Penny Wise and Time Foolish

Networking takes time. Done properly your time investment brings huge rewards. Done poorly, the way most people network and how I did for years, your time is wasted, never to be regained. Read Mike Macedonio's article for insight.

Penny Wise and Time Foolish
By Mike Macedonio

Is it just me or is anyone else shaking their head at the assertion that “word-of-mouth marketing and referral marketing are FREE advertising.” Clearly, referral marketing (done properly) is a cost-effective way to get businness, but the only way I can possibly see making it FREE is to do nothing at all.

So what is the investment for referral marketing? There are two investments with building your business by referral: time and money. I’m surprised when I ask business owners how much they are investing in referral marketing and they don’t have any idea. Is it because it is so cost-effective that they don’t think it is worth budgeting or tracking? Maybe. However, I also see businesspeople turn down opportunities to get involved in networking organizations, acquire training, attend conferences or sponsor strategic alliance events for financial reasons.

What about the hidden cost? How much time are you spending networking and meeting with referral sources? What is your time worth? Often when I ask that question, I get the billable rate. Here is the simple formula I use. How much you earn, divided by how much you work. For example, if you’re making $120,000 a year working 40 hours per week, 50 weeks a year, your time is worth $60 per hour. You may be billing $150 per hour; however, after you factor in everything else you are doing, this is what your time is returning to you.

When you consider that the serious active networker will spend eight hours a week attending networking events, networking online, meeting with referral sources and giving time to activities with his network, that works out to 400 hours per year or $24,000 of time invested a year. Hmmm, that doesn’t sound like FREE to me.

Referral marketing is the most cost-effective way to grow your business. Getting the best return on your time and money requires a clear referral marketing plan. Will you be spending your time doing the right things, with the right people, in the right organizations? Investing in referral marketing knowledge will help you get the best return for your time investment. Be careful not to fall into the common trap of being penny wise and time foolish with your referral marketing. Create a budget and invest appropriately in your referral marketing.