Generating More Business Referrals

When it comes to finding new sources of business, most people don't really enjoy the task of prospecting and having to continually develop new business leads.

On the other hand, just about everyone in business loves to receive referrals, as these leads don't appear to require any prospecting effort.

Despite the obviousness of these statements, few business people ask for referrals frequently enough. This is most likely because asking for referrals feels too much like prospecting, and the fear of rejection prevents many from initiating such requests.

However, business referrals are the life-blood of those who are considered to be truly successful in their chosen professions. These individuals not only outperform their peers, but they typically enjoy their business much more than average, as well.

Let's face it, having an endless stream of new leads without having to prospect or wait for the phone to ring is much more pleasant than the alternative.

The first lesson here is simple: you probably need to ask for referrals much more often than you already do.

This is, of course, easier said than done. While anyone can simply begin asking for referrals, many questions will likely cause you to hesitate.

  • When is the best time to ask?
  • How do you ask without seeming too "pushy?"
  • What is the most effective way phrase the request?
  • How can you reduce the fear and reality of rejection?
As with most things in business, and life, it's best to have a plan. Rather than thinking of the request for a business referral as an event, you should consider it a process.

Successfully generating referrals as a regular business practice can be easily achieved through a simple five-step procedure.

First, you need to plant the seed.

The next time you begin a business relationship with a customer or client, make sure you emphasize that you prefer to do business on a referral basis.

If the prospect has come to you through a referral of some kind, then reinforce that the reason you're willing to work with them is because of the referral from the mutual acquaintance.

For instance, "I'm glad Jerry gave you my number. He might not have mentioned it, but I generally only work with clients who are referred by someone I know and respect." "How is Jerry, by the way, I haven't talked with him in a while?"

On the other hand, if the customer came to you from some other source, an incoming call for instance, then point out your willingness to work with them as a special exception.

"I should tell you that I usually only work with clients who are referred by someone that I personally know. However, I do have some extra time in my schedule this month, and knowing the area as well as I do, I really believe I can help the two of you get the most money for your home."

In either event, and regardless of how you say it, letting the new prospect know that your time is valuable and that you generally prefer to work with referred clients will reap great rewards down the road.

The second step is to obtain a commitment.

We all know that getting someone to commit to an action on the spot can be both uncomfortable and difficult.

However, you'll likely find that obtaining a commitment for a "future event" is much simpler than you realize.

The difference is in the lack of resistance most people feel toward future commitments.

For instance, if you ask this brand new client for a referral right now, there are plenty of reasons why this could feel awkward for both of you, and that you might not receive a referral.

They may not be able to think of anyone to refer to you on the spot, or may not yet trust you enough to do so. Additionally, the request to act immediately is likely somewhat of an unwelcome surprise.

On the other hand, if you ask them to provide referrals at some future time, you'll find that resistance to your request will not only be diminished, but will likely not exist at all.

Example: "Mr. and Mrs. Tandy, if I agree to go to work for you now, and can successfully handle this transaction to your satisfaction, would you be willing to refer business to me in the future?"

Few people will resist this request. There's no pressure or immediate need to act, and their obligation is contingent upon you doing a good job for them, which of course is something they want.

If they do decline or resist this very reasonable request, then it's a pretty clear signal that you probably shouldn't invest your time into working with them in the first place.

Step three is simply a matter of reinforcement.

Once you've planted the seed and then obtained a future commitment, all that's really necessary is to provide them with good service and then set up the collection of the referral.

This is to say that when your immediate business with the client is complete, likely some months from now, you only need to remind them of their agreement to refer business to you whenever the need arises.

An important distinction that needs to be made is that this step is not actually a request, and therefore cannot be denied. The commitment to refer business to you was made long ago.

A great way to phrase this reminder is one in which you both reinforce the obligation for referrals and make the client feel good about doing so at the same time.

You can approach this in any manner that makes you feel comfortable, but an example would be:

"Mr. and Mrs. Tandy, it's been a pleasure working with the both of you and I hope we can work together again in the future."

"By the way, when you know of someone who needs to buy or sell, after giving out my name and number please call or email me directly to let me know that you've referred them"

"As I told you when we first met, I generally only work on a referral basis, and I'd hate to have your friends leave me a message and not realize that they were referred by you. If you can let me know to expect their call ahead of time, I would appreciate it. And, I'll make sure I do my very best for them."

Not only does a statement such as this gently remind them of their obligation to send referrals, but it makes them feel important in the process as well.

Collecting the rewards

While following the first three steps will substantially increase the number of referrals that you receive over the years to come, you should still make it a habit to follow up with these past customers and clients to ask for more referrals.

Two or three times a year you need to make a personal phone call and ask for more referrals. Not only will this generate positive results in response to your direct requests, but also these calls will gently remind past clients of the importance of remembering to refer business to you.

The key to success with this fourth step is in having a good reason to call, besides asking for business.

Simply calling and asking for a referral will likely be uncomfortable for both of you, and will not produce nearly the results that a well reasoned call is capable of.

On the other hand, calling to inform the past client of a recent listing or sale on their street will generally be appreciated, as everyone likes to know about real estate activity and values in their immediate area.

A daily scan of your MLS "New Listings" section should provide you with ample opportunities to contact past buyers.

While the dialog will depend on your personality and style, who would object to a call such as:

"Mr. Tandy, it's Stephen Canale calling, how are you and Jean doing?"

After a few minutes of unguided and natural conversation you can then tell them why you're calling:

"You've probably noticed that the Bernards are selling their home down the street, but did you know that they are asking $192,000?"

Again, this may lead to several minutes of conversation about the Bernards, real estate values, other properties in the area or just general neighborhood gossip. Any and all of which is good for building rapport and future business.

At some point in the conversation, likely towards the end of the call, you simply need to ask the very natural question:

"I thought I should call to see if you can think of anyone at the University (or where ever he or she works) who might be interested in the Bernard's home?"

Regardless of the answers you receive, you can be sure of two things:

  1. You will receive leads from these calls

  2. This casual, yet purposeful reminder of the importance of referrals will generate future referrals to you as well

The final step, positive reinforcement

Simple psychology, when someone does something you would like repeated, reward the action.

In this case, the reward for sending a referral should be threefold.

First, you should immediately contact the person who sent you the referral and thank them, while also letting them know that you'll provide the best possible service to the friend, neighbor or relative.

Secondly, you should consider keeping the person who sent the referral "up to date" as much as is appropriate for the situation. Someone who has referred an immediate family member would likely appreciate more feedback than one who simply referred a neighbor.

In any event, you should let them know when the business transaction has been successfully consummated, using this opportunity to again remind them of how much you appreciate their willingness to go out of their way to refer business to you.

Thirdly, a follow up gift is more than appropriate. While this may be subject to business regulations, a personal gift, gift certificate or even something so simple as a gift-basket with a handwritten "thank you" card will go a long way to generating additional referrals.

What's important to understand about this fifth step is that the whole structure of rewarding the person who sent you the referral centers around clearly communicating how much you appreciate their action of referring business to you. Additionally, you want to reinforce that you will make sure that they never regret referring business to you by providing excellent service to the new client.

Committing to the process

If you follow these five steps to generating more business referrals, you will likely find the process to be a painless and natural extension of providing the kind of personal service that most consumers will very much appreciate.

Rather than feeling like prospecting, these steps really are no more than an effective business process for providing the consumer with reasonable expectations as to your working relationship with them, and then clearly communicating your business needs along the way.

The content of this article is based on my seminar:
Generating Business Referrals
Stephen M. Canale
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