By Fola Daniel Adelesi
Many entrepreneurs are reluctant to start a venture without capital. The lack of capital is often regarded as the reason why many ventures are yet to kickoff. Entrepreneurs often consider money as a prerequisite for starting a new venture and do not realize how important it is to invest in social capital before making any serious financial commitments.
Social Capital is defined by the Organization for Economic Co-operation and Development as “networks together with shared norms, values and understandings that facilitate co-operation within or among groups. We can think of networks as real-world links between groups or individuals”. The social capital of an entrepreneur is as important as the financial capital. To put this in perspective, the social capital of an entrepreneur often determines how much of financial capital can be accessed.
Even when a business owner has access to the funds needed to start, he or she needs an initial network of people to buy into that business idea. Four elements to consider when measuring the social capital of an entrepreneur include:
Integrity – The integrity of an entrepreneur is an important factor that prospective customers consider when patronizing your business. The projected value of a business and the perceived value from external parties must match. A business must be straightforward in its service offering without false claims or hidden charges as they can hurt the integrity of that business.
Trust – A business must build trust over time to gain and maintain loyalty from its customers. Trust is built from how your target audience perceives your business. Where there is trust, people are more likely to buy into your business idea, patronize you, and may go ahead to refer you to others.
Shared Values – The potential partner, investor or customer you are targeting must be able to connect with you on a certain level, to enable them buy into your business idea. Most people are able to connect when they have shared values or beliefs. It is important for businesses to effectively communicate what their shared values are, and establish a connection with their target audience from the onset.
Network – Fostering long term relationships is key for any business to succeed. The success of a business is determined by the relationships that have built over a period of time. Success is not necessarily determined by the expertise of the team behind the venture, but by the strategic relationships that the business has established, built and maintained. People are more comfortable dealing with those they are familiar with and are more likely to engage and recommend others to a brand that they have a solid relationship with. There is also the need to follow-up regularly to maintain those relationships.
Social capital opens doors, improves credit worthiness and increases customer loyalty for a business. Social capital is evident when your target audience derives a higher value in your product or service. Experts often recommend for entrepreneurs to factor in social capital when writing their business plans, as it could have a more lasting impact than the financial capital invested into the business.
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