Growth & Customers

Why referrals are vital to your business growth


When I first start working with new clients, one of the first things I ask them is if they have a referral program.

It still amazes me to find out how many businesses don’t have one!

It is such a wasted opportunity to be able to add new clients and revenue to their business, as it is such an easy addition to implement into their business model.

Instead, business owners are continually seeking new clients, which is often much more expensive and time-consuming than having people refer potential clients to them; which by being a warm lead they are potentially more likely to do business with them.

In fact, when I was creating the program I teach to businesses I make sure to add referrals as one of the crucial elements they need in their business.

Why? Because referrals are vital to every business, no matter what size, industry, location, etc.

Without a system to both invite and manage referrals it is like leaving money on the table and not even realizing it.

Referrals can come from a multitude of sources: past clients, current clients, prospects, joint venture partners, affiliates, networking opportunities, and even competitors.

Whatever means you choose to establish and nurture referrals you want to explore practical ways to encourage these people to become ‘Raving Fans’ and send you quality referrals.

Why are referrals important for your business? Because creating ‘Raving Fans’ is vital to the ongoing success of your business instead of always having to chase after that new client.

You want your connections to WANT and LOOK FOR ways to refer new clients to you.

Some business owners tell me that they receive referrals from time to time. However, this is not a big priority for their business as it could or should be.

Without a system in place, especially if you have staff to support a referral program, opportunities are likely being missed.

People do not just remember to refer someone to your business naturally. Sometimes they need a reminder that you would welcome any introductions.

If businesses do receive referrals, it is even less seldom that they have a system to reward connections providing the referral.

Yes, some professions and industries do not permit or reward of any type referral system and are limited to how much they can spend to reward the contact.

However, that is why I get called The Business Development Ninja™ by my clients because I am always looking for the right way to work with these types of restrictions. Let’s take a look at some examples of how several businesses have been to win in their industry by having a referral program.

Case Studies

How one financial advisor developed a referral program

I recently chatted with a financial advisor who told me that she was limited to what she could offer as a reward for referrals.

After asking her about her clients and those who might have referred her business in the past, she told me that many of them were women. So, I suggested she contact a cosmetics company, perhaps one located in a shopping mall or large retail store, to see if they could work out an arrangement where if she brought in her valued referral partners to the store the cosmetics company (always looking for new customers) would provide free makeovers, and set it up like a party just for her clients.

Even if some of her best referrals were coming from men, they might have women in their lives that they could treat them by attending such an event.

How one company salesman developed an out of the box referral strategy

Recently during one of the training sessions for my system, one of the attendees (with similar restrictions for his profession) came up with the idea of inviting his referral partners to go to a local high-end car dealership for a test drive. He was making arrangements with the dealership to put on an exclusive event just for his clients to test drive new cars that they might not own yet. This is a great opportunity to introduce a prospective customer to the dealership.

No rules were broken for either of the two examples described above. This is just a creative way of thanking those who might send these business owners referrals for their efforts.

Why referral programs aren’t just for small and medium-sized businesses

What I have discussed so far doesn’t just apply to small or medium-sized businesses, but this also includes large organizations who need a referral program.

Most major companies have loyalty programs to reward customers for purchasing their services or products so that they continue to buy from them, but not many that I have come across have a formal referral program to enhance their business.

I know one organization that gives each person who refers new business a ticket in a drawing for a vacation. I am not one to miss out on a free vacation, however, how many other referral partners would I be competing with to win this trip?

I referred a networking group to hold their monthly meetings at a local Starbucks, over six months ago. I did this to both assist the group organizer in finding a suitable location for their gathering, but also to help my local Starbucks, not only with the business they receive once a month but potentially some of the people attending that meeting coming back again at later times.

I did not even get a ‘thank you’ from the store manager, let alone a free hot chocolate for the referral.

Many businesses do not realize that both parties involved will benefit from a referral system, but this is just a small example of where businesses of all sizes are missing out on recognizing the importance of fostering referrals and then rewarding them in some way, even if it is only a hot chocolate.

Another example stands out for me and that is a gift I received from Marriott Hotels. I was rewarded for the referral business I brought to the hotel chain by having the chef of one of their nearby hotels come to my home to cook a special seven-course meal for five dinner guests.

The chef even called me to discuss the menu in detail, and on the night of the dinner he brought a maître d with him, just to enhance the experience for my guests. My guests were so excited to have a professional chef prepare such a wonderful dinner and Marriott just received five prospective new customers. That night will never be forgotten.

Points to ponder:

  • If you do have a Referral Program, is it a consistent system that you and your employees use on a regular basis?
  • How could you reward your referral partners for their connections in a creative way?

Small business survival toolkit

Get your free guide, business plan template, and cash flow forecast template to help you run your business and achieve your goals.

Download your free toolkit
10,548 readers have downloaded this toolkit
Female hands working on a laptop

Subscribe to our Sage Advice Newsletter

Get our latest business advice delivered directly to your inbox.

Working from home with tea in hand