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Making a deal as art form Networking: More than 70 clubs -- some with hefty membership fees -- exist in Maryland for the sole purpose of members' exchanging leads to further their businesses.


You often see the announcements:

The Chamber of Commerce will hold a networking dinner, or the local trade council will sponsor its monthly informal networking breakfast.

But such social functions -- and even the golf course -- aren't the only places you'll find business networking.

The art of exchanging business cards with the intent of forging a deal has become a multimillion-dollar business in itself.

The theory behind networking companies is: The more clubs and participants each company has, the more money everyone -- the companies, local groups, members -- makes.

The industry makes money through networking clubs to which members pay annual dues and where they meet weekly to share business leads. There are more than 70 such clubs -- and plans for more -- in Maryland.

Among the top networking groups in Maryland are Leads Club, Business Network International (BNI), and LeTip International. They are national and were founded almost two decades ago in California.

"I got $2,600 in business my first month," said Dave Murphy, founder of Damar Group Ltd., a computer training and publishing company in Columbia. He was a member of Leads Club for two years before joining LeTip in August.

"We have 33 members and we're passing 58 qualified business tips a week. There's no fooling around," Murphy said.

Generally, club members are founders or principals of small businesses, for whom each business deal is crucial. But some members work for large companies and are dispatched to join these groups to drum up deals.

Networking clubs can falter if they aren't well-organized, members said.

"I'm paying for structure," said John Isaac, an insurance agent with Northwestern Mutual in Silver Spring and a member of the Howard County Leads Club. He said he makes about 20 sales a year from club referrals, representing about 25 percent of his business.

"I know of less formal groups that have disbanded because interest waned or there have been personality conflicts," he said.

The "big three" have had a presence in Maryland for the past five years, but new chapters have formed, especially in the past 18 months.

Club revenue is largely from membership dues, which can range from $165 to $375 a year.

Based on their average number of members and each company's membership dues, each year BNI takes in about $4.9 million in membership dues; LeTip takes in about $3.2 million; and Leads Club takes in about $1.6 million, company officials said.

LeTip is a sole proprietorship owned by Ken Peterson, a former disability insurance agent, said Pat Carney, the company's eastern U.S. director who is responsible for 185 chapters in the region east of the Mississippi River, including Ontario, Canada.

As a director, Carney is paid a commission for each person that joins.

Based in San Diego, LeTip was founded in 1978 and has 499 chapters worldwide. It has two chapters in Maryland that represent 75 members.

Leads Club was founded the same year by Ali Lassen, a housewife who started the group to aid her return to the work force. It's based in Carlsbad, Calif. Leads, which is a franchise company, has 17 chapters with 300 members in Maryland.

BNI, also a franchise company, was founded by Ivan Misner, a business professor and author, in 1985 in San Dimas, Calif.

Networking companies have not replaced more traditional networking activities such as monthly events sponsored by local chambers of commerce, said Miles Cole, the vice president of government relations for the Maryland Chamber.

Chambers and for-profit clubs sometimes appeal to different sets of people who are looking for different networking experiences, he said. On average, about 50 people show up at each chamber-sponsored networking event, he said.

"It's an individual decision," Cole said, adding that there's no competition between chambers and for-profit clubs. "We complement one another. We're all trying to serve the same need.

"The whole concept of networking has taken off," he said. "Business people are just excited about meeting other business people. They love to mingle and talk."

Many networking club members also attend functions sponsored chambers of commerce and other organizations, besides their club responsibilities -- which can be demanding on time and costs, some club members said.

"The business is profitable and is expanding rapidly," said Jerry Schwartz, an executive director of BNI, which has 50 groups with about 1,000 members in Maryland. "If I can help other people make money, then it's OK for me to make money also."

About a third of BNI's Maryland groups were founded in the past year, he said, making the state the fastest-growing region for the company. The company has 22,000 members worldwide.

"We're growing so well in Maryland because people need our guidance. Cold-calling or telemarketing doesn't work," said Schwartz. "We're not hosting a social mixer, we're providing training and development."

During meetings, members learn how to do 60-second infomercials about their business to get them in the practice of selling their services in a compressed period. They also are taught how to do 10-minute presentations to cement a sale.

Schwartz, who has a professional background in sales training and marketing, does all the coaching during meetings and evening sessions. Outside speakers are also invited.

'Taking more time'

Membership can be overwhelming at times, said Sandra Engel, founder of a Baltimore graphics design company, and a member a BNI downtown chapter for six months before she dropped out.

"It just ended up taking more time than I had," she said, adding that members were expected to attend a lot of events and were under pressure to bring in new members to keep the organization going. "It wasn't just an hour a week," she said.

"I'm self-employed, and I needed to be at my business," Engel said. "They gave me the option to return, which I appreciate. About 50 percent of the referrals given to me panned out."

Belonging to a networking club is serious business.

The clubs have similar meeting formats and rules, such as those governing a member's attendance and the number of referrals a member must provide. Falling short could lead to dismissal from the group.

"Networking clubs are not for everybody," said Carney of LeTip. "You must seriously be willing to give for it to work for you."

The rise of networking clubs is a natural progression for the zTC business community, said Jessica Lipnack, a networking expert in West Newton, Mass., who has co-authored five books on the subject.

"Networking is not free," Lipnack said. "It's a sometimes invisible activity of which people do not realize the economic value."

Initiation process

Once businesses became more complex and more competitive, it became natural for companies to offer to broker networking deals.

To join a club, there's an initiation process where potential members are screened, references checked and businesses evaluated. For potential LeTip members, that involves having "inspectors" visit businesses and call customers to make sure they are reputable.

There's a one-person-per-profession rule to eliminate competition. A group may have two lawyers or real estate agents for example, but they must have different specialties. So if there isn't an opening in a particular chapter for your profession, you are placed on a waiting list.

All members carry other members' business cards, ever ready to dispense them at appropriate times.

Members who don't meet a referral quota are given guidance at first. If they don't improve, they receive warnings before being dismissed from the group. Similarly, members are expected to attend meetings regularly and have legitimate explanations for being absent. If they miss too many meetings, they are dismissed from the group.

"This is a business meeting; not attending affects your credibility. I need to know I can rely on you to handle my referrals," said Alex Moharos, Leads Club executive director for Maryland and Virginia.

It's peer pressure, corporate-style.

Pub Date: 12/21/98

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