Why savvy business people build relationship capital

Good relationship capital can change your business forever, explains Shark Tank investor Daymond John.

DAYMOND JOHN: Relationship capital. There's three phases, of course, to having power and giving power, and one of the most overlooked one is relationship capital. You know, there's a saying that it's 21 times easier to up-sell a current customer than it is to acquire a new one. Most people are trying to expand their portfolio and their brands by operating new businesses instead of digging into the relationships that they already have – 5, 10, 20 years. Because when you already have worked with somebody, whether it's a relationship as friends or your community or at the office or as an investment, the first transaction is usually the lowest. It is the ten transactions afterwards—not only the transaction you're having with the person, it's the fact that that person is probably another businessperson or has a relationship and they're out there networking, telling people about how good you are. And that's exactly where it is.

See, your reputation is like your skyline. You drive to the city, everybody can see it. And when you have developed these relationships and nurtured them you do more and more business because the people know your ethics or morals and how you handle situations. And when you don't nurture these things it slowly corrodes the foundation of who you are and you have to go out and acquire new relationships. And that's why the development and the nurturing of a relationship is more important than anybody else.

If you're on social media right and you have a good amount of people following you it's nice if they keep liking your comments and saying happy birthday and thank you. But if you're not liking them back and you're not actually going into their avatar and seeing who they are and making a comment here and there, sooner or later they're going to go away to somebody else who's doing that. You have to nurture these relationships. They are symbiotic no matter what level you're at and that's the importance of, after you've negotiated. now the real pot of gold is all those other transactions, all those other relationships, all those other references and networking things that they'll do for you and you'll do for them that you'll end up realizing have paid the best dividends.

You know one thing about shifting power and relationship capital is that I wish that I can tell you that you always have to be glossy and things of that nature. You have to be true to who you are—it's the reality. Because a lot of people want to be something different than they're not or be perceived as something they're not. You have to be extremely aware and a lot of us, because of society we think, 'Well, nobody's going to accept me because I'm this way.' And the reality is they will accept you. You have to just be honest with yourself. What are you doing this for? Can you put yourself in two to five words. I may joke but I'm serious: Old dirty bastard was an old dirty bastard and he delivered on that every single day. And when you start to try to be something you're not, it crumbles, it kills your authenticity when you shouldn't be afraid of who you are.

We've seen people often who are persecuted or various other things because they can't be who they are. And once they do become who they are their life opens up. So I want to make sure that I don't give you this lava lamp, really prissy, campfire, kumbaya thing where you need to think that you need to only be one way. Listen, if you're a coder and you come to my office to have an interview you better not be wearing a suit because I know that you're supposed to be in your pajamas three nights straight coding all the time. If you come to my house to be a construction worker to handle construction you better not be in a suit because I think that you're paying the people who are really wearing the knee pads and the dirty clothes with their wrenches. Be who you are and be authentic to it and that's one of the keys of Powershift.

  • Relationship capital is one of the most overlooked facets of doing good business, says investor and entrepreneur Daymond John.
  • Savvy entrepreneurs know that digging into the relationships that they've nurtured for 5, 10, or 20 years is what pays the best dividends. That doesn't happen passively. You must build your reputation and take great care to be authentic in your interactions, says John.
  • Relationship capital is symbiotic and becomes a network. When two parties genuinely look after each other over the long term, that goodwill spreads across both their networks and brings tens or hundreds of new transactions instead of just one initial deal.

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