Essential for Every Small Business | The Sales Manager

Essential for Every Small Business

Referrals- Why they are good for small businesses.
Most small business owners would testify that the hardest part of getting a business off the ground is getting in front of the right prospective customers.  Most would then say sustaining that flow of new customers comes a close second.  Many find that the constant pressure to get that regular flow of customers eats away at their soul as well as their profit and time. 
The reason why referrals are good for small businesses is they release time, increase profits and most importantly they feed the soul.
Let’s be clear before going into detail what I mean by a referral.   It is the opportunity to do business with someone who is in the market for your product or service and is keen to meet you as you have been recommended by someone they trust.  We call this trusted person your referral partner.
Referrals release time. 
If you do your prospecting yourself then you will know how much of your time is spent trying to speak to the decision maker.  If you spend time cold calling either on the phone. Knocking on doors or even going to events where your target prospects hang out you will know how much time this devours.  Your referral partner either works with or hangs out with your prospects anyway.  It takes just a few minutes of your time to take their call and clarify the opportunity. A great referral partner will even set up the appointment for you,  Even if they don’t the prospect is ready to take your call when you make it.
Yes, you do have to reciprocate but when you are the referral partner remember you already have a relationship with the person you’re referring so all you’re doing is adding on an extra subject into your conversation.
The time saving doesn’t stop there.  If you’ve ever received a referral you will know that closing the sale is easier.  In fact, in a survey of American life insurance agents, a referred client was 3-4 time more likely to buy from you than if approached directly.  Most people I know would say that figure holds true for much of their business too. Your referral partner will have checked out that there really is a need for what you offer and have endorsed you.  All you need to do is not mess it up at the sales meeting.  So 3-4 times less wasted sales meetings.
This survey also revealed that referred clients are more loyal and stay with you 4 times longer. That means you will need 4 times fewer new clients to sustain your income.  How much time will that save you.
Lastly these referred clients are two and half times more likely to refer you on to others.  So one great referral from your partner can spawn a network of clients  without you doing a great deal more than deliver a fabulous service which is for the small business owner usually the reason they come into business in the first place.  Fast forward to the section on feeding your soul.
Referrals increase your profit.
Here’s an interesting statistic from that same survey.  Referred clients buy 3-4 times more from you in the first year.  As you have been recommended you borrow the trust between your partner and your prospect.  As a result your prospect doesn’t feel the need to test you out first to the same degree.
A recent observation from one of my clients illustrates a major advantage of being referred.  He had done a comparison between his referred clients and those who had approached him via his website.  The website enquiries were looking for the cheapest price whereas the referred clients simply accepted the price as they were buying on value.  Apart from being able to charge his premium price this meant his referred clients were less likely to be enticed away by competitors undercutting him and  getting caught in a price war.
Lastly describing clearly who your ideal client is ,  those who buy your most profitable product or service, your referral partners will introduce you to people with that need..  So you get more closed sales, to people primed to spend more money with you on the product /service that earns you the most profit.   And who are inclined to refer you to others like themselves.  
Referrals are free... to a point.  You do still need to invest in some marketing collateral, although I do know people who run successful small businesses without even a web presence, simply by referrals. ( I’m married to one of them)   You will have to invest in your relationship with some cups of coffee, the odd lunch, trip to the pub,  golf day or whatever interests you and your partner have in common.
You may have to invest in joining network groups to meet the right referral partners and maintain your relationship but that brings us nicely to the most important value of referrals..
Referrals feed your soul.
Most small business owners chose their business with a passion for whatever product or service they deliver.  Their heart is usually as much about the delivery of their “baby” as the money in their bank account.  Who wants to see their baby being rejected more often than accepted?    Referrals do the opposite,  what greater compliment can your receive about your baby than someone else taking the trouble to recommend it to others. 
Referrals let you run your own business and yet not be in it alone.  Referrals are generated through reciprocation, collaboration and partnership rather than competition and putting the other down. Referral partnerships are sustained through spending time with people you trust respect and can forge the bonds of friendship. They are about giving back as well as being supported by others.  They are about being introduced to clients you want to work with and being recompensed and valued for the service you offer.
To me, this is the deeper reason that referrals are good for small businesses because they feed your soul.