Social Equity - Businesses Use it, Here’s How to Get Some

Courtesy of  www.nrpa.org

By Hector Cisneros

Most people know what equity is. For a business, it's the net difference between the assets and liabilities a company has. We've also heard of sweat equity, where a person does a portion or all of the work when fixing up their home, business or other projects. So then, what is social equity? In the word-of-mouth world, social equity refers to the notion, which people often feel a need to reciprocate for the help received. It’s when they believe they were befriended by someone and have a feeling of indebtedness.  It’s a psychological debt that they feel they need to return the favor.  You’ve heard people say “I owe you one,” right?  

Social media is a powerful form of word-of-mouth marketing. Your social network as a whole it has a total aggregate value. This total value supports or detracts from your brand and it is this value of social equity that’s important. For that matter, “real brand names” have value because of social equity.

In this article, I will use the term social equity in a little bit different way. I am using it to describe the total branding value that your social networks produce for your business or trade name. How social equity can increase or decrease your business brand value. I will explain how it directly affects your company’s monetary value, and your ability to get top dollar for your company when it’s time to sell! I will also show how the role of social media can play a vital role in evaluating that all elusive business’ Brand value.

What a Business Broker Looks at

2010 - 09 - 07 - Spa Business Article - Marc Smith on Social Media (Photo credit: Marc_Smith)

When a business broker appraises a business, he or she first analyzes the business’ tangible assets. Things like cash flow, sales volume and the company's hard assets are all taken into account. Then they look at intangible assets. These include the customers and employees, any patents and licenses and other intellectual property. These items will often allow the broker to determine if the business is in decline or on the rise. These factors should help determine if the intangibles are true, (i.e. is this a good business with positive customer relations or is it a mediocre business with no special brand value at all)? They analyze many factors to determine the sell-ability of that business.

Most businesses today strive to brand themselves in one way or another. Branding should be a way of life for any business. However, a brand only has value if it is recognizable by a large segment of the population.  In the past companies have spent large amounts of money researching and surveying people to determine how their brand is doing. 

Research and Surveying Play a Vital Role

 
Today, researching and surveying a brand is easier than ever. The rise of the internet has changed the game forever.  And now social networks have taken brand awareness to a whole new level. Social media allows customers to connect with a brand like never before. More importantly, it allows the business owner to measure positive (or negative) brand awareness like never before. A business (or broker for that matter) can now use social media as another indicator of customer loyalty. In social networks, every post is measurable. Anything that gets said is track-able. Matrix’s that tell us the ratio of positive to negative posts are possible. We can measure coupon usage, viral messages and customer interactions.  The numbers and types of followers can be counted for all to see.

There is nothing like having a large client base with large numbers of long-term contracts producing large cash flow to make a buyers' eyes light up. However, social network followers may soon change this perception. We can now measure customer loyalty by measuring the number of positive interactions a company has with its clients through social media.

Example of Brand Value

Brand Interaction Cycle (Photo credit: DaveHarkins)

Let me give you an example. If a business has 100,000 Facebook Fans, 50,000 Google+ contacts, 125,000 Twitter followers and another 30,000 LinkedIn connections, you could say they are well connected. What you may not realize is that this company can also quantify brand awareness by measuring its own social nets. It can measure product awareness, perceived company and product quality, perceived company service and measure the number of positive (or negative) mentions the company receives. All social network interactions can be measured because all of these networks record every event for posterity.  In other words, you can easily measure how often customers positively (or negatively) talk about you. You can also easily measure customer interactions, how often customers provide testimonials, recommend your products, use coupons, buy products, as well as how often they follow shared links and much, much more.

Follow the Footprints

Foot Prints (Photo credit: buck82)

On top of that, social networks leave many footprints with regard to a company’s reputation. You can actually search the internet and find these footprints (or smoking guns) with very little effort. This is why I often say that Social Networks are the great equalizers for consumers. There are literally hundreds of reviews on the internet and Google has even added its own recommendation system called plus 1 (listed as +1). Many e-commerce software packages readily include a product review feature. Big online retailers like Amazon, eBay and Best Buy all encourage shoppers to leave consumer ratings for products.  Other sites like Merchant Circle and Google Local ask for consumer ratings. Many websites today encourage its users to post reviews, likes and recommendations to their social networks when they are visiting that product page.

Rating Sites Matter!

Rating sites like Mywot.com provide aggregate ratings for websites that are determined by its members entering either positive or negative interactions with the websites that their members have visited. There are even paid membership sites like Angieslist that provide “real customer reviews based on purchases and customer satisfaction”. Today any savvy business owner (or broker) can pull reviews, opinions, and ratings for their business.

Value in and of Itself

value, not control (Photo credit: Will Lion)

More importantly, building and owning a large social network is a valuable asset in and of itself.  A large social network allows a business to reach out and touch its customers and prospects like never before.  At the press of a button, you can deliver messages to tens of thousands if not millions of people.  You can interact with them live, during events like TV shows, Radio broadcast and more. Using internet applications you can engage in Webcast, Tweet Fest and Google+ Hangouts to directly interact with your following.  Want to send out a discount coupon, birthday card or other incentive items? Just create it and hit send. Now sit back and measure the results.

Databases That Pay Dividends

database schema (Photo credit: gnizr)

Having a larger social network is like having a large database of customers and prospects that you can engage and market to anytime you want. It is a marketing and credibility-building asset for your company. It allows a business to create a wide variety of marketing programs at a very low cost.  Its maintenance and operational cost is also low and best of all it can distribute your message at the speed of the internet, even going viral by spreading your message far beyond the reach of your current customer base.

Smart Business owners (and business brokers) are starting to realize how valuable a large social network can be to a company. They are now seeing how it can be a marketing tool, a credibility-building tool, a customer support tool, and a way to build customer loyalty. It is a great way to measure and test perceived product value and company brand. They also realize that most aspects of the social networks are measurable and track-able giving the business owner (and broker) one more way to gauge customer loyalty.

In this article, I  proposed that having a large social network is not only valuable to any business as a marketing tool, it is an asset that can be used to gauge customer loyalty and many other valuable indicators of customer relationships. These interactions can provide insight into the viability of a business purchase. If you are a business broker who is using social media as another way to gauge a business sell-ability, let me know.  Right now, you are a rare breed. If you’re a business owner and you have little or no social network following, wake up and smell the coffee. Social media is the fastest-growing segment of the internet today and is one of the lowest cost marketing tools on the Internet!

I hope this article raised your awareness of the value social networks can play in a business purchase.  If you like this article, leave us a comment letting us know what you liked. If you have a different opinion, let us know that too. Either way, share your thoughts with our readers.

Courtesy of www.nrpa.org

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Hector Cisneros is COO and Director of Social Media Marketing at Working the Web to Win, an award-winning Internet marketing company based in Jacksonville, Florida.  He is also the co-host of the weekly Internet radio show, "Working the Web To Win" on BlogTalkRadio.com, which airs every Tuesday at 4 p.m. Eastern. Hector is a syndicated writer and published author of “60 Seconds to Success.”

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