Word-of-mouth referrals are a very strong way to build your business, both for selling services as well as products. In this blog post, I’ll focus on using referrals for selling services – consulting, coaching, mastermind groups, membership programs, training workshops, and professional speaking. Here’s a step-by-step guide for designing your referral strategy.

When your clients and colleagues tell others about you, there is a “borrowed trust” that goes along with that referral. Your prospective clients feel more assured when they hear about you from someone who has experience with you.

There are two types of referrals: referrals from clients and referrals from partners/colleagues. Your strategy is slightly different for both types. Networking is an important component of developing a referral strategy, but that’s another blog post of its own!

We need to make it as easy as possible for our clients and colleagues to make the referral. I give you some tips below, and sometimes simply asking them, “What’s the easiest way for you to give me referrals?” can help you customize an approach based on their preferences.

For all types of referrals:

• Asking for the referral
• Deciding if you will pay a commission and deciding what and when to pay
• Keeping track of results

Why should they give you a referral?

We get so focused on designing our word-of-mouth referral strategy that we forget to think about the person giving the referral. Why should they do it? People are busy, so why will they take time out of their day to send a prospective client to you?

• Because that’s the way they think, always networking and always making connections and introductions.
• Because there is a financial incentive or emotional reward.
• Because they want to help you.
• Because they think you will reciprocate and send referrals to them, too.

Asking for referrals from clients

Current and existing clients are a rich resource for your marketing efforts. They already know you and trust you, and know their own personal network well enough that they can easily make a referral. Some consultants and mastermind groups only accept new clients from referrals of existing clients. The best thing about existing clients is that they often know other people just like themselves, so they have connections to the pool of your ideal client audience.

Here are some strategies:

• Since they are existing clients, it’s an easy thing to ask them for a referral to a service they’ve just experienced themselves. The best time to ask is either after they’ve had a big success (because they have worked with you) or wait until the contract is finished.
• For memberships and mastermind groups that are more long-term, don’t wait until the end: ask them around the third month of working together.
• Say to them, “You know, I build my business through word-of-mouth referrals. Do you know anyone who would benefit in the kind of work you and I are doing together?”
• If you are asking them to send an email on your behalf, write it for them, or send several ideas they can pick from. Make it easy for them to talk to others about you in a conversational way.

• Consider having printed brochures or postcards you can give them to give to others.
• Instead of asking for referral contact information, ask for “introductions” where you get on a call or meeting with both parties or your existing client calls/emails a prospect and introduces you to each other.
• If you are looking for more speaking gigs, use referral cards whenever you speak. These are small cards with a blank contact form. Give them to your audience and ask them in your speech if they know of another organization looking for speakers, you’d love to have their contact information.
• When you are teaching workshops, ask students for the referral during class or when class ends.

Asking for referrals from partners and colleagues

It’s all about making connections and forming relationships. You need to find people who serve your same audience so that it’s a natural referral between the two of you. For instance, a CPA or business attorney is a natural ally of a small business consultant.

Networking groups like BNI are set up for lead referrals, but these groups are typically local. Larger online networks have a broader audience, but you can get lost in the size of the group. In theory, social media is an ideal place to network, but you need a targeted strategy to find potential referral partners. Since referrals work best coming from someone who already knows and trusts you, your strategy must include truly getting to know each other so you can make appropriate referrals.

Whichever technique you choose, ask yourself: What’s in it for them? Sure, you’d love the referral, but why do they want to partner with you in this way?

Will you need to educate them about your services? If you’re offering a mastermind group, your referral partners might not know what that is, so you’ll need to talk with them about how a mastermind group works and the benefits of a mastermind group. This is where your elevator speech needs to be polished to perfection.

Deciding if you will pay a commission and how much to pay

Some networking groups, like BNI, are set up for sharing leads and making referrals. In meetings, members share who their audience is and how they help their clients. Other members then refer business to them, or form referral partnerships, based on an ideal match.

Some referrals include a commission or affiliate payment. The first decision to make is whether you’ll offer commissions or not. Next, you’ll decide how much of a commission and when it’s paid out.

It’s important to note that not every referral pays a commission. Sometimes colleagues have an unspoken, casual referral network. When they hear of someone who might be right for one of your services, they simply send that person to you, without any thought that there should be “pay back” in cash. The pay back comes when you refer business to them, too. This is true of colleague-type referrals as well as referrals from corporate clients. Sometimes the appropriate thing to do is send a thank-you card or gift instead of paying a commission. Be aware that some corporate employees are not allowed to accept gifts or commissions.

A typical commission structure might be 10% of the consulting or coaching contract, or 10% of the first years’ fees in memberships and mastermind groups. I have seen commission rates from 5% to 20%.

You may have seen affiliate programs were the business owner pays a 50% commission. This is exceedingly high and only for high-quantity “product” type sales, like online workshops, etc. If you are running mastermind groups and offer a 50% commission, that means you must double your mastermind group fees in order to make a decent profit. And doubling your fees might price you out of reach of your clients, so this is a commission strategy that only works when you are selling a high quantity of items or you are selling big-ticket programs.

Think about a flat-fee commission rather than a percentage. It makes your bookkeeping easier. And commission doesn’t need to be a cash payment: consider offering your existing clients something for free in return for their referral, like a private coaching session, or a free admission to a workshop, or a free month membership in your mastermind group.

So, ask yourself: what is this referral worth to you? If it’s made your marketing easier, that’s valuable, and that might be the determining factor on commission rates.

When to payout commissions

When you sell a consulting or coaching package, you can pay out the commission once your client has paid you. In short term packages, the client typically pays you up-front or over a short number of months. In longer term consulting gigs, you might get paid half up front and half when the work is completed.

In longer-term membership and mastermind groups, where your members might pay you over a six month or one year timeframe, consider the possibility that a member might not make all the payments. If you payout a 10% commission fee in month #1 and the member stops paying in month #5, you will lose money. It might be better to do a flat-fee commission paid in month #1, rather than a 10% commission paid over time, so you can avoid this bookkeeping problem.

There are affiliate marketing software programs that will automate some of this for you. If you have a small number of referrals, you can easily handle it manually. But if you are expecting many referrals through an affiliate marketing approach, software will ease the way for you. You may find your existing shopping cart software has an affiliate marketing module.

Tracking referrals

Creating a referral strategy is one thing. Making sure it’s working is another!

A good place to start is your website statistics. If the referral is being made via a link to your website, you can track that information to see which referral sources are sending traffic to your site and if those visitors convert to paying clients.

I recommend you create a spreadsheet or note that tracks referrals that come to you via phone or email. You might combine this with the referrals that come through your own networking endeavors so all prospective clients are in one place. There are many CRM software packages that allow you to keep track of prospects and reminds you when you need to follow up with them. You may find that your existing shopping cart/email contact management software does this for you already or you can try a specialized software like Less Annoying CRM.

Action plan:

Now that you have the components of your referral strategy, here’s a quick To Do list:

1. Go through your existing contact list. Which clients and colleagues can you immediately contact to ask for referrals?
2. Decide if you will pay a commission or give a thank-you gift.
3. If you decide to pay a commission, determine the amount and when it’s paid out.

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