1. How do you foresee social networking changing the business environment for entrepreneurs?

2. How might entrepreneurs use social networking media to secure financing for their businesses?

One of the biggest challenges for an entrepreneur is getting the word out about a new business to potential investors, suppliers, the media, and customers. Perhaps that is why entrepreneurs have been so quick to embrace social media as a tool for communication to as many people as possible.

If used skillfully, many believe, social media can help level the playing field between small businesses and their giant competitors. David avRutick, co-owner of Folbot, a small kayak retailer, claims that without Twitter,  he wouldn’t have as many sales as he does. “You can’t buy that kind of exposure,” avRutick says. Folbot competes against such household names as L.L. Bean and Cabela’s—there’s no way the smaller company could challenge the larger ones without widespread interactive communication. Stephen Bailey, who tracks social-media marketing for the footwear retailer John Fluevog Boots & Shoes notes, “The people coming from social media have been buying.” How could Bailey’s company lure customers away from Zappos.com without social media? 

However, critics point out that the use of such sites as Facebook, Twitter, LinkedIn, and the more recent Yelp have a wide range of value to small businesses. “The hype right now exceeds the reality,” observes Larry Chiagouris, a professor of marketing at Pace University’s Lubin School of Business. Despite the fact that the use of social media by firms with fewer than 100 employees doubled in one recent year, only 22 percent of those who responded to a separate survey reported a direct increase in profits as a result of social media use, while half said they broke even on the investment. Others caution that social media networking eats up valuable time, particularly for an entrepreneur whose day is usually chock full of tasks ranging from design to distribution, and manufacturing to marketing. “If you spend two hours a day on Twitter and Facebook, that’s 25 percent of your day!” points out Chaitanya Sagar, founder of a small business outsourcing company called p2w2. (http://www.p2w2.com). 

Most experts, including experienced entrepreneurs, support the use of social media, but with moderation. Chris Lindland, owner of Cordarounds.com, an online clothing retailer, advises patience. “My business has been visited millions of times, but I haven’t made millions of sales,” he comments. But he believes that his patience will pay off. “People have told me they finally got around to buying from my business after reading about it on social media two years ago.” Chaitanya Sagar agrees. “If you expect immediate sales from social media, you will be disappointed,” he counsels. Sagar suggests that entrepreneurs focus instead on marketing their brands instead of expecting direct sales. “If you have this perspective, you will be able to use social media for the right reasons and save a lot of time.”