5 Tips for Building a Referral-Based Business

For many service-based entrepreneurs, the practice of “sales” is not their favorite aspect of running their business. The prospect of seeking out new clients and convincing them that you are worth hiring can be intimidating at best. Fortunately, there is an alternative to the practice of cold calling. Building relationships and a referral-based model can be a more effective way to grow your business.

Creating a referral network for your business is hard work, but it is going to save you time and effort in the long run.

Consider: Are you more likely to buy a product or service after seeing an advertisement, or after hearing a trusted friend share a wonderful experience they had with a certain company? You’re more likely to go with the advice of a friend, right?

Your referral network will ideally operate in the same way. Instead of you spending all your time and money telling people to work with you, you’ll have a lot of clients and network partners telling people to work with you!

Here’s how to build a winning referral network:

#1: Treat Your Clients Well

If you don’t have a good track record with clients, they are not going to be keen to sending referrals your way. In fact, they are more likely to damage your reputation. It doesn’t matter how much that client spends with you, treat every customer like that six-figure customer. Treating your clients well, adhering to a strict ethical code, and charging a fair rate are key to building trust. Trust leads to referrals, which leads to more revenue.

Remember: Reputation can make or break a referral-based business.

#2: Get Out & Meet People!

Networking is key to building solid referral partnerships. Get out in the community! Join your local chamber of commerce, consider organizations like Business Networking International (BNI), a mastermind group, or join a volunteer organization. You never know which connections may become powerhouse referral partners down the road.

#3: Cultivate Relationships First

When you’re building a business, it can be tempting to ask for a referral from a client or a complementary business owner right off the bat. Resist this temptation at all costs.

Referral-based businesses are built on a long-game strategy. Focus on getting to know the other party before asking for a referral. Take them out for coffee or lunch, and get to know their business. Offer opportunities to work together – perhaps by cross-promoting blogs, as an example. Make the situation a win-win, not just about what you can get from them. You must bring something to the table as well – after all, they are called referral “partners” for a reason.

Another reason to focus on the relationship before jumping into a referral relationship is the potential that the other professional may not share your values on important things – like ethical business practices.

Make sure your vision and their vision are a good match. Find a reason to work with them directly so that you can see first-hand how they operate. Follow up with referrals that you send to your partners to ensure that their business practices meet your standards.

Every time you make a referral, you are essentially endorsing that other business. Do so with care.

#4: Show Your Appreciation

A quality referral is worth its weight in gold – especially for a service-based business. When you do get to the point of exchanging referrals, be sure to properly acknowledge the efforts of your referral partner. Send a letter, treat them to coffee or lunch. Some businesses even offer a commission of sorts to their referral partners. If one of your referral partners sends you a client, consider offering a “finder’s fee” to them. This can be a great incentive for them to send you more business in the future.

#5: Identify Your Star Partners & Focus on Them

Nearly every professional who frequents a networking function is there looking for new business in some form. You’ll find that a good portion of your initial contacts will get excited about building a referral partnership with you. After a while, you’ll notice that only about 20% will follow through. Track your referral sources, and really focus your relationship-building efforts on those partners.

The more you practice building business relationships, the more likely you will be successful in the long term. This means less time and money spent on sales!

Happy networking!

Guest Contributor: Erika Heeren is the founder of Heeren Content & Strategy. With 14 years of experience marketing and public relations, she has a professional focus on integrated media spanning 16 different industries.

Heeren works with small businesses and non-profit organizations to provide affordable, professional-quality content development, marketing, and public relations services. Her clients include local small business owners, marketing agencies, public universities, media outlets, Huffington Post-published authors, IT firms, and non-profit organizations.

A military spouse herself, Erika is an outspoken advocate for veteran and military spouse education, employment, and entrepreneurship. As a volunteer eMentor for the Military Entrepreneur Program, she works one-on-one with aspiring military-affiliated entrepreneurs to help them grow their business. She also volunteers as a digital marketing instructor with Treasure Valley SCORE.

Heeren is an award-winning writer and has been featured on NextGen Military Spouse, Veteran on the Move, Wright Stuff Radio, and Social Media Week.