Nutrition, Investing and NetWorking, Part I: The Power of Diversification

We have all been told not to "put all of our eggs in one basket" and that "variety is the spice of life".  This philosophy holds true for many things in our daily life.

Take, for example, nutrition. As the old saying goes, we cannot live "on bread alone" (expecially if we're on Atkins or South Beach).  My wife had a philosophy she shared with me back in the days when we were first dating that the best meals are the ones that are more naturally colorful and varied...I thought that was too weird at the time and had little validity...my wife has since convinced me otherwise.

But as I strive to improve with age, I look at the USDA's Food Pyramid.  Since when are there 6 major food groups?  When I was growing up, there were only 4!  There must be something to this diversity thing.

This certainly holds true in the world of investing.  At one time, we were told that it is riskier to invest in stocks than in mutual funds, because mutual funds are collections of stocks and are less risky because they are run by professionals who know stocks. But what's less risky than investing in a mutual fund?

Investing in more of them!

Talk to any financial planner/advisor these days and your hear the catch phrase "asset allocation".  This basically states that by investing in multiple asset areas (i.e., funds dedicated to emerging markets, international companies, utilities, real estate, etc.) rather than just one, you considerably reduce risk over time.  Sounds good, right?

But does the same apply to NetWorking?  If we found an organization that's working real well for us, why do more?

First of all, I find it rare that one organization...no matter how effective...provides the "silver bullet" that provides a steady stream of continual qualified referrals for any extended period of time.  Why? Because even in the tightest of NetWorks, there is always attrition: people move, people are promoted, people lose interest, people pass away and people become successful that they no longer have time to participate. 

I tend to view each NetWork much like a mutual fund.  They are assets!  Think about it...they have varying levels of risk, they vary in scope, they depend on the quality of the group of people managing them and the number of them out there are continually growing all the time.  Even as mutual funds hold some stocks for longer periods of time and let other non-performers go, the same can be said for a NetWorking group.

So as you evaluate your portfolio of NetWorks, how diversified are you and how diversified do you need to be?  The answer is the same if your asking your Nutritionist or Financial Advisor:

it depends!

From a NetWorking standpoint, some the variables to consider are:

- The amount in your marketing budget allocated for word-of-mouth

- The amount of time allocated for you, your marketing and/or sales staff on a weekly or monthly basis

- The geography of your business

- Your own personal likes/dislikes for structure, rules and regulations

- The level of effort required or expected of its members

It should be noted, as well, that a NetWork can consitute just about any organization: a B-to-B NetWorking group, a chamber of commerce, a local rotary, a mastermind group, a professional association, your house of worship, local sports association, etc.

I believe that there exists the right mix of NetWorks for any organization based upon a given snap shot of time.  I believe that, just like an investment portfolio, it should be reviewed at least annually with your membership strategist, strategic planner, marketing expert or business coach to make sure that the results you're getting are worth the investment.

But while we have discussed the similarities between Investing and NetWorking by looking at them from an asset allocation perspective, there is one element missing in order to truly maximize your returns.  The KEY is actually understanding when a NetWork is NOT like a mutual fund and MORE like sticking to a DIET.  For more on this, stay tuned for Part II of Nutrition, Investing and NetWorking next month!

Kovitz Enterprises, LLC
Connecting, Educating and Inspiring Business
18 Rockwood Road
Levittown, PA 19056