Step 8 of Building a Better Business
Build strong networks to generate referrals
Referrals are the easiest way to generate new business, and building strong networks is a great way to generate referrals. Networking and referrals are cost-effective ways to grow your business, as the return on investment can be huge. Think about the types of networking you can undertake and encourage your team to do the same.
Five ways to maximise referrals from your networks:
1. Consider the lifetime value of a new customer.
Calculate the revenue you’re likely to generate from a new customer, then consider ways you could reward them to show appreciation for their repeat business. For example, you could send them a bottle of wine, a voucher towards their next purchase, or cash back. They’re likely to spread the word.
To calculate the lifetime value of a customer, use the below formula:
Average transaction value x average number of transactions x gross profit margin x customer lifespan
2. Identify businesses that complement your services.
What businesses have a mutual interest in your customers but aren’t your competitors? For example, a surveyor may work with lawyers, bankers, accountants, and tradies, and they can all refer business to each other.
Create an informal group and commit to meeting regularly. At each meeting, be sociable and have fun but also discuss how you can work together more effectively!
3. Focus on referring more to your networks than you’re seeking in return.
Giving work to others will encourage referrals in return - this is called The Law of Reciprocity. When you do something nice for someone, they’ll have a deep-rooted psychological urge to do something nice also. The more you refer, the more you’ll receive in return. And, be sure to thank your referrers!
4. Find out where your target clients hang out in the greatest numbers.
There may be existing networks that you can join right away that will result in referrals, e.g. BNI, Rotary, Chamber of Commerce, etc. Find out which one is most relevant to your business and join.
5. Get involved with non-profit organisations.
Choose an organisation that you or your team are passionate about, be that a sports club or a local community organisation. Avoid ‘peddling your wares’ when working with the organisations. Simply wear branded clothing and have signage where appropriate. Prospective customers need to know you, like you and trust you before they’ll buy from you.
What can you do today to grow your network and maximise your referrals?
“The currency of real networking is not greed, but generosity.” - Keith Ferrazzi
