Wednesday, August 31, 2011

INSIGHT: What Is Your Economic Value?

Economic value is an important term with regards to any business and building wealth. Understanding this value will ultimately show you why you should establish a strong network of customers and potential customers for your business. Robert Metcalfe, co-inventor of the Ethernet in 1973, suggested the value of a network of computers was a function of the number of nodes, or members, connected to the network. Metcalfe later formulated his theories on network growth into Metcalfe’s Law.

For the network marketer, such as myself, his law is important because it illustrates the power of a network of motivated entrepreneurs to create significant income from group sales volume. Here's how a standard business model works with no networking involved: As with any business, for each customer you serve, you receive so much in return. Your economic ratio is 1 : 1. If you serve two people, your economic power or value is 1 : 2. The first number in the ratio is you (your business) and the second number is your customers. If you have 100 customers, your ratio is 1 : 100.

Ultimately, there is a limit to how many customers you can find and serve. You are only one person and you can only serve so many people in a given day. In network marketing Metcalfe's Law of Networking says that your economic power or value is the square of the number of entities (people, customers, or businesses) in your network. So, when you start your networking business with Qnet, your economic power is 1 : 1 squared or 1. That's why in the beginning, you appear to not make a lot of money or have a lot of economic pull. The growth of your network is like the proverbial rocket ship leaving the launch pad. Your progress is slow, lumbering, and sadly, precarious. It’s easy to quit at this early stage and hard to see the potential for making money.

As your network grows, so does your economic value. Economic power is the potential amount of money you will receive from your network. If you have 2 people in your network, your economic power is 4 (1 : 2 squared equals 4). That means, instead of having just 2 potential customers in your network, you have 2 more because of the network each of your two has. As your network grows some more, say you have 10 people in your personal network, your economic value now turns to 100 (1 : 10 squared equals 100.) So, instead of just having 10 people paying you money, you potentially have 100 people paying you from the people within your 10 personal referrals within your network because each of those 10 have the same 10 referral potential you have.

A critical part of Metcalfe’s Law that you must understand is the role of staying in contact with your team members. Metcalfe applied his law to physical phone networks, and described network value in terms of potentialities. That is, the physical phone structure may exist, but it is only valuable when people use it to connect with one another. Likewise, your network marketing business is a social network, and its potential value is only realized when people within your group work together to train, motivate, and generate interest for new prospects. If you have 5 members in your downline working as individuals, the value of your network is 10. Get everybody on the same page, working towards a common goal, and that value explodes to 100.

Metcalfe's Law of Networking is why network marketing is so popular in the world of business. People you refer know people and their people know people. This referral based marketing concept is used for the sales and distribution of products and services around the globe and if you are patient and consistent with your efforts, your network will grow until you have more people than you know what to do with. This is the power of economic value in business.

I hope this brief lesson, that i recently learnt myself, has helped you understand why networking is so powerful and if you have any other questions or you are interested in starting your own business right now, check the QNET website, e-mail me directly or leave a comment below and I'll get back to you. Remember this one thing about Metcalfe’s Law: One additional new member on your team can make a huge difference in your success potential and the overall value of your network. Go forth and multiply!

No comments:

Post a Comment

Do you have any questions or feedback pertaining to what you have read here today?