Referrals can be such a good source for new business but most fail to live up to the expectations. How can you ensure that referrals become an effective and impactful part of your new business process?
You know how it works with referral agreements. You meet someone who can introduce you to prospective clients, you talk it over and everyone gets excited about the potential, you rewrite your forecasts to accommodate the huge injection of new revenue you know will come flooding in. And then nothing happens. Eventually, you realise you’ve been here before and promise yourself you won’t let yourself waste time on this type of arrangement again. And after a while, you do. Rinse and repeat.
And yet referrals CAN be a fantastic source of new business. Often, because of the referral, there’s little or no pitching (perhaps something I should have added to the ‘win without pitching’ article from a short time ago), prospects are more open about what they want, and you have an advocate in the wings watching your back because they want you to succeed.
So, what can you do to turn your referral discussions into an effective part of your new business machine?
Have an agreement. But not the same cookie cutter for everyone. If it’s a relationship worth establishing and cultivating, it’s worth taking your time to be clear about defining what the relationship actually is. Remember, this is a negotiation – whilst you’re all looking to collaborate and work ‘mutually’, there is commercial benefit for all parties and that means this is a haggle!
No mutual referrals. If your both agreeing to refer work to each other, have two separate agreements.
Agree the fee. What you’re “paying” for the referral.
Where is the value in the referrals? It’s more than money (sometimes). So identify all the areas where the referral will bring value to the referrer. And they’re not referring just for the money (normally) what benefit do they get and are you able to quantify that?
Examples of this might include:
- Referrer is protecting their own client relationships by introducing you (and keeping out less sympathetic providers)
- You might be providing services that make it easier for the referrer to sell their services
- Your team might be acting as “ears on the ground” and feeding back valuable insights to the referrers team
- Referrers relationship with their clients might be based on them helping clients source reliable providers
There are hundreds of reasons (beyond simply generating an income stream) why someone might refer business to you. If you don’t know what these drivers are, you’re highly unlikely to have a productive relationship.
And I’d go further. Don’t just identify these drivers, attribute a value to them. It may not be a monetary value, but perhaps agree priorities – a small income stream might not be the key benefit to the referrer.
Fix a review date. Things change over time. Both parties want to feel it is fair. If it is a good source, you want to be sure the referrer is feeling the benefit too.
Agree milestones. First referral is the hardest. What will happen as the relationship develops to help both of you know it’s progressing well (even if you haven’t yet had a referral?)
RACI. This is a project, a campaign. As with any project, you need to agree who will be accountable and who will be responsible for the various deliverables.
Training. Referral agreements often flounder because no one bothered to share all of this information with your team (or the referrers team). Assumptions fill this gap, misunderstandings grow and solidify and very quickly misunderstandings can happen. If you and the person agreeing the referral deal are not the ones running the activity, you have to take the time to train those who are.
No free lunches. Work at it. Nurture it. Don’t assume that because it is still working for you it’s working for them.
Audit your ‘agreements’. It’s never too late to create a mutually effective agreement with referrers. Revisit your current agreement – formal and informal – and see which ones could be resuscitated if you follow this advice. What referral relationships do you have? Do they look like this or are they very clear and driving effective new business? Could they “go bad”? Would you know? Can you identify more (better) opportunities?
To summarise, your agreement should:
- Identify what is important and agree objectives of the agreement
- Agree the priority of these
- Attribute a value of these to the referrer
- Establish a way of measuring delivery
- Acknowledge the factors that will indicate you are making progress towards the objectives
- Define accountabilities and responsibilities and train your team
- Agree how reporting will work
- Get regular reviews in the diary and set expectations about the agenda for the review
Find an hour to sort this out. It will be time well spent.
I’d love to hear how you get on with this.
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