When the topic of assets and currency comes up, your mind probably goes straight to the financial side of running a business. You’re likely to think about the assets your business has invested in over the years and how they benefit you, how they’re a currency you can use to your advantage. But, with competition stronger than ever and the world of networking changing, there’s a new currency to barter with – social capital. When social capital is invested into your network, and you treat that network as a key business asset, you’ll position yourself for growth and relationship building success.
What is Social Capital?
Social capital refers to the value that’s embedded in your relationships, reputation and professional connections. It’s the trust, access and goodwill you’ve built up with others, ranging from friends and colleagues, to mentors, clients, and even the odd business acquaintance. It’s what opens doors that professional credentials and capital can’t access alone. Whereas financial capital buys you physical things, social capital opens doors to opportunities, partnerships, connections and deals.
You will have heard about compound interest in finance. When you invest early and add to your investment consistently, your return on those investments increases. It’s the same principle when it comes to social capital. When you intentionally dedicate time to building your social capital, it compounds in ways that can drive your business forward, snowballing until your network is as strong, diverse and sustainable as possible.
Why Social Capital is Vital for Business Owners
- It Future-Proofs Your Career and Business – There’s always something changing in the world of business. Your market could suddenly shift. Your industry could suffer a big disruption. The economy could crash. Your customers’ behaviour could suddenly change. But, for business owners with a strong network and a lot of social capital, bouncing back is significantly easier. Your relationships are one of the few assets that move with you across markets, industries and stages of business. They provide resilience in uncertain times, and momentum in times of transition. Just like a diversified investment portfolio, your network and social capital gives you options.
- It Reduces Transaction Stress – When you’re a trusted business owner, everything moves a lot faster. Making a sale doesn’t take quite as long, referrals come flooding in, and deals happen with a lot less back and forth. When it comes to speed and scale, social capital gives you a shortcut. If you’re hiring, social capital gives you access to the best candidates and top talent. If you’re launching a new product, service or business, social capital creates a network that’s ready and waiting to be your first customers.
- It Grows in Value Over Time – Though some assets depreciate over time, social capital grows stronger, becoming more valuable. The longer you nurture social capital and the more time you invest into it, the more it’ll pay off. It’s not about immediate ROI, and you’re unlikely to see major returns overnight. But, playing the long game is worth it. It’s about building equity in relationships that benefit you further down the line. Investing in social capital and building your network now will pay off months, years and decades to come.
How to Use Social Capital to Invest in Your Network
If social capital is the new currency for business owners, then networking is the investment strategy.
- Change Your Mindset from Networking to Providing Value – You don’t want to be known as a business owner who’s only in networking for themselves. You need to provide value to others. Think about how you can be useful to someone else, who you can connect them with and what insights, tools or service you have to offer. This will help you to become one of the most valuable people in your network, someone people want to partner with.
- Build a Consistent Approach to Relationship Management – You wouldn’t check a financial investment once a year, so don’t fall into the trap of forgetting about investing in your network. Get into the habit of staying in touch with connections and managing professional relationships. You can do this by sending a note or article to someone once a week, set a recurring calendar event to check in with peers, and follow up after events to keep conversations going.
- Be Selective with Your Network – You’re not going to get much out of networking if you’ve built up a group of hundreds of people who aren’t aligned with who you are, what you do and the types of business you’re interested in. Instead, focus on building a network with fewer people, but ensuring all of those people trust you and know what you stand for. When you’re investing in your network, it’s about quality, not quantity.
- Audit and Reinvest in Your Network Regularly – You’re bound to audit, reinvest and rebalance your financial assets, so make sure you do the same with your social capital. Determine if you’re too invested in one industry, and whether you should balance things out by networking with leaders in another area. It’s also important to make sure you’re spending time nurturing older relationships, and not just making new ones.
Social capital isn’t built overnight, but it can be lost quickly if you fail to give it the time it deserves. Approach networking and investing social capital with the same seriousness and respect as you would any other form of capital. Social capital doesn’t just support your growth, it can accelerate and protect it when it’s invested wisely. It’s not just who you know in business, it’s who trusts you and who wants to work with you.
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