calculate your roi on networking events

How to Calculate Your ROI on Networking Events January 16, 2014

How to Calculate Your ROI on Networking Events

What is this webinar designed to do? •  This webinar + Networking ROI Template = fast and simple calculation of return (%) and value generated ($)

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• Give you access to Axial’s downloadable ROI excel template

• Go through the mechanics of the template • Walk through the theory behind the calculations • Take you through a start-‐to-‐end calculation with detail on every input

• Calculate the % ROI and $ generated on the time and money spent attending events


Who is this webinar for? •  Intermediaries: investment bankers, brokers, lawyers and legal counsel, other advisors

• Product Providers: technology platform providers, service providers

• Capital Providers: private equity funds, mezzanine funds, commercial lenders, strategic acquirers, family ofXices, direct private investors, other investors

• Company Management: CEOs, CFOs, COOs, Finance VPs, Treasurers, owners

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Kateri Y. Zhu Marketing Manager, Axial Kateri Zhu supports Axial’s marketing efforts to investment bankers, advisors, private equity funds, mezzanine capital providers, strategics, and other capital providers. Prior to Axial, she was a private equity associate responsible for evaluating and executing take-‐private transactions at Mill Road Capital. Previously, Kateri worked as an investment banker in the Healthcare group at Morgan Stanley in New York City. She holds a B.A., phi beta kappa, cum laude, in Political Science and Economics from Duke University.

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Leading the Webinar


Overview: The Question • Types of networking events:

– Conferences, summits, tradeshows, roundtables, dinners, receptions

• Exactly how much is networking, or the lack thereof, accelerating or decelerating your business?

• How do you calculate the actual dollars gained from attending networking events?

•  Is it possible to quantify the return on new contacts, relationships, and interpersonal interactions?

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Overview: The Answer • The answer:

– It’s difXicult but it’s certainly possible – We started by distilling the hard and soft elements of networking costs and gains into the calculator

• The warning: – A useful return metric won’t come without some care and thought around the assumptions

• The objective: – Calculate your ROI (%) and net generated value ($) on attending networking events

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Font Colors in the Template • Yes, they mean something • Color coding:

– Blue = input – Black = calculation

• All the inputs have been cleared out • This means that your job is to input your Xigures into the empty cells

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Units in the Template • The template is formatted to show units automatically – For example, type “10000” into cell C6 and it will show as $10,000.00

– For another example, type “8” into cell C8 and it will show as 8 employees

• All the cells have been formatted, so you should not be using any units, dollar signs, or symbols of any type

• This means that you should complete the entire template with your number keys, 0 through 9

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•  If an investment doesn’t have a positive ROI or there are other opportunities with a higher ROI, then the investment should not be undertaken

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ROI defined • Return on Investment: a performance measure used to evaluate the efXiciency of an investment

• To calculate: the beneXit (return) of an investment is divided by the cost of the investment

ROI = (Gain from Investment – Cost of Investment) Cost of Investment

• The result is expressed as a percentage or ratio


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1.  Estimate the cost of investment 2.  Estimate the gain from investment 3.  Put it together

Gameplan

Estimating the Cost


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Step 1: Upfront Costs • Determine:

– The upfront, cash costs – Input the registration costs and sponsorship fees, if any, involved with snagging a seat at the table

• Example: – Adam Johnson, investment banker at XYZ Advisors – Attending a healthcare industry conference – Goal is to connect with past clients and meet new ones – Sending 3 employees to San Francisco to represent the Xirm and paid $635 each, upfront, for registration

– Also paying $2,750 to sponsor the conference


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Step 2: Travel, Rooming, and Entertaining • Determine:

– Number of employees attending – Expenditures on air or ground travel, hotel rooms, and meals, drinks, and entertaining on a per-‐employee basis

• Example: – Expect to spend ~$570 on a round trip Xlight for each employee – Reserve each employee a hotel room for $285 per night – Note that conference is providing breakfast/lunch and budget:

•  ~$130 per person for dinner after the conference •  ~$25 per person for breakfast meetings the next morning •  ~$40 per person for lunch meetings before the return Xlight


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Step 3: Preparation Hours • Determine:

– Number of hours each employee took to prepare for the event • Example:

– Scheduled a 2.5 hour planning meeting three weeks prior to conference

– Expect each employee to spend ~5.0 hours on the phone and in email scheduling meetings for the conference

– Expect each employee to spend ~6.0 hours preparing materials in the week leading up to the conference

– Scheduled a 1.0 hour check-‐in meeting the day before the conference


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Step 4: Attendance Hours • Determine:

–  Number of hours that each employee spent in transit or attendance which they would have otherwise spent in ofXice

• Example: –  5 hour redeye Xlight + 2.5 hours commuting to and from airport

•  Counts for 0 hours since team members would have otherwise been at home

–  8 hours at conference –  3.5 hours at an apres-‐conference dinner meeting with client –  1 hour breakfast meeting the next morning –  3 hours of ad-‐hoc meetings with people met at the conference –  1.5 hours in a lunch meeting –  5 hours on a Xlight back from west coast + 2.5 hours commuting

•  Count only hours during which your team members would be otherwise working

•  Why? Because the opportunity cost will be calculated based on salary, reXlecting work hours only


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Step 5: Employee Cost per Hour • Determine:

– Average cost of each hour of employee time • Example:

– Assume average salary of $100k, 49 working weeks per year (52 weeks with 3 weeks of vacation), 5 days per week, 8 hours per day

Attendee = $100,000 annual salary = $51 per hour, Cost/hour 49 weeks/year x 5 days/week x 8 hours/day per Attendee

•  This number represents the cost of every hour each of your employees spends preparing for, traveling to, and attending the event


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Total Costs •  Finally, add upfront event costs, costs of attendance, and costs of preparation to calculate your total networking costs

Estimating the Gain


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Word of Warning • This is the harder part

– Takes more care and thought to calculate accurately • Goal is to quantify the $’s gained from networking • Four sample ways to approximate the gain:

– Investment banker – Financial sponsor – Company – Service provider

• Not exhaustive, but puts numbers against interpersonal interactions

•  Calculating the value generated is a more challenging and sophisticated exercise than calculating the cost

•  To help structure the calculation, we’ve laid out four ways to approximate gain


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Step 7: Number of Interactions at Event • Determine:

– What your interaction of value is when it comes to networking – For most of you this will be # meetings; however it may be # conversations, # new business cards collected, or another interaction type

– The number of interactions you expect at this event • Example:

– Banker Adam Johnson from XYZ Advisors sets up 11 meetings for the conference and 5 meetings for the following day


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Step 8: # Interactions Needed to Compete • Determine:

– The metric of greatest relevance to business performance – The number of interactions needed to make your desired outcome possible, e.g., in the example below, Adam is rarely in the running for a deal mandate when he’s had less than 3 meetings with the potential client •  This is often called a “full cycle” both in sales and Xinance

• Example: – Advisory business performance is often driven by # of transactions, or deals, advised per year

– Historically, Adam has found that he needs to meet with a client 3 times, on average, in order to be considered for a deal (i.e., mandated to represent the client)

•  Investment bankers often attend events to meet with past clients and make connections with new ones

•  For many advisors, if they can stand out at a conference and follow up effectively, their chances of closing on a new client go up meaningfully


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Step 9: Win Rate • Determine:

–  The probability that you’ll achieve the desired outcome (e.g., win a mandate, contract, investment, etc.) assuming a “full cycle”

–  This will be a percentage of total full cycles completed

• Example: –  Historically, Adam has found that of the potential clients with whom he goes through a full pitching cycle (in this case, 3 meetings), he’ll win the mandate 1 out of 12 times

–  This means that Adam’s probability weighted meetings per mandate is 36.0 meetings


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Step 10: Value Generated per Win • Determine:

– The average amount that your business takes away from a successful “win”; this refers to the mandated deal, the executed contract, the closed deal, the signed LOI, etc.

– This will be a $ • Example:

– Across all the transactions on which Adam advises, his average advisory fee is $120,000


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Total Value Generated


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Example: Financial Sponsor •  Fund Partner Ben O’Sullivan from ABC Capital expects 12 1-‐on-‐1 interactions at the upcoming deal professional summit

•  Historically, he has found that it takes him 9 management meetings to properly diligence an investment

•  Of those investment opportunities for which he’s worked through 9 meetings, he’ll ultimately sign for and win only 1 of every 8 deals, or 12.5%

•  Thus his weighted average meetings per deal is 72 meetings (9 ÷ 12.5%)

•  His average return on investment, once exited, is $2.0 million •  In the Template, under Step 3, link Total Generated Value (cell I7) to Total Generated Value under Step 2 (cell F36)

•  For many private equity funds, a major milestone in the deal process is signing an LOI, or letter of intent


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The Endgame •  ROI = (Total Gain – Total Cost)/Total Cost

•  Net Gain = Total Gain -‐ Cost


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The Endgame •  ROI = (Total Gain – Total Cost)/Total Cost

•  Net Gain = Total Gain -‐ Cost

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