Referrals - the most powerful way to grow your business

If someone asked you how much of your business comes from referrals, you would most likely give an answer of 50% or more. In fact, in last month’s survey, you told us that, on average, a little over 78% of your business comes from referrals! Time and again, we find that many businesses indicate that their customers come from referrals. Why is that?

When someone is referred to you – they are already pre-sold. Their friend or neighbor or relative liked the work that you did, believe you did it at a fair price, and would trust you to do more work. For the referred potential customers, the issues of trust and quality are already established.

As a business owner, referrals are great. They require just a little effort to convert to a sale and, referrals don’t cost you much. In fact, if your business is like most businesses, you don’t typically spend much, if anything, on referral business.

If so much of your business, today, comes from referrals with little or no effort from you, imagine how much your business could grow if you put some resources in to developing your referral business. Here are some ideas for building your referral business.

First, understand where your referral business comes from
It may surprise you but your referrals come from many sources - not just your customers. It is important to understand these referral sources and, to develop specific efforts to nurture referrals from all of these sources.

Referral source #1: Your existing customer base
Most of your referrals probably do come from your current customer base. With just a little effort on your part, you can get even more referral business from this powerful source. How?

Follow-up with your customers after the job is complete.
After you complete your work, make sure you touch base with your customer in some way. Call them and ask them how their experience was and if they are satisfied with the work performed. Or, send out a follow-up mailing to your customers that includes a thank you note and possibly a customer satisfaction survey. However you do it, convey to your customers that you appreciate their business and that you are thankful they hired you to do the work.

Ask your customers for referrals.
Whether your follow-up is by phone or mail, make sure you ask for referrals. A great way to do this is by developing an incentive program for referrals. For example, offer your customers a $10 gift card for gas or to a Dunkin Donuts for each of their referrals that receives a written estimate from you. And, make sure it is easy for your customers to refer you. If you are calling and someone says that they would refer you, send them some of your business cards to pass out. Include your business cards in any follow-up mailing that you do.

Let your customers know that you appreciate their referrals.
Most importantly, when the referral call comes in, make sure you thank your customer for the referral. Train yourself and those that answer the phone for you to listen for the caller that says “My friend/associate/neighbor recommended that I call you.” Make sure you send out a card, or call the friend/associate/neighbor that recommended you to thank them for that referral. If at all possible, track the fact that your current customer referred you. And, if that current customer calls you for additional work at some later time, offer them a small discount for their recent referral. When you consider how much you might spend on advertising, a small discount to an existing customer is well worth the business that customer might send your way.

Referral source #2: Your suppliers Do you know whether or not your suppliers are recommending you? Your suppliers can be a great source of referrals for your business.

An important first step in developing this referral source is to make sure your relationships with your suppliers are good ones. Always be courteous to everyone you interact with, and make a sincere effort to overcome any challenges quickly. Your suppliers will be more generous with referring you if they have a good relationship with you. Let your suppliers know about the type of business you are looking for, or about your specific area of expertise for which they can recommend you.

Don’t forget to thank your suppliers
Most likely you will be interacting with your suppliers all the time so a formal “thank you” program is probably not necessary. However, thanking them for their referrals when you do see them is very important. Let your suppliers know that you appreciate their referrals and your relationship with them will be ever further solidified.

Referral source #3: Your competitors
Chances are you know your competitors and have a friendly relationship with them. You belong to local trade associations, organizations or social groups. Nurturing these relationships to share business is a win-win. When you are busy, being able to refer one of your competitors gives a favorable impression to potential customers. Often times I’ve heard people say “I called X and he couldn’t do the job so he referred me to Y. I would definitely call X again.” Referring business to your competitors also makes your competitors more inclined to refer you if they find themselves unable to perform a job when called.

A word of caution about referrals
Nothing will stop referrals more quickly than providing a poor experience to the referred customer. Rest assured, your customers talk to each other. If A referred B and B’s experience was not good, B will tell A about it. A is not going to take a second chance at referring you again so now both A and B will not refer you. But, if B has a great experience, you can count on the fact that B will tell everyone they know about you and A will too. And, the same is true for your suppliers and competitors. They won’t continue to recommend you if they receive negative feedback from the customers they referred to you. But, give a great experience to your referred business and everyone will know about it!