This is the text of a proposal to create a business-to-business co-operative referral network, called ‘Principle Six’. It was written a couple of years ago, before we realised that a lot more groundwork and education needs to be done (certainly within the UK movement) before we can think of gathering the resources and investing the time to make it a reality. But the idea is not dead – all comments very welcome.

“Principle Six: A Business Proposal

Executive Summary

• Principle Six is a network of business men and women, which has been operating informally for around 12 months. Principle Six generates new business opportunities for its members. It does this by providing a structured and open environment for the giving and receiving of qualified referrals – introductions to potential new customers, clients and business partners.

• Membership of the network is open to any person who can bring referrals, who is prepared to work within the mutual ethos of the network, and who undertakes to introduce visitors and potential new members.

• The network has a statement of aims, principles and an ethical code based on the seven co-operative principles.

• Principle Six has a steering group, which intends to incorporate the network as a co-operative consortium under Industrial and Provident Society rules. It intends to secure startup funding, with a view to launching Principle Six as a sustainable, self-financing enterprise, owned and run by its members and funded through membership subscriptions and fees for educational and networking events.

• The startup funding will be used to carry out further research into appropriate networking methodologies and protocols; to write a business plan and manual for network members, groups and activities; to market the network to potential members; to hold regional launch events and establish local network groups; to establish an internet-based dimension for the network; and to employ a consultant on a 12-month contract to carry out and co-ordinate this work.

• It envisaged that Principle Six will be self-sustaining in early 2008, and that it will:

- facilitate a mixture of regular local, regional and national networking events and an online business network-building and referral website for members

- be based on a network of local/regional networking groups of 15-50 members, each run by an elected committee, with committee members’ subscriptions being waived for their term of service

- ask members to undertake to educate their fellow members in the nature of their business, clearly identify the referrals and new business opportunities they seek.

- make continuing membership conditional on participation in network events, giving referrals to other members, and to following up properly on referrals received. Members would also undertake to bring visitors to Principle Six events, and encourage them to take up membership

- monitor and publish the number and value of referrals, with due consideration to matters of commercial confidentiality.

November 2006

The Proposal

Introduction

Principle Six is a new network of men and women working in businesses of all kinds. The sole aim of the network is to generate new business for its members, through the exchange of business referrals.

The members of Principle Six are individuals looking for, and giving, qualified personal introductions to potential new clients, customers or business partners. They may work in large, medium sized or small companies, or as sole traders. They may represent plcs, private companies, co-operatives, social enterprises, employee-owned firms, partnerships, trading arms of charities or third sector organisations.

The members of Principle Six share a desire to increase the quality and quantity of business they win, an understanding of the principles of referral networking, and a commitment to the mutual ethos of Principle Six.

What is a referral network?

Referral networks do not seek to match buyers and sellers directly. They are not first and foremost about intertrading between the members. Rather, the members educate each other about their products, services and markets, and use the resources of network to give and get qualified introductions to third parties who may be a source of new business.

This is a more powerful proposition than simple intertrading, since the potential referral pool is made up from the wider contact spheres of all of the members. The connections which can be made by a diverse networking group with more than 20 active members is almost inexhaustible – even where the group meets frequently to exchange referrals.

Business success through networking

The best business networking groups are highly entrepreneurial. They focus on generating referrals and introductions in the most efficient way, and on bringing in as many visitors and new members as possible, to enhance the value of the network. They help their members to acquire and use business networking skills. They work on the basis of clear protocols and business ethics, and rely entirely on the ‘givers gain’ principle – “if I find new business for you, you will want to find new business for me”.

Good business networking encourages lateral thinking and action. As a member of Principle Six, you will promote your business proposition to the other members, so that they are equipped and motivated to find opportunities for you. Conversely, you need to note and understand the other members’ referral requests, and try to make appropriate introductions. Sales and marketing networkers are neither ‘hunters’ nor ‘farmers’, but use the skills of both in a structured and open business referral environment.

Referral networks bridge the culture divide between large companies and small businesses, and between different business types. They can bring together experienced, senior business people and relative newcomers in a mutually profitable way, because the primary activity of the network is exchanging contacts. The value each member derives from belonging to the network is proportional and relative to their ‘ask’. Although the aim is to generate business through third party referrals, this activity almost always produces other direct trading and social benefits for the members, such as joint enterprises, intertrading and mentoring opportunities. These benefits result from mutual understanding built through good networking, from successful third party referrals and from the resulting testimonials.

Other referral networks

Referral networks like Business Network International (BNI), Business Referral Exchange (BRE) and ecademy are private companies. They all employ a version of the ‘givers gain’ principle in their methods, but surpluses are returned to shareholders. In the case of BNI’s UK operation, the £100 joining fee is income for the regional BNI franchisee. The £400 annual membership fee goes to BNI HQ in California. In addition, each member pays a local chapter subscription of around £400 p.a. to cover the cost of meeting rooms, local events and promotions. Members also pay one-off fees for skills seminars and regional events.

Principle Six, once having secured funding for its start up costs, will be self financing through membership fees. Unlike other referral networks, any surplus will be returned to members or invested in growing the network.

Why Principle Six?

Although Principle Six will be open to anyone able to give and receive business referrals, the majority of its early participants worked in businesses which, like Principle Six itself, are co-operatives. For this reason, it was named after the sixth co-operative principle – ‘co-operation between co-operatives’.

An inclusive network

The model of incorporation is the co-operative consortium, where the members are drawn from the widest spectrum of trading entities, including companies which are not themselves co-operatives. We are marketing and selling a diverse range of products and services; what we have in common is the need to grow our businesses, and a recognition that referral networking is a proven way of furthering that aim.

The future of Principle Six

Up to now, Principle Six has been an informal grouping. There were four business referral events in London and Manchester in 2006, and the network was promoted using a brand, set of aims and principles, web page and promotional material written and produced by the members, and donated to the network.

The 2006 events were productive in terms of producing referrals, but the network is too small and under resourced to launch, sustain and expand its activity in more than one or two locations, or to develop an effective infrastructure. But promotional seminars and informal research show that there is enthusiasm and potential commitment from individuals working in a wide range businesses.

In November 2006, a steering group was formed to oversee the activity of the network, to agree on the form of rules, incorporation and governance, and to work towards establishing Principle Six as a financially self-sustaining enterprise.

The current members of the steering group are people who have participated at Principle Six events, or supported the network in other ways:

Paul Evans – Poptel Technology
Shaun Fensom – Manchester Digital Network
Rosalyn Luckman – Co-operative Bank
Graham Mitchell – Co-operatives UK
Gareth Nash (Treasurer) – Co-operative and Mutual Solutions (CMS)
Nadiya Rayan – Wave Design
Siôn Whellens (Secretary) – Calverts
Lucy Williams – Manchester Biodiesel
Nelson Wootton – Poptel Technology

The steering group has agreed to apply for funding for research and initial development costs, from supporters in the co-operative movement and elsewhere. When sufficient funds have been raised, they will be used to:
incorporate as a co-operative consortium under Industrial & Provident Society (IPS) rules
write a business plan and growth strategy
carry out further research into the methods of successful business referral networks, and how they can be adapted for Principle Six
develop, write and publish a manual for Principle Six referral networking events and groups
develop the internet based dimension of the network
run seminars on referral networking skills
market Principle Six to potential members
hold at least two regional launch events and establish the first local networking groups
employ a consultant to carry out and co-ordinate this work
reimburse members and officers of the steering group for loss of earnings and other direct expenses incurred

Appendix 1: Statement of Aims and Principles

Aims

Principle Six has one purpose, which is to increase the amount and quality of new business won by its members through the giving and receiving of business referrals.

Membership is open to men and women working in businesses of all kinds.

Principle Six provides a structured environment for the exchange of information about new business opportunities, and qualified introductions to potential new clients, customers and business partners.

Members undertake to educate each other about their services and products, and the kind of referrals they seek. They engage actively in network events and activities, and generate qualified business referrals from within their own contact sphere.

They undertake to follow up conscientiously on referrals they receive, and to be open with other members about the outcome of those referrals.

Members agree to help grow the number and quality of referrals by bringing visitors to Principle Six events, and by introducing potential new members.

Principles

The network is named after the sixth of seven principles upon which we operate. They are:
Open membership
Anyone who can bring qualified business referrals, and is willing to work in accordance with the mutual ethos of the network, is eligible for membership.
Democracy
The policies and activities of Principle Six are democratically controlled by the members.
Equity and participation
Principle Six is owned by its members, who engage actively in helping to grow the network.
Autonomy and independence
If Principle Six enters into an agreement with another organisation, it only does so on the basis that it stays under the control of its members.
Education
Principle Six trains its members in business networking skills. The members educate each other about their own businesses, and help promote the aims, activities and principles of the network.
Co-operation
Principle Six works co-operatively to generate new business referrals for all the members.
Community
Principle Six exists to support the sustainable growth of its members’ businesses, and the communities in which they operate.

Code of Ethics

Members of Principle Six agree to abide by an ethical code. They undertake to:
be truthful with the members and with people to whom they are referred through the network.
be honest in promoting their business and its products or services at a level of quality and cost they are able to deliver.
build trust among the members, and goodwill between Principle Six and the communities in which its members work.
take responsibility for following up on referrals they receive
display a positive and supportive attitude with network members
live up to the highest ethical standards of their trade or profession.

Appendix 2: The co-operative movement and Principle Six

Co-operatives and employee-owned businesses trade in goods and services, whether business-to-business or business-to-consumer, in competition with other types of company. The success of our individual businesses, and the strength of our sector, depend on
the existence of markets for our goods and services
the successful servicing of those markets by co-operatives and employee-owned enterprises
We are served by organisations representing us politically and sectorally (Co-operatives UK, Job Ownership Ltd, Social Enterprise London, etc), but there is no organised, movement-wide business referral activity focused on raising the quality and quantity of business that we win, or on increasing our share of all business. This could be changed by forming a business referral network – a secondary sales and marketing organisation acting for the collective and individual benefit of all our businesses, by facilitating qualified introductions to potential business partners, clients and customers.

Beyond “C2C”

In 2002, Co-operativesUK resolved to promote intertrading between member companies under the banner of “C2C” (Co-operative to Co-operative Intertrading).The Employee Co-op Council, which represents many of the UK’s worker co-ops and employee-ownerships, supported C2C because it believed the opportunity to work and trade in co-operative markets was the strongest single motivation for its members to engage with the wider movement.

C2C was a purchasing policy initiative, and it was clearly aimed at the larger consumer co-ops. It exhorted members to give preference to co-operative suppliers, without challenging orthodox best value criteria, but asking buyers to consider co-op status as a plus where other factors were equal. It did not address the potential to develop creative, cross-movement marketing and sales initiatives with the aim of growing, not just individual businesses, but our share of all markets. Neither did C2C address the barriers to trading that exist because of differences of scale, capacity and business culture within the movement, beyond appealing to co-operative goodwill.

The co-operative advantage realised

In a co-operative business referral network, we would be far more than just suppliers and buyers of each others goods and services. We are diverse organisations, working in our own markets through our own networks of clients, customers, suppliers and partners. These networks extend into the wider world of business, government and society.

The potential to think and act in a more productive way means learning to see ourselves, and become in reality, a network of businesses rather than a procurement chain. It means realising the untapped value in the market intelligence of each of our businesses and turning it into a resource for all the others. If this intelligence is networked and exploited on the ‘givers gain’ principle, its value rises exponentially. It means mobilising the networks, sales forces and marketing capacity of individual co-operative organisations for our mutual benefit.

Although the primary focus of Principle Six is generating new business for its members, the secondary benefits will be many. An active referral network trains its members in sales and marketing skills and builds their confidence; it can be a pool of expertise and resources; it can be an employment information exchange; it can bridge the apparent gulf in business culture between the smallest and the largest, newest and most established, businesses.

Principle Six would give employees of co-operative businesses an opportunity to engage with and learn from a wide range of business cultures and methods. Finally, it would give non co-operative businesses a material incentive to align more closely with our sector, and it would be a clear example of co-op values and principles in practice.

How it will work

There are a number of existing models for formal business referral networks, each with its strengths and weaknesses, and each with more or less relevance to the circumstances of the co-op movement in the UK and internationally. We will look at each of these models in the process of designing and growing our own network. At this stage, it is envisaged that Principle Six will:
be a business in its own right, and a co-operative consortium
eventually derive all its income from joining fees, annual subscriptions and one-off fees for special events
facilitate a mixture of regular local, regional and national networking events and an online business network-building and referral website for members
be based on a network of local/regional networking groups of 15-50 members, each run by an elected committee, with committee members’ subscriptions being waived for their term of service
have a code based on the seven co-operative principles
ask members to undertake to educate their fellow members in the nature of their business, clearly identify the referrals and new business opportunities they seek.
make continuing membership conditional on participation in network events, giving referrals to other members, and to following up properly on referrals received. Members would also undertake to bring visitors to networking events and encourage them to take up membership.
monitor and publish the number and value of referrals in as much detail as possible, with due consideration to matters of commercial confidentiality.
Appendix 3: Other business referral networks

Ecademy (www.ecademy.com) Internet-based business referral network, although they hold local face-to-face networking events. Sliding scale of membership fees

Business Network International (BNI) (www.bni.com) has thousands of ‘chapters’ worldwide, and in 2005 passed more than 2 million business referrals. It works through highly-organised local groups holding weekly face-to-face meetings, and places a strong emphasis on training in networking skills. Has an internet based referral facility (www.bniwebring.com). Cost of membership in the UK is around £800 pa

Business Referral Exchange (BRE) – similar to BNI (www.brenet.co.uk/)

Ryze (www.ryze.com) Internet based network of individual professionals

Business Junction (Shoreditch Business network, Clerkenwell Business Junction, Hackney Enterprise Network, Womens Junction) www.shoreditchbusiness.com, www.womensjunction.co.uk etc. Franchise of local business networks using a variety of types of networking events.

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