Shock and Awe of Business to Business Networking Costs

Does $38,900 shock and awe you specific to business to business networking costs? What would you say if I said that was probably more on target than you may care to believe?

Business to business networking is a significant business building activity.  Yet, the majority of small business owners to salespersons to C Suite executives fail to analyze the effectiveness of this frequently utilized marketing action to increase sales.

If you disbelieve this $38,900 or more annual investment, let me share how I arrived at this significant and often overlooked investment.

Chamber Investment: A typical small business owner joins a local chamber for $200 annual fee and then attends 10 – 1.5 hour monthly luncheon meetings at $20 each.  She then spends 3 hours each month on two chamber committees (12×3 = 36 hours). Given each event is an hour drive she racks up another 34 hours of time or two weeks of work each year.  Total dollars invested is $8,800.  Sales Coaching Tip: If you do not believe your time is worth $100 an hour, then this may be one reason why you are not reaching your goal to increase sales.

Results:  The small business owner average client value is $1,000. She secures one new client per quarter for total new annual sales of $4,000 and is one happy camper.

The Marketing ROI Gap:  The small business owner thinks the $400 is a great investment and relishes getting 4 clients per year from the chamber along with additional sales leads. She is getting far more back than being paid.  Oh, really? To recover the investment requires a minimum of securing 8.8 new clients or 1.4 new clients per month.

Professional Industry Association:  The small business owner joins a professional industry association to secure new sales leads where food costs are optional and the meetings are for 1.5 hours during the evening 10 times per year.   Drive time is still 1 hour round trip.  Total time invested is 25 hours or $2,500.

Results:  The small business owner secures 2 clients and six new sales leads during the year.

The Marketing ROI Gap: The individual believes again she is receiving a good return on investment as securing the two new clients didn’t cost her a darn cent not to mention those six new sales leads.

Formal Networking Group:  Believing in building local relationships, the small business owner joins a formal business to business networking group connected with a national franchise.  The annual dues are $600′  the weekly 1.5 hour meetings require $8 dollar breakfast tab and another 30 minutes in tracking referrals.  Drive time is 30 minutes round trip. Total investment is $1,016 out of pocket costs plus 130 hours of time at $100 an hour or a total of $13,000.

Results:  The first six months a few sales leads are exchanged, but not until month eight are any new sales earned.  Then 4 new clients are billed at the average $1,000 value and an additional six sales leads have been received.

The Marketing ROI Gap:  There exists a gap of 9 clients. However, the small business person is happy because the investment was just $600 and breakfast is a write off anyway.

Professional Association:  Believing in professional development and the value of business to business networking to secure new sales leads, the small business owner joins a professional association at an annual membership fee of $200.  Again, there are 10 monthly luncheon meetings at a cost of $20, the usual 1.5 hour of meeting time along with 1 hour of drive time. Direct hard costs are $400 with time costs of 25 hours at $100 per hour or $2,900.

Results: She receives two clients from being a member and is delighted.

The Marketing ROI Gap:  For this investment to generate a positive return on investment requires securing a minimum of 3 clients.

Miscellaneous Networking Events:  During the year, this crazy busy small business owner attends one weekly business to business networking event such as a ribbon cutting or an open house.  Time invested is one hour along with on average 30 minutes of round trip drive time for a total time investment of 78 hours at $100 per hour or $7,800. Additionally, she plans one out of the area networking luncheon or dinner each month taking a total of 3 hours of time along with $25 in food costs. Total hard costs are $300 with indirect cost of time at 36 hours or $3,600 for a total investment of $3,900.

Results:  From these networking efforts, she secures one new client per month at the standard client value of $1,000.  She looks at the time invested and thinks this is really too much effort for such meager results.

The Marketing ROI Gap:  Given the total expenditures for these business to business networking activities is $11,700 and she has earned $12,000 in new sales, these activities are generating the most positive return on investment.

When all the numbers in red are added, the total investment is $38,900.  This figure does not include participation in any tradeshows, purchase of business cards, development of website, costs associated with printing of brochures or giving any promotional items such as pencils or pens.

With an average client annual value of $1,000, a minimum of 38.9 or 39 new clients in round numbers must be secured.

Just imagine what would happen if that small business owner re-purposed her marketing budget and directed it to activities than generated better results?  Yes business to business networking is essential. However this does not mean the small business owner or salesperson should ignore analyzing his or her out of pocket expenses (direct costs) and time (indirect costs).

Business to business networking is not cheap, it is expensive.

Take a shock and awe lesson and consider putting in place a way to measure the effectiveness (marketing ROI) for all those memberships, lunches and hours invested.

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8 Responses to “Shock and Awe of Business to Business Networking Costs”

  • How well I remember all those fees and things associated with being a Realtor. So glad I changed focus, decided to have an online biz, and do most of my networking online. You just reinforced that I made a great decision!

  • Martha – Part of this posting actually came from working with a realtor who never took the time to compare the costs with the results. I cannot understand the aversion by so many small business owners to crunching numbers beyond their checking account balance. Thanks for stopping by and sharing your experience..

    Leanne Hoagland-Smith

  • Hello Leanne!
    These numbers are quite an eye-opener to any entrepreneur. We small business owners are quite unaware about where our precious time is going and few us take the time to sit down and quantify and measure one’s ROI. I myself have been guilty of this. As entrepreneurs, we can’t afford not to network with others. Yet, it’s time we got smart about it.

  • Yes Srinivas, the numbers are quite revealing. I undertook this analysis when I saw myself being quite busy and not securing the results I wanted. Sometimes the cultural hype associate with business networking to social media to even mobile technology needs to be logically analyzed and more importantly tracked so that some predictive analysis can be undertaken. Like your observation of “we can’t afford not to network with others. Yet it’s time we got smart about it.”

    Leanne Hoagland-Smith

  • Oh, dear! Leanne, this was quite an eye-opener. But when I consider the time I spent online the results in figures are about as shocking as those shown above. I absolutely agree with Srinivas’ wake up call for getting smart – any ideas? Thanks, I really enjoyed your post!

  • Barbara – One suggestion is to automate as much as possible. I was speaking with Fred McMurray (3 daughters no sons) of Media Vine Marketing and he may be a good outsource for you.

    Look forward to you coming back in the future,

    Leanne Hoagland-Smith

  • Leanne,

    As always, very good stuff!

    I had valued my time in my math, but not calculated, quite exactly, as you had above. Thank you for presenting so thoroughly.

    Question: When you say re-purposing marketing budget – What are you referring to?

    ~Keri

  • Keri – Thanks and for the re-purposing of the budget, may mean shifting funds designated for the example the chamber away to more results driven marketing activities such as social media to industry associations. The funds are still for marketing, but are directed to more results driven marketing activities. This type of analysis reveals what marketing activities generate the greatest results. Does that make sense?

    Leanne Hoagjand-Smith

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