4 questions to help you build a winning business referral strategy
Building a referral strategy is one of the most reliable ways to grow your business. These four questions will help you win more leads.
It’s the constant refrain in small business. We all want more leads, more business and we want to know where to find them. But here’s a simple solution – have your existing clients give you new referrals.
Word-of-mouth marketing can be powerful, cost-effective and trustworthy. In fact, building a referral strategy is one of the most reliable ways to help grow your business.
The problem is, most small businesses have no idea who their Ideal Target Market (ITM) is, which is a crucial first step in driving a successful referral strategy.
Years of saying ‘yes’ to every job creates a diverse client base with diverse product offerings. Naturally, this makes it hard to keep everyone happy – and even harder to scale a business. But the clearer you are about your ITM, the easier it will be to grow your business through referrals.
So exactly how do you do this? It sounds counter intuitive but you need to work towards a tight niche. So tight it feels positively uncomfortable. Think about some of the most mature businesses in the world like Apple, Kia and Bunnings. They all have a very clear idea of what they do and who they do it for.
Of course, getting to this stage is a constant work in progress. So to start, let’s break things down into some smaller questions.
Question 1: What sort of businesses do I prefer working with?
Believe it or not, you always have a choice as to who you work with. At Business Benchmark Group, we call our best clients ‘A graders.’ They pay their bills on time, appreciate what we do for them and we love working with them.
We’ve even created a specific description of who our ‘ideal client’ is, focusing on three key features:
- Number of employees (10-50 for us)
- Geography in which they work (Melbourne)
- The type of work they do (blue collar/construction/trades)
You can go further and think about the industry your clients are in, what the owners are like, their reputation in the market, their turnover, and so on. Start making a list of your A-grade clients and call them to ask why they chose to work with you, and what they think you’re best at. The more specific you get, the clearer your niche will become.
Question 2: What products turn over the highest gross profit?
When you’re determining your ITM, you need to make sure you’ll be making a profit – and importantly – that you have a constant focus on gross profit. You’re building a business here, so it makes sense to have some financial criteria.
To narrow it down, make a list of the top five products you offer and work out how much gross profit you’re making on each. Do this by taking the revenue you charge and subtracting from it how much it costs you to deliver the service - this is your gross profit.
Question 3: What do you really enjoy doing?
What sort of work gets you out of bed in the morning? When is work so good that it doesn’t feel like work at all? What are the moments you don’t look forward to? What jobs feel like a constant and unnecessary struggle?
There are clues everywhere. You just have to take a minute to spot them. It’s likely you have a preference for the type of work you do and who you work with. And the good thing is, there’s likely a profitable niche within your industry that caters to this.
Question 4: How many new clients do you want?
Let’s do a bit of math to make sure the market you’re aiming for will get you where you want it to go. Choose one of your A-grade clients and add up what they typically spend with you during the year to get their annual spend.
Average $ sale x number of transactions per year = average annual spend
Now that you know the value of each of your A-grade clients, you can work out how many you would need to hit your growth targets. If you’re a B2B business, you’re not looking at huge numbers here which is why a referral marketing strategy is perfect.
Our tried and tested advice to all small businesses is to aim big, double what you first thought and take it from there. The only way to get bigger is to think bigger and go for it!
Your next moves
From answering these questions, you now have the first and most challenging part of your referral strategy: ‘who to ask for.’ Be patient as this process can take time. But it’s worth it because this will be the cornerstone of your whole strategy.
In this series of articles, stick with me and I will help you create all the leads you need to grow your business with this one strategy, so you can scale your business in a way that works for you.
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