Last week's issue was about the importance of Building Relationships in Winning the Game of Business and how networking can play a key role in helping you develop new ones. If you missed last week's issue, you can review it on the Newsletter page of our web site. You will find the Newsletter button by clicking on the FAQ's and Resources button in the right hand column.
As with any game, knowing the rules helps a whole lot if your intention is to compete effectively enough to win the game. Here are some of the rules for effective networking
(and there are more):
- Be prepared
- Have more than enough business cards for every member of your group
- Have something to take notes with
- Know what you are going to say
- Rehearse it until it becomes natural
- Build rapport first
- Do not launch into a sales pitch right away
- Give as little info about your business so that you have something interesting to discuss in the follow up meeting
- Do not spend more than a few minutes with each suspect. Networking opportunities are limited. Make the most of them!
- Know what makes a suspect a qualified prospect or ally.
- Create two or three non-threatening questions, stick to them, and use them.
- Get as much information as you can about their business
- At a minimum, make sure they are the decision maker
- Give them referrals
- Talk about the referrals you can give them
- To receive, you must give
- Get a commitment for a specific day and time to meet again or follow up
Here are some questions from Molly Gordon that you can use to explore how you can be a more effective networker.
- How does your product or service serve or advance the best interests of your prospective customers, in particular, and of your community, in general?
- How can you be a better listener so you can connect with people on the basis of their interests?
- What story are you telling yourself about your customers and their ability to respond to your offer? How might your preconceptions block your ability to make your offer with integrity and grace?
- What, if anything, is in the way of your holding your potential customers' best interests at heart? What keeps you from giving what you have to give?
- Where can you best have a conversation with potential customers so that they can feel comfortable assessing your offer?
- How can people respond to your offer? Is it easy for people to connect with you in their own time and on their own terms?
- Are you asking for what you want? Do the people you are asking know that you are making this request?
As you reflect on these questions, check in with yourself to see if you are holding any old beliefs that are getting in the way of effective networking. Consider how letting go of those old beliefs might make room for new options.
Remember, making new sales involves two things… building relationships and playing the numbers game. Don't expect everyone you speak with to buy from you the first time you meet. It takes time.
This column covered general information about the rules of business networking. There are many techniques that can be used powerfully and effectively for different industries and professions. If you are new to the game of networking, you may want to consider joining our Business Boot Camp (BBC) Series of workshops. Business Networking is one of the topics that is covered in depth.
Next week's column: What to do after the mixer
As your ally in Winning the Game of Business, Level IV is committed to maximizing your investment of time in all things business related. As such, we work very hard to ensure that the information contained in every newsletter provides value and benefits for our readers. It is also why you will only find the first couple of paragraphs from each article contained in this email. Our intention is to give you enough information in the first couple of paragraphs for you to decide if the remainder of the article or column is something you might find value in. Should you be interested in learning more, a link beneath each article will take you to a place on our web site where you can read the full text of the article.
In addition, we remind you that our mailing list is strictly permission based, and no one is obligated to receive this information. You are receiving this newsletter because at some point in the past you met a member of our firm that believed you would benefit from the information contained in our newsletter. At any time you may unsubscribe yourself from receiving any or all information distributed by our firm by clicking the link provided at the bottom of every newsletter. We also go to great lengths to protect your personal information from outside sources.
The most common and basic of all human fears is the fear of the unknown. It stops us daily in untold ways. For example, what social events have you been invited to in the last month or so that you didn't attend because you didn't know what kind of people would be attending? What opportunities have you been offered that you didn't take advantage of because you didn't know if there was a "catch," some hidden cost or consequence in your participation? Other examples? Fear of what people will think of us stops us from approaching people. Fear of people not liking us stops us from sharing or being in communication with people. Fear of technology stops us from using it powerfully to benefit us.
It's one thing when our fear of the unknown stops us from involving ourselves in social activities. Something else entirely when it stops us from realizing the tremendous potential inherent in owning a business.
OK. So you've narrowed your choices to two new cars, but you can't seem to decide which one is really the better deal. The purchase price of each car is nearly the same. The features are similar, and you like the way they both look. Still, a nagging feeling tells you that there must be a meaningful difference between them, even if it's not readily apparent during the purchase process.
Your intuition is right on the money. And now there is a FREE new tool that reveals the hidden costs - all of the costs - associated with buying, owning and operating a car over a five-year period. It's called "True Cost to Own" or (TCO), and it is a new consumer product provided by Edmunds.com. That's right, all this valuable information/research, and no catch, no charge!
The Edmunds.com True Cost to Own (TCO) pricing system calculates the additional costs you may not have included when considering your next vehicle purchase. These extra costs include: depreciation, interest on your loan, taxes and fees, insurance premiums, fuel costs, maintenance, and repairs. Search below to view the TCO of any vehicle.
To show you how it works, let's look at two midsize family sedans. The purchase price of one is $21,500 and the other is $22,400. You like each one equally, so your inclination is to say, "I'll just buy the cheaper one." After all, that would save you almost $1,000.
However, the purchase price is only the tip of the iceberg. What you may find by reviewing the TCO figures is that, over five years, the cheaper car to buy is actually more expensive to own. Over five years, it will cost $33,438 to drive the car with the lower initial price. The more expensive car to buy will cost $30,140 to drive over five years. The car with the lower purchase price costs 45 cents per mile to drive while the more expensive car costs 40 cents per mile to drive (assuming you drive 15,000 miles a year).
At this point you are probably wondering how Edmunds comes up with these figures. There are seven categories of TCO costs: depreciation, financing, insurance, taxes and fees, fuel, maintenance and repairs. The costs are researched and placed into a series of proprietary algorithms developed by Edmunds' statisticians. The result is an estimated total ownership cost for a five-year period. This information is presented on a single page for each vehicle (beginning with 2002 models). The information is standardized, so expenses for different cars can be accurately compared.
TCO reveals a complete picture of car ownership-related expenses, designed to help consumers make the right choice when purchasing a vehicle. In fact, some buyers might find that they can afford to buy a car, but they can't afford to own it. Understanding a vehicle's TCO is extremely important to a person on a fixed budget.
You might use the following analogy: You are choosing between two shirts and you finally decide to buy the one that is $20 less. But later, you discover that it has to be dry-cleaned using a special process. Each time you get it dry-cleaned it costs $4 plus the hassle of taking it to the cleaners. After five washes, the savings on the shirt you bought have disappeared, and you probably wish you had bought the more expensive one in the first place.
Additionally, TCO may confirm something that you already know and help you solidify your decision on which car to buy. For example, it may be common knowledge that a Honda Civic is a good value for the money. With TCO, you can confirm this: The cost per mile is about 28 cents, one of the lowest of any vehicle.
To try it for yourself, click here.
For the record, Level IV is not associated with Edmunds.com nor do we vouch for the accuracy of their analysis. We have, however, found the information interesting and potentially helpful for people looking to purchase a car.
At least once each month, we will include this column for entrepreneurs that may or may not have used the services of a business coach as an example of the types of issues that may be addressed in a business coaching relationship with
Level IV and, ultimately, the benefits of having this relationship for you and your business. If any actual client situations are referred to in this column, names and any identifying details will be altered to protect the confidentiality of the individual. The following story could apply to any business, whether selling a product or service, but in this particular case they manufactured and sold a series of products. See how this might apply to YOUR business.
Years ago we worked with a business that, on the surface, appeared to be doing everything right. They made a healthy profit on every item they produced and sold (service providers, this applies to you, too), they knew their monthly expenses, and they had created a budget for marketing that they stuck to faithfully. By all accounts, they were a successful, growing business. Or were they?
Despite their best efforts, the business wasn't profitable. So what was it that was missing? How did we turn this "money pit" into a "cash cow" for our client?
We asked our client how they arrived at their per unit cost. (Service providers can substitute "unit cost" with the total cost of delivering your service, either per hour or per service delivered.) They said they added up the costs of all the raw materials, sub-components, and packaging for each item they sold. That gave them an accurate picture of what each item cost them so that they could assign an appropriate markup.
But did it really?
We began by running through one of our checklists. We asked them:
- How long it takes to develop, research, and test each new product
- How much they pay their development staff
- How often do they add new products/services
- How do they account for new products/services that they don't implement on their bottom line
- How long it takes to build/assemble each item
- How much they pay their assembly line employees
- What kind of compensation their sales staff received,
- How much they spend each month on customer service,
- How much on quality assurance,
- What they paid each month in employment taxes and workman's compensation insurance
- How long it takes to process an order once it's received,
- How much they pay their employees that process orders,
- How much they pay their employees that ship orders,
- What is the cost for packaging for each shipment,
- How much it costs to generate each invoice,
- How long it takes to get paid on each invoice,
- How much it costs to collect and process payments for each invoice,
- How much they spend each month on rent,
- How much they spend each month on utilities,
- And how much they spend each month on executive salaries.
We then calculated the actual cost of each employee that was involved with every product from inception to production and from initial contact with a prospect to receiving payment. We divided their monthly overhead and marketing expenses by the total number of units sold every month and applied the amount proportionally to each item. Then we added those two things to their cost of materials and packaging.
Guess what we found?
Yep, you guessed it! They were losing money on every sale!! Armed with this knowledge, it was relatively simple to make adjustments to their pricing and marketing strategy to ensure that they were in fact profitable… on every sale!
But how many business owners take the time to ask and actually answer these questions? Not enough. How about you?
The moral of this story is: Know your numbers! All of them!!! And if you don't have the time or expertise to do it yourself, get help!
Your business, and your future, depends on it! A really big part of Winning the Game of Business involves knowing your numbers, or, put another way, knowing the score. Do you know the score in YOUR business? Really?
For more than a year now, Level IV has enjoyed a close working relationship with a wonderful attorney named Kevin Khalili. We have been most impressed with the high level of integrity that he operates at, in addition to the direct and compassionate way he communicates with his clients. He is a member of the State Bar of California and has been practicing law for over 6 years. He has participated in Landmark Education's Curriculum for Living and recently became a father. In his spare time, he helps out at a thriving small business he owns on the West Side. Consequently, he understands better than most attorneys the legal issues that business owners must deal with, both at the start of the business and during day-to-day operations. He also appreciates how important it is to run a tight and profitable business. Mr. Khalili contributed the following article.
Time after time small business owners start or purchase a business and start operating the business before considering the structure that would best suit their needs. There are several options for a small business owner to consider. They are:
- A Sole Proprietorship;
- A Partnership;
- A Limited Partnership;
- A Limited Liability Company;
- A Corporation; (whether "C" or subchapter S)
The one that is best for you depends greatly on your individual circumstances. In the coming weeks, we will be taking a look at the advantages and disadvantages of each form of ownership.
For this issue, we will discuss corporations… specifically, a traditional corporation, sometimes call a "C" corporation.
Benefits of Incorporating
- PROTECTION, this is and will continue to be the number one reason to incorporate!
- Business owners can shield themselves with anonymity by incorporating. This can be especially important if a businessperson does not want their involvement in a business to become public knowledge. (Nevada & Delaware)
- With a corporation, capital can be raised easier than in other businesses by selling equity interests or stock.
- The transfer of ownership of a corporation can be handled with the simple sale of stock.
- A corporation is an entity of its own, where officers, directors, and shareholders can change as often as you like without affecting the business. Unlike people, corporations never die (they just go bankrupt)!
Issues You Should Consider Before Incorporating
- Double taxation (for a "C" corporation), meaning that the net profit of the corporation is subject to federal and state income tax and the distributions by the corporation to its shareholders are taxable as well.
- Costs, e.g. filing fees, separate tax returns, more expensive accounting fees, etc.
- Strict compliance with corporate formalities, e.g. annual fees, formalized accounting practices, annual meetings, and administrative work.
Important note: There are some significant differences between a traditional "C" corporation and a subchapter S corporation. These will be discussed in an upcoming issue. Stay tuned!
This publication is NOT INTENDED TO SERVE AS A SUBSTITUTE FOR LEGAL ADVICE. Please consult with a licensed attorney if you require legal advice.
Entrepreneur: I've done a great job of networking and collecting information on prospective new clients. In fact I have a stack of business cards to prove it. But now I have a problem: how do I organize and manage all of the cards I've collected?Level IV: People that are great at networking often end up with so many names, professions, specialties and companies that they can't remember who does what. So how can they get this jumble of valuable contacts organized and keep the information at their fingertips? It can be done, but it takes planning.
There are many ways to do it, but the system that works best for you depends mainly on two factors: the nature of your business and the way you process information. With so many different kinds of businesses, the way you organize networking contacts will probably be uniquely your own.
Whatever system you set up, the most important factors in maintaining it are to:
- be consistent in the way you organize and use it and
- keep the information in it up-to-date.
Each time you return from a meeting, conference, trade show or out-of-town trip and prepare to catch up on what's happening at the office, the first item on your agenda should be to record and organize the new contact information you've gathered. Your starting point is all those new cards you've brought back with you in your pocket, briefcase, suitcase, gym bag, purse or computer case. And if you're a really savvy networker, you will have collected several cards from each contact, one to use in your card-filing system and the others to use when making referrals.
Let's break the work down into three clear tasks. To integrate the new information into your existing network, you need to do three things:
- organize and
- follow up on your contacts.
You will follow your own inclinations, preferences and criteria for accomplishing each of these tasks, but the end result of your efforts should always be to strengthen, extend and enhance the effectiveness of your network of contacts.
Regardless of your system, the first thing you need to do is sort your contacts according to their potential importance to your network. Your time is valuable, and if you're like most people in these busy times, you have to ration it.
We recommend a triage system:
The A list consists of contacts with whom you definitely want to develop relationships and maintain regular contact, whose cards you want to keep near at hand. This category can be further subdivided into three groups:
- Prospective clients.
- People you will refer to others.
- People who will pass referrals to you.
The B list includes contacts whose cards you might want to keep for possible reference, but that will not be developed under any of the A-list criteria. These are people with whom you don't expect to stay in regular contact other than sending them an occasional sales letter, promotional piece or newsletter. To simplify your filing system, it's usually best to keep these cards separate from your A-list cards.
The C list is everybody else-people or industries you don't want or expect to contact. There's no reason to keep these cards, so if you're short of desk space, throw them away. But think carefully before you toss them: Haven't we all dropped something into the trash, only to regret it a day or two later? A separate card box might become a lifesaver. You can note the date of contact on the back of the card and leave it in the C box for a few months or a year. Go through it periodically and cull the ones you've had the longest and never used. In the meantime, your C-box cards will come in handy as bookmarks… or toothpicks.
Any two-way relationship, whether personal or business, is based on a familiarity with each other's interests, skills, preferences, ambitions, desires, charitable activities, hobbies and other factors. It is also based on making contact often enough to avoid being forgotten or ignored. These two principles guide the way your A list helps you build and maintain relationships.
Once you've done your triage and have sorted everything into three piles, you can start to organize your A-list database by alphabetizing your cards, grouping them by region or industry or profession, cross-referencing them or applying any other criteria that fit your profession and your business habits.
There are two principal ways of setting up your database: the old way and the new way. The old way is a manual filing system. The new way is a computer database. One of the most common, and least used and understood, contact management software programs is Microsoft Outlook. Few business owners we've met are even aware of its power, let alone use it to its fullest potential. Take a look at the Help section in Outlook, ask your technology consultant, or work with Level IV to unlock its full potential as it applies to your business.
Your filing system may differ, but the importance of using it to make and maintain contact is vital. Write out a schedule and set goals for making contacts. You could set aside 30 minutes each day to look through your file and choose someone to call. Or you could leave the time factor open and set a goal to call five, 10 or 20 contacts, new and old, every week. Keep an eye out for people and events you can discuss and choose the people most likely to be interested in or able to benefit from these opportunities.
Few of the people you meet for the first time at a business mixer are going to express a need for your product or service, but that doesn't mean you have nothing to offer them. Recommend the people on your A list by distributing their cards at other functions you attend. Let them know you've passed their card to an individual, recommended their business and that the prospect is expecting a call.
Once you've made that first contact, you need to keep building on it. One important way to do this is to follow up on previous contacts. A few weeks after your note to someone, follow up with another note or a phone call to ask whether the referral worked out. This will remind that person of your interest in his or her business and other pursuits. It will also reinforce his or her resolve to look for ways to return the favor.
Another powerful and effective way to build relationships is with newsletters. But that's a topic for another conversation…