A clear referral strategy will broaden every company’s business development reach, generating more revenue from more clients
Research has shown that 82% of your satisfied clients are willing to recommend you but only 29% do without being asked. So at a minimum, you should be seeking to activate the 54% gap. Referrals don’t end there, with every employees’ network containing potential referrers. In the modern connected world, anybody with a few years of experience probably has a thousand plus connections on LinkedIn, many of whom will trust them enough to be willing to help with referrals. But has anyone in your business ever asked your bookkeeper to get referrals from your suppliers? They have a vested interest in helping you.
That gives every person in your firm indirect access to a network of hundreds of thousands of people, which is likely to contain at least one ideal client for you. As professionals we instinctively know this, but many are reticent or unsure how to exploit the opportunities that exist in one’s own network.
In fact, most businesses suffer one or more of three significant shortcomings when it comes to referrals:
- Not being systematic about asking for them.
- If they do ask, doing so in such a way that the potential referrer responds “I’m happy to help, I’ll have a think”.
- Allowing self-limiting beliefs to limit their potential, even in senior people.
The probability of meeting a prospect in an audience of say 20 to 30 people at the average networking event is really quite low, whereas the odds of one of them knowing an ideal client for you amongst their shared 200,000 or more contacts is really quite high. Networking events should be used proactively to seek referrals, not to chat to people at random in hope rather than anything more.
Why do referrals matter?
We all know instinctively that referrals are high-quality leads. They are 70% more likely to convert into a won deal than any other lead source. This is, in part, because whether they admit it or not, people make decisions to buy emotionally and post-rationalise those decisions. Our role in selling our firms is to convey sufficient credibility that the buyer makes a decision in our favour, and can justify it to their stakeholders (spouse, boss or investors).
Opportunities won from referrals also tend to be bigger; in fact the data shows that on average they are 129% bigger, which is more than double the size of won opportunities from other lead sources.
Worryingly, despite the fact that according to the Growth Consultancy Network 48% of all new revenue in professional services firms is generated by referrals, only 12% of those firms have a systematic referral strategy in place, which implies such firms could all grow a lot faster if they invested in referrals strategies.
How to ask for a referral and actually get one?
You probably already run your business on referrals, but by accident. Do you tell people you do? Are clients, suppliers and other professionals in your teams’ networks primed and actively aware that you welcome referrals?
Eighty two percent of B2B buyers start looking for a new vendor of any product or service by asking their network for recommendations and find a satisfactory solution. They may never make it as far as engaging with your traditional marketing activities, meaning if you rely on anything other than referrals you are effectively targeting only 18% of available client spend.
If you do have a systematic approach to asking for referrals, the chances are you ask in a fairly open way, as we are taught to do in sales and many walks of life.
Typically, the conversation sounds something like: “I’m looking for more clients at the moment, you know what I do, do you know anyone who might need my help?”. This is where disaster strikes. You have doubtless heard a potential referrer respond with the immortal words: “Oh yes I’m happy to help, I’ll have a think”.
But the ‘thinking’ never seems to transpire. There is a reason this doesn’t work: there is nothing in it for the referrer other than doing you a favour and adding value for the referee by introducing you to help solve a problem; the feel-good factor. Hence it is not an action they write down, and without a to do item or a deadline, it tends to be forgotten. You’ve probably been guilty of it yourself, and as a result, you feel uncomfortable following up.
You need your team to change their behaviour in relation to referrals: firstly, to ask systematically in more situations and of more people. Any referrer will typically be willing to give you nine referrals over the course of your professional relationship.
You need to help your team identify the triggers to ask, whether in a meeting or on the sidelines of the rugby pitch on a Sunday morning while your kids train.
You also need to change the way they ask. Broadly speaking, these techniques come down to changing the way that you ask in one of three ways: by preparing in advance, by being more specific when asking so that you help the referrer to filter their own mental little black book, or by reciprocating and offering a referral to them, so that they feel they owe you one in return.
Whoever is responsible for business development in your firm should encourage every colleague to adopt new behaviours. This will require that they are offered time and reinforcement to embed what you are asking, perhaps incentives to begin with, and importantly that you collectively celebrate early successes in getting referrals (and new client wins that arise from them) to create a positive reinforcement feedback loop from peer learning.
As an aside, in a business to business (B2B) context, never ask for referrals digitally because it doesn’t work as well as a conversation as part of a mutually trusting human relationship. In business to consumer, especially high volume situations, it may work, but usually requires incentivising the referrer. There is no need ever to pay for a referral in a B2B environment.
Quantifying the upside
Companies with a clear referral strategy will find they widen their business development activity and generate hundreds of thousands of pounds of new top of funnel pipeline and in due course revenue from new clients via team members that had never done it before. This avoids overreliance on so called rainmakers. Firms who are considering external investment, an equity event or change of ownership will also find that if they can demonstrate, by using CRM data, that the majority of referrals do not arise from the founder or CEO’s own network that their enterprise value goes up.
Top three takeaways you should action now
- Remember to ask: The biggest limiting factor is thinking you can only ask a satisfied client at the end of a project.
- Every single person in your firm has a network; don’t limit referral activity to the C-suite or BD teams.
- Don’t pay for referrals: There is no need to pay for referrals if you ask in the right way. Affiliate/partner programmes are different and may need incentives.
ISP members can catch up with the webinar on this topic here.
Written by Thomas Coles
Thomas Coles has founded and exited five technology consulting businesses in his 298 year career. He’s now advising numerous B2B companies in professional services, consultancy, technology and other sectors to accelerate sales.
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