What is your RON?

Why Care About RON

It’s the end of the first quarter and it is time to evaluate how well you have been doing in business so far this year. In order to do that many business professionals start to look at ratios, and financial statements.

Which means you probably have heard of ROI (Return on Investment), and you might have even heard of ROE (Return on Equity), but you may not have heard of RON (Return on Network).

Your network is your most valuable resource for new generating new business. Managing that resource should be at the top of your mind. Financial ratios are not everyone’s cup of tea, but they do provide a valuable window into the stability of a company, just as the RON will provide a valuable window into the stability of your network.

Information Gathering

Understanding how much business you are getting from your network is crucial to knowing if there is business being left on the table. In order to do this you have to calculate your RON, just as you would any other ratio for your business.

First things first, have you kept track of the business that has come your way from your network? This is absolutely crucial to determining your RAN. You need a few pieces of information:

1. The name of the person in your network that passed you business.
2. A determination if the referral turned into business.
3. Make sure the referral happened within the time frame you are tracking, in this case Q-1 2010.

RON In Action

Recently I was helping a BNI member determine her RON for the first quarter. She was able to identify that she had been given 14 referrals over the course of the first three months in the year.

She determined that those referrals were passed from 8 different people,

• Andy – 2
• Doug – 1
• Sue – 3
• Bob – 1
• Sally – 1
• Julie – 4
• Dan – 1
• Ellen – 1

Who Does Your Network Know?

This part is a little bit of an educated guess, now take each of the people from your list and guess how many people they know, keeping in mind that the average person knows about 250 people, and they could have upwards to a 1,000 active clients or customers. For the BNI member her list came out looking like this:

• Andy – 250
• Doug – 300
• Sue – 300
• Bob – 150
• Sally – 250
• Julie – 800
• Dan – 300
• Ellen – 450

After putting the list together she determined that she was being rather conservative with how many people they know, considering that most of these people probably have client lists that are three or four times these numbers.

Putting RON Together

The first step is to add all the referrals that were passed to this member over the past three months, in this case the number would be 14.

The second step is to add the network of those referral sources together, and in this case it would 3,100 people.

The last step is to calculate your RON by taking the number of referrals, 14 in this case, and divide it by the number of people those referrals sources know, in this case 3,100, to come to .004, to find the RON percentage multiple the .004 by 100 to get .4%.

Ouch! You may be shocked by your result. In many cases it will come out a lot lower than you thought it would.

Another Way to Calculate RON

Finding the RON of your entire network is not really the most valuable number to have. Using the same technique calculate the RON of the individuals in your network.

For this example let’s look at the RON of Sue, she gave 3 referrals and it is estimated that she has a network of about 300 people. In this case her RON would be 2%, much better. It is here that you can see that Sue is a valuable member of the network.

What is a Good RON?

Considering that a normal conversion rate for a direct mailing piece is right at 1% a RON of under 1% is really way to low. A good referral source should be giving you a minimum RON of 10%.

Looking at the example of Sue again, this would mean that in the same time frame Sue would need to give 30 referrals, or an average of 10 referrals a month to meet the minimum RON of 10%.

Beefing Up RON

It’s time to put your network to work, and get that RON number to represent something that you are proud to share.

So what are you going to change? What are some things that you can do to increase your RON?

Step one: Stop adding people to your network! This may seem counter intuitive to you, but with a low RON what it is saying is that you have very shallow relationships with your network. Find the heavy hitters in your network and concentrate on building stronger relationships with them, start with only 3 or 4 people.

Step two: Meet with your heavy hitters on a regular basis. You eat lunch, grab coffee, go to local events, each and every day, so why not start inviting people from your network along? Remember, people do not do business with a profession they do business with a person. Once you make the true personal connection with someone they will open up their network to you.

Step three: Add someone to the network. But wait, didn’t I just tell you to stop? Yes, that was until you completed step two. Once you have really built up your relationships it is time to grow your network. The goal is to focus on creating strong network relationships.

Looking Forward

It may be that you were not able to figure out your RON at all, or that you had to guess on how many referrals your network passed. This exercise is very helpful in pointing out that you need to track your referrals.

If you are tracking them with little pieces of paper, there comes a point when you want to purge those papers, I completely understand. Just make sure that you have quantified what your network has done for you before you shred the evidence!!!

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