Investing in Your Social Capital
Join us at Entrepreneur magazine's Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Register here for exclusive pricing, available only for a limited time.
I'm sure all entrepreneurs have heard of financial capital, but many may not have heard of social capital. Social capital is, in fact, very similar to its monetary sibling. It, too, is accumulated by an individual or a business and used, or is available for use, in the production of wealth. Put more simply, it's the accumulation of resources developed through personal and professional networks. These resources include ideas, knowledge, information, opportunities, contacts and, of course, referrals. Just what do you need to keep in mind when thinking about building your social capital?
Social capital is built by design, not chance. According to Wayne Baker, author of Achieving Success Through Social Capital , "Studies show that lucky people increase their chances of being in the right place at the right time by building a 'spider web structure' of relationships that catch information." Furthermore, according to Baker, "Success is social; all the ingredients of success that we customarily think of as individual-talent, intelligence, education, effort and luck-are intertwined with networks."
Thus, a key way that social capital is acquired is through networking because successful networking is all about building and maintaining solid, professional relationships. The trouble is, we don't live like the Ingalls in Little House on the Prairie anymore, and we don't have the natural community-like business relationships that existed before. Many business owners hardly know their own neighbors, let alone the local businesspeople in town.
More than ever, networking is critical to an individual's success in business. A strong contact network, also known as a business development network, where one person from every profession is actively seeking business from and for one another, can help create a virtual Main Street for businesspeople. It provides an environment and a system for a 21st century approach to the traditional model of doing business.
Formal, structured networks like this provide the mechanism for accomplishing the shared objective of business development within a particular community. According to Eric Lesser, author of Knowledge and Social Capital , "Without a shared understanding of common terms, activities and outcomes, it becomes very difficult to reap the benefits associated with building social capital." Herein lies the incredible power of structured networking programs. They provide the "common terms, activities and outcomes" (or system) that lead to building substantial social capital for the people who use the program effectively.
Effectively developing your social capital can be a daunting task. However, doing so within a structured, organized networking framework will leverage your efforts and help you begin building your balance of capital to positively impact your bottom line. Here are some keys to creating social capital that will help you form the foundation of your business endeavors:
1. Plan your word-of-mouth. Having taught strategic planning at a California State University over the past decade, I've learned a great deal about planning and starting new businesses. Many years ago, it used to surprise me that 50 percent of all businesses fail after only three years in operation. However, now that I know how little planning many businesses do, I'm surprised that only 50 percent fail.
If you want to be successful in business, it's critical that you plan your work and work your plan. Furthermore, part of your plan should involve your strategy for building your business through word-of-mouth. In my book, The World's Best Known Marketing Secret , I talk at length about the importance of what I call your "Word-of-Mouth Business Acquisition Tactics" plan, or WOMBAT plan. Completing the WOMBAT plan will help you achieve the results you deserve for all the hard work you do as a business owner.
2. Give referrals. Every day, week and month, entrepreneurs strive to build their businesses through referrals. Part of this process is to build a team of people whom we recommend and refer. This is part of the process of building your social capital.
If you're not already a member of a strong contact network, find a chapter near you and get started. There's no better way to systematically develop a solid base for building social capital than in an organization dedicated to helping you succeed in this endeavor.
3. Show professionalism at all times. Being dependable, delivering a product on time, meeting appointments consistently and treating others with courtesy will give you a professional reputation and cause you to be remembered by those you wish to have become a contributor to your social capital.
It's a dog-eat-dog climate in the business world today. Competition is fierce, and some entrepreneurs employ down-and-dirty tactics. Studies have shown that one of the most important factors in doing business by referral is someone's "professionalism." By remaining professional at all times, you'll rise to the top of the barrel and succeed where others will fail.
As you invest your time in developing your social capital, know that you are, in fact, increasing your bottom line. Strive to make the most effective use of this investment by doing everything possible to thoroughly enhance the relationships you develop in the coming months and years, because social capital definitely leads to improved financial capital.