The Christian Entrepreneur » word of mouth referrals

My Proven Client Referral System – Part 1

Brad Harmon — Tue, 26 Jan 2010 21:09:31 +0000

Last month, I asked Just How Valuable are Customer Referrals Anyway? I used a real world example to show how easy and profitable it is to grow your business through word-of-mouth referrals alone.

I’m not suggesting that referrals should be your only source of business growth; however, given the low acquisition costs associated with referrals they should be a major source of that growth. In fact, they are the low lying fruit on the tree of business growth that take very little effort to harvest.

Why do so many small business entrepreneurs miss out on referrals? In my post, Is Your Small Business Kissable?, I pointed out that one of the reasons is that we simply fail to ask for them. Another reason is that they lack an effective client referral system.

Who Do You Want Your Clients to Refer to You?

Before we get into the referral system, you first have to know who it is that you want your client to refer to you. It’s a very simple step that too many entrepreneurs skip, but it is one of the most critical steps.

If you’ve been reading this blog for a while then you will know that I come back to this question over and over again. Who is your target customer? Be specific.

Your client is going to need to know specifically what you are looking for in a potential referral if you want to receive quality leads from them. You don’t really want all of their friends and family members without any qualifying factors, do you?

What are Your Target Customer’s Problems?

What problems are you solving for your current clients? Is it saving time by making them more efficient? Maybe it’s making them more profitable? Perhaps, it’s making their business less stressful? Make a list of the problems you are solving.

Now list the symptoms of those problems underneath each bullet point. What is it that people say in general conversation that would indicate they are having a problem you are great at solving?

Let’s face it, most of us don’t go around telling our friends that we need to revamp our hiring process because our application doesn’t really gather useful information needed to make an informed hiring decision.

We tend to make statements like “good help is hard to find,” or “if you want things done right I guess you have to do them yourself.” You need to set your clients up to think about referring people based on their symptoms.

Sizing Up Your Target Customer

Symptoms are great because they allow you to pinpoint needs that you are great at solving. It doesn’t do much good though if the person with the symptoms can’t afford your services or is part of a mammoth corporation that is too large for you to service.

Write down the names of your ten best clients (the ones you would love to have more of – not just the biggest). Under each bullet point list out what you know about them.

This includes the size of their company in both number of employees and revenues, their occupation, their education level, their hobbies, etc. What are the most common data points that you listed? Does this fit with your target customer profile?

For example, you may find that most of your ten best clients have fewer than 50 employees, are college educated, work in the computer industry, and love to play golf.

Now you not only know the size of business and industry that you want to target, but you also have a great idea where they hang out.

Who Else is After Your Target Customer?

Hopefully, you are starting to have a good image in your mind as to what your target customer looks like. They should look very similar to your ten best clients.

Now it’s time to start brainstorming as to who else could be looking to do business with your target customer. I’m not talking about competitors, rather what other businesses could sell their products or services to your client.

For example, a client who needs a certified public accountant may also need an attorney, a financial planner, an insurance agent, or a stockbroker. Developing a referral network with other business owners providing synergistic products and services is a great way to expand your customer base.

Why not ask your best clients who it is that they are using for these services and start a relationship with them? Referral networks are much easier to form, and more profitable, when mutual clients recommend synergistic partners to each other.

Making Your Target Customer a Reality

We started with looking at your target customer though your eyes, but then we refined that image by looking at it through the eyes of your client and other service providers.

You should begin to see how taking these first steps before talking with your clients about referrals are setting you up to receive higher quality and more focused referrals from your best clients.

It’s also a great process for making sure your target customer becomes more concrete in your own mind. Someone suggested in a comment the other day that we should name our target customer and even make an avatar for them.

The more real they become to you the easier it will be for you to successfully market and operate your business.

The Next Step in the Referral System

Tomorrow, we will look at creating a Customer Profile Sheet using the information gathered from this post. It will be a vital tool throughout the rest of the referral system.

How you use it though makes all the difference. Please be sure to check back throughout this week for the rest of my proven client referral system.

Just How Valuable are Customer Referrals Anyway?

Brad Harmon — Mon, 30 Nov 2009 18:08:43 +0000

If you ask any small business owner where they derive the majority of their new business they will inevitably tell you that it’s through word of mouth referrals from their existing customers.

We all seem to know that our existing customers are a gold mine of future business opportunities via their contacts, but why do so many of us fail to convert these leads into tangible results? It seems like too many times we end up getting the shaft while someone else takes the gold.

Last month, I published a post called Is Your Small Business Kissable? where we looked at how small business owners can send the wrong message to their customers when it comes to referrals. So how well are you doing a month later?

Asking for Referrals is SO PAINFUL!

Chances are that you agreed with what I wrote in that post, but quickly got distracted and took no action. Maybe you thought about how you would, or even attempted to, get referrals from your customers.

What did you think? Was it painful? Perhaps, it was even excruciating to some of you? Many gurus will tell you that it’s really not, it’s all in your head.

It’s almost like they are saying, “Quit being a baby when it comes to asking for referrals!” Honestly, it’s pretty hard for many of us to start this conversation with our clients, but I think they’re right.

You started your business to provide a product or service to your customers that was higher quality, more efficient, and greater value than what you saw being offered in the marketplace. Why would you send their friends elsewhere?

“A System! A System! My Business for a System!”

So you don’t want to send them elsewhere, but you need a proven system to convert them? Okay, I’ll buy that. This whole process would be much simpler and less painful with a proven system.

I could give you my system right now, but many of you would probably still fail to use it. Is the system that bad? Is it just a bunch of smoke and mirrors?

No, but here’s the problem. Until you truly see the value in a referral from your customer you will most likely quit the program at the first sign of failure.

An Example Using Just Referrals

Let’s take a small business owner who is just starting out. We’ll call her Jane. Jane has managed to build her business up to 10 clients who on average generate about $5,000 a year in revenue. Looking at her clients, she decides that she is going to ask half of them to refer 2 prospects.

Jane really believes in the customer referral system, so she decides to focus only on referrals. She will not use any other source to generate client leads. Pretty extreme, but if you knew Jane you would understand.

The Assumptions

To make our example realistic, we will assume the following:

10 existing clients
$5,000 avg. revenue/client
50% of clients refer
2 referrals per client
Jane converts 1/3 of the leads
90% retention rate

Show Me The Money!

Here’s what the first year would look like. Multiply all the factors above together – 10 clients * $5,000 per client * 50% referrals * 2 referrals per client * 33.33% conversion * 90% retention = $14,998.50 from referrals bringing total revenue to $65,000.

Year 2 all the same assumptions, except now we have 13 customers. Year 2 revenue from new referrals is $19,305 bringing total revenues to $84,305.

Year 3 all the same assumptions, except now we have 17 customers. Year 3 revenue from new referrals is $25,245 bringing total revenues to $109,550.

Did I Get Your Attention?

Pretty amazing, huh? Plug in your own numbers and see what it would look like for your business. Honestly, these numbers assume a pretty low level of effort in trying to generate referrals. Don’t forget this doesn’t include any other advertising.

Now that you see the true value of customer referrals, how scary does it sound? Is the fear worth letting your competitors take this gold mine away from you?

What’s that? Oh yeah, what is my proven system? I will be sharing that with you over the next few weeks, so make sure you come back. Better yet, why not Subscribe to My RSS Feed so you are sure not to miss it? It’s free, what do you have to lose?