized you are, the easier it is to establish yourself quickly in that area. … Second, having identified your niche, you should aim to get published, in some form. This might eventually be a book but, in the early stages, you should demonstrate your thought leadership in specialist trade press, using weblogs and articles. Third, Priestley advocates developing information products, including CDs, DVDs or internet downloads such as eBooks. These can allow you to share your ideas with more people and even earn money from your expertise. Fourth, you should raise your profile online, so that you start to appear nearer the top of the Google search rankings. Learning how to use key online social networking platforms such as Twitter, LinkedIn, Ecademy and Facebook will enable you to grow your personal brand online and can help to connect you to other thought leaders in your chosen field. Fifth and finally, you need to form the right partnerships, which can provide significant leverage if managed correctly.”

In some ways, Priestley’s fifth recommendation is a Catch-22. You try to establish a reputation so that your networking becomes easier. If, however, you need to “form the right partnerships” to do this you’re right back at the start trying to get connected with the right people. Obviously, networking is not as easy as it might first appear. Let’s look at networking for each purpose (i.e., getting connected to investors, finding customers, and finding employees) in turn.


Networking to Find Investors


David Gill, managing director of St John’s Innovation Center in the UK, asserts that if you are looking for investors, networking is important. But, he writes, “I do not mean generic networking.” He insists that “just turning up to an evening talk” is a waste of time. He says that you need to get “to those events where you are likely to meet investors and to be able to get a sense of what they are looking for.” [“Tips on angel funding,” by David Gill and Alex Hoye, Financial Times, 22 May 2011] Getting into such meetings may prove problematic, so Gill recommends using investment readiness programs. He writes, “If the guys running these are marketing their programs properly, they will provide the opportunity to meet real investors.”


Networking to Find Customers


Jonathan Moules writes, “The digital age has spawned an array of technologies to help entrepreneurs reach their customers, from Google adwords to Facebook pages. However, for many, there is nothing to beat the old-school techniques of knocking on doors and getting recommendations for a job well done.” [“Nothing fancy does the job of reaching customers,” Financial Times, 14 February 2011]. Moules continues:

“Scott and Lisa Sumner have built their corporate cleaning business, Olivers Mill, into a £3m operation with more than 200 customers, entirely through word-of-mouth recommendations. The staff headcount has risen to 330 people but, in 15 years of trading, the Kent-based company has never once hired a sales executive. … A business built on referrals is stronger because it has deeper relationships with its customer base, Scott says.”

Word of mouth is fine for some companies; however, Mike Southon insists that for most companies a sales director does become an imperative [“The hardest person to hire,” Financial Times, 6 December 2010] He writes:

“Once a business has become established, with offices and other fixed overheads, hiring the right people for growth becomes an important priority. By far the most difficult person to recruit is always the sales director. Most start-ups are established by a couple of complementary individuals who are able to sell their initial products and services to family, friends and former colleagues. … To expand the business, the founders acknowledge they must find a highly experienced sales director. This is the first person in the company specifically responsible for finding new accounts, growing existing ones, hiring a focused sales force and ensuring that sales grow steadily over the next five years.”

Despite the fact that he recommends that start-up companies eventually hire a professional sales force, he nevertheless concludes that “you should encourage everyone in the company to continue selling as you did before, in a low-key, personable way.” There are innumerable companies willing to sell you lists of cold-call contacts (such as email addresses and phone numbers). But their lists will never match one well-connected director of sales. Finding someone with established industry connections is a real bonus.


Conferences, of course, are another way to network. Conference organizers always assert that their conference is a great place to make the good connections. Attending the right conference can indeed pay dividends and I’ve made some very valuable contacts at such functions. My only caution is to not go overboard — be selective. Mike Southon cautions that setting up exhibits at conferences rarely achieves the hoped for return [“How to make an exhibition out of yourself,” Financial Times, 7 March 2011] He writes:

“It is not cheap to exhibit at a trade fair – the stand space is expensive and then there is the cost of building it, developing marketing materials, plus the staff time involved in just being there. … If you do decide to exhibit, make the sales messages on your stand as obvious as possible. An interesting exercise is to walk down an aisle at a trade show, trying to guess what an exhibitor does just by looking at its stand. … People who attend trade shows are looking for someone to solve their problems or meet their needs. If you clearly state those problems and needs, and then explain how you can address them, you stand a good chance of attracting a potential customer.”

Although I agree with advice about how an exhibit stand should appear to attract potential customers, I agree even more with his next bit of advice. He writes:

“In my experience, very little business is gained from people casually wandering on to your stand – the key to success at a trade show is in the pre-event preparation. Experienced trade show exhibitors train their staff in good stand technique and do most of their work in advance of the event, contacting potential customers to make specific appointments. Any spare time at the show is used in scanning the other stands, eyeing up the competition and looking for new leads. If you do spot a potential customer on another stand, it is poor etiquette to try to engage them in a sales conversation there and then. You should just ask for the name of the key decision maker for contact after the event, and take as much of their sales literature as possible for your pre-meeting research.”

Have you noticed a common thread that runs through most of the above suggestions? It seems to me that almost everyone recognizes that nothing replaces hard work and personal contact. I’ll discuss that more fully in the next post.


Networking to Find Employees


A blogger at JEM Consulting wrote, “Many smaller businesses rely on networking or referrals to find employees rather than traditional or online want ads. Well it comes as no surprise to me that 59% look to their network to find prospective employees; those networks being family, friends and current employees. Additionally they are looking to social networks, especially business based networks.” [“Small Business Finding Employees Networking and Social Media,” 7 June 2011] If you want to go beyond family, friends, and current employees and use social networks, Josh O., founder and CEO of Snthy, an online recruitment concierge service that claims to take “the grunt work out of the hiring process,” offers ten sites, including his own, that you may want to consider [“10 Sites To Find Employees For Your Startup,” EpicLaunch, 20 May 2011]. He writes, “Through trial and error entrepreneurs find and perfect their business model, only to be discouraged when they cannot find a team to execute their ideas. Finding the perfect team leads to finding the perfect balance. The balance all of us entrepreneurs seek is often just clicks away … buried in a world of spammers and unreliable, incompetent workers.” Click on the link above to see the “list of 10 sites to help you on your journey to find the perfect balance.”


Putting yourself in the right place at the right time is a good way to begin networking; but it is only the start. In tomorrow’s post, I’ll discuss some of the recommendations that others have offered about what you should do once you find yourself in a networking situation.

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