What are some ways that a new start-up or small business can use social networks to grow their business?

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Coley, you're instincts are correct that you can take advantage of social networking sites to build your business without hiring a consultant. The beauty of these tools is that they are free (at least for now) and work best when used by real people who are using them to connect with other like-minded real people. Here are a few ideas to get you started.

Facebook
Start a fan page. This article by Katie Hellmuth Martin will walk you through how it's done:
http://thatitgirl.blogspot.com/2008/04/h...ebook.html

Spread the word about your Facebook page. Talk about your new page at every opportunity. Include it as part of your email signature. Link to it on your company's website. Send out an online newsletter to your customer list announcing the new page, perhaps offering a coupon or some other promotion to those who visit and do something like leave a comment on your Facebook wall. Tell all your personal friends on Facebook about your business's new page and invite them to become fans.

Encourage people to share your content. Consider posting things your fans might want to share on their walls; each time that happens, it will send more visitors back to your page. I posted a slideshow on the world's ugliest buildings from Travel + Leisure's page on my Facebook wall because it was amusing. That's just the kind of thing that gets people talking and going to check out the rest of Travel + Leisure's page.

Make it useful or fun to visit your page. If you sell gourmet foods, offer recipes on the page. If you sell athletic gear, post advice about fitness and nutrition. Better yet, create a program for people wanting to monitor their diet or exercise routine; they'll need to return to the page every time they update it. If you're an interior designer, publish before and after shots of rooms you've furnished. Make it interactive by asking people to vote on ideas to complete a room. You get the idea.

Twitter
At first, using Twitter feels a lot like talking into a empty room. But if you use Twitter properly, you will soon be having conversations with customers, potential customers, the media and all kinds of people that can be helpful to your business. This guide for Twitter - http://business.twitter.com/twitter101 - written for the company by Twitter expert Sarah Milstein (co-author of The Twitter Book), gives way smarter advice than I could ever give you. Pay particular attention to the case studies and the best practices.

One thing about social media -- people using it love to give and read advice about ways to do it better. Start reading blogs like Mashable.com and Ducttapemarketing.com, and follow industry leaders like Chris Brogan (http://www.chrisbrogan.com).