#4 - Are You Asking for Referrals?

While business owners have no shortage of challenges, such as cash flow management, hiring and retaining employees, time management, inflation, regulations, taxes, and economic uncertainty, many still struggle with acquiring new customers. Marketing, such as social media, paid ads, content, and cold outreach can all be helpful ways to source new leads and grow your business. However, these are generally more expensive, more time consuming, and less effective than referrals. While 82% of small business owners cite referrals as their primary source of new business, only 11% of salespeople actually ask for them.

Referral leads convert at 30% higher rates than leads from traditional marketing. Let's break down why they're more effective:

• Trust - With referrals, you've shifted the trust factor from your business (a stranger) to someone familiar with the prospect. How many times have you heard someone buy a stock or new cryptocurrency based solely on the word of a distant family member, neighbor, or a buddy? People have much higher trust in their closest friend groups who can advocate for positive experiences.
• Cost - How much does it cost to take 10 seconds to ask for a referral from a satisfied customer? While marketing may have a larger reach, these costs can be in the tens of thousands of dollars per year.
• Quality - With referrals, the quality of leads is much higher because your customer already knows your product or service, which allows them to directly share your information with suitable potential clients.
• Time - If your product or service requires any education before consuming, having referrals assist in the teaching aspect can significantly cut down the time to close. These warm leads will walk into the conversation already having a general idea of what you're offering.

Asking for Referrals

There are several reasons business owners may not be asking for referrals, such as fear of rejection, lacking confidence in their product/service, forgetfulness, fears of appearing pushy, a lack of knowledge or tools, poor timing, or an understanding of the value of referrals. As always, this starts with adding as much value as possible to clients by consistently improving your product or service. If you aren't proud of what you're delivering, you shouldn't be asking for referrals. However, once you have a superior product or service, you can take solace in the fact that 91% of customers would be willing to provide a referral to a company or brand they are satisfied with!

Perhaps it makes sense to create a referral SOP (standard operating procedure) for your business. Here's what it could look like:

1. Deliver the best results possible for your clients. Don't settle for anything less.
2. Create a referral script for yourself or salespeople [i.e., "John, it was so great working with you. Do you know anyone else as awesome as you who also might need (product or service)?"]
3. Always ask for referrals right after the sale is complete when your client is most pleased with the results.
4. Set reminders or use tools to make sure these requests are always part of the sales process.
5. Offer incentives such as discounts or rewards for referrals that convert.
6. Make it as easy as possible for the client to refer people. For instance, handing out business cards, flyers, or even asking the client to start a group text message with a prospective client might be some easy and effective options.

Conclusion

Passive referrals are likely already a huge part of your business. So, why wouldn't you want to tap into this rich opportunity for high-quality leads, especially from your best customers? Once you have a process in place to market your high-quality product or service, the effort is minimal and the risk is virtually nonexistent. Before you think about sinking thousands of dollars in expensive marketing solutions, make sure you're making the most out of client referral opportunities.