Referrals are one of the most helpful elements available when trying to build a business. They generally have a very high closing ratio, which some say is as high as 90 percent. This is because referrals are highly valid and add credibility to your reputation. Should a trusted business associate inform you of another professional who can help you, you're probably predisposed to use this person–usually before you've even met them.
The trouble is that referrals are not very prevalent. For some senior advisors, they're practically on the endangered species list. When they do come, however, they are almost like striking gold. Many successful advisors are not shy when noting that nearly all of their new business comes from referrals–often without having to ask for them.
To understand how to generate more referrals and obtain them without pushing too hard (or at all), it's imperative to realize how they come about. And, more important, why some get them on a regular basis and others see only a few each year.
Making your calls
"I've relied on referrals since the day I started in this business," says Michael Radler, CLU, a 29-year industry veteran and senior vice president at Mercury Wealth Management in Avon, Conn. "In my early days I'd make 150 calls each Monday. When I connected with a client, I'd ask if there was someone else I could help. I still do this because if you stop taking batting practice, your average suffers."
Mark Snyder, ChFC, of Medford, N.Y. agrees. "We regularly ask for referrals. It's part of our business model. When we track where new business comes from, a percentage can always be traced to referrals."
A referral is, in its simplest form, an endorsement from a trusted colleague or business associate. That carries significant weight as the person providing your name is indirectly endorsing you. That's a lot to ask, so it stands to reason you've probably done a good job handling that client's business.
A social butterfly
So what's the all-star referral gatherer doing that you're not, besides raising the bar on production and service? In all likelihood, the referral-gatherer is a big-time social networker. Referrals don't just happen. They need to be nurtured and cultivated with a multi-dimensional approach. It's very likely he's a regular at local Chamber of Commerce or Rotary Club meetings. He may also serve on boards of high-profile, local organizations such as hospitals, nursing homes and schools, where he comes into contact with people who may need his services. This is a form of center-of-influence marketing. "Referral marketing is the most powerful, cost-effective and targeted marketing you can do. The single most important factor is that you must first expect referrals," says marketing consultant John Jantsch, based in Kansas City, Mo.
How do I get there?
"The first step is simply having the gumption to ask but, more important, when to ask. Seek referrals just after the closure of any sale," says customer-service consultant Drew Stevens, Ph.D., of St. Louis, Mo. "The client is at their absolute emotional high and you want to strike when the customer is most satisfied and there is no dissonance. The second step is to ask for three to five referrals from the customer of [potential clients] they believe will be as attracted to the similar value that you provide."
