Why Bother with Referrals

I was following an interesting conversation over at Advice Tap last week regarding referrals:

I often recommend my clients to colleagues of mine like graphic/web designers as well as other agencies if I can’t take on the job. What is the protocol for this, or process?

Cinci Csere

I posted a quick answer to the question as asked, but then realized that perhaps I had answered the wrong question. Before you can discuss the protocol for handling a referral, you need to understand the more basic and fundamental reason why people give referrals in the first place.

In trying to answer that question, I pulled up a conversation I had several months ago when someone asked what would most motivate me to give a referral. My answer there, once again, did not explain why I would give a referral, but did give a hint – it’s not about the money.

If a client asks me to do some work, and for some reason I cannot or will not do the work myself, then my next thought is as to whether I should give the client the name of someone who can help them. The first questions I ask myself are therefore whether I want to have any association with this client – if they are easy to deal with, don’t quibble about the bills, and are appreciative of a job well done, then the answer is usually yes.

The next thing I look for is to determine who in my network is best suited to this kind of work. Since I’ll be banking my own reputation on the referral, I want to ensure that I make the best possible reference.

If there are multiple people in my network who could perform the work satisfactorily, then, all else being equal, I’ll pass it off to the person who would benefit the most from the referral.

Note, at none of these steps did compensation factor into the equation, and the reason is actually quite simple. I’m referring my own clients, which means that I’m already being paid by this client. I don’t need to earn something off every piece of work done by every one of my clients.

Additionally, I can look at the bigger picture. Every time I send some business to a colleague, I strengthen that relationship, and business will come back to me. Perhaps not this week or month or year, but it will come. My payment will come when my client is happy with the work done and hires me again, or when my colleague has a project that fits my expertise and sends it my way.

It’s easy for me to remember what it was like waiting for the referrals to come – I still live in that world. When a business is small, every referral matters, and so, you appreciate it when a colleague drops something in your lap that means you can grow your business another step. You’re even more appreciative when they tell you not to worry about paying them, and so, when a project is a little too big for you, or out of your area of expertise, you send it their way.

One colleague put this barter system another way – if we add all the referrals I send him, and subtract all the referrals he sends me, we’ll probably balance at about $0 anyhow. This way, we save ourselves the bother of counting.

I would be curious to know what motivates you to provide a referral – is it the money? returning a favor? Or is it something else entirely?

  • http://bomshteyn.com Nathan

    I feel that if i refer a client to someone else, especially if it was something I could of done myself, I have just proven to a client that I care about him and not only about my self…
    For example I could sell a person who is looking to open TFSA a Segregated Fund, but knowing that most people who put money into TFSA are not putting for a long term (even when they say they are planning to) I advised the person to go to ING Direct since they have a promotion that if you open a TFSA account with them you get 3% guaranteed without freezing your money.
    This person will come back to me for other advice and one of those times (when I will find that the product I have is what the client needs) he will buy from me.

    As you see in this case I am never going to get anything back from this referral directly, but indirectly I just earned a client.

  • http://blog.optimalupgrades.ca Elie

    Excellent point! Sometimes referrals can be a way to pull in business at a later date, which is one of the main reasons that you should be careful to only give quality referrals.