Entrepreneurs are often told the importance of getting out there and meeting people. But how does it actually affect business?
According to research, it could have a significant impact on the success of a start-up. Data from a survey of more than 1,000 entrepreneurs in the UK found that they are aware that they need to improve their ‘social capital’ but do not know how to go about it.
The report carried out by the Business Schools at the Universities of Surrey and Greenwich, defines social capital as ‘the goodwill available to individuals and groups; it operates where friends, colleagues or general contacts receive opportunities to use their financial and human capital’.
Perhaps the obvious way these days for entrepreneurs to maximise their social capital is through online networking and social media but the researchers found that most regarded this as a ‘necessary evil’. LinkedIn, however, was considered to be of equal importance to traditional networking events.
Professor David Gray of the University of Greenwich, who co-led the research, explains: “Successful SMEs are mindful of both the potential benefits, and dangers, of spending time networking on social media. While they value LinkedIn for showcasing their business and establishing their brand, they are wary of getting too sucked into discussions, losing sight of the need to find new customers. The same is true of Twitter – it can be a highly effective tool for SMEs when used in conjunction with other social media, such as the business’ website and blogs; but there is the danger that tweeting may replace genuine business activity.”
The findings make it clear that entrepreneurs do not consider online networking as a replacement for face-to-face connections. But they also show that entrepreneurs should be selective in deciding which events they attend to avoid ‘event overload’.
“Our research shows that SMEs need to be strategic in their use of offline and online activities to maximise their effectiveness and avoid falling into the time-wasting trap,” study co-director Professor Mark Saunders of the University of Surrey says. “Social capital – the quality of goodwill created through these activities – provides information and influence from which SMEs can yield valuable business development opportunities.”
It is important, however, that entrepreneurs don’t fall into the common trap of thinking that the more connections they have, the more likely they are to succeed.
“We need to determine the optimum number of connections we can comfortably handle,” Punit Arora, assistant professor at the Colin Powell School of Civic and Global Leadership, CUNY, says. “We have a limited capacity for relationships. While the numbers may vary a bit, research from University College, London tells us that our cognitive capacity is limited to handle no more than 150 to 250 relationships.”
The more important thing, according to Arora is cultivating these relationships well. Rather than going out and trying to create many new connections, entrepreneurs should focus on having varied connections, he says. “We like to network with those who have something unique to offer – knowledge, skills or entertainment. The first step in building your network is to identify your unique skills and find people who are different, but complementary. You do not want your contacts to be so similar that all the information and resources you get are redundant or so different that you have nothing in common.”