Wednesday, October 14, 2009

When, if ever, is it time to quit building a relationship with a potential referral source?

Vena Ramphal has just asked me this question on Twitter. It's a very interesting question. Referrals come from people with whom you have built relationships over a period of time. In some cases the relationships may take years to develop. So how do you know when to focus your efforts elsewhere?

The first thing to understand is how a referral comes about. People are more likely to refer you, and provide you with quality referrals, the more they trust you and understand what you do. Some businesses need greater levels of trust and understanding before people refer them than others. For example, you will probably be more comfortable referring a printer you have only recently met than an accountant.

Everyone you meet and everyone around you is potentially a referral source. Whether they are clients or colleagues, family or friends, they will have their own network and will potentially come across opportunities to refer you.

A referral strategy, however, requires a degree of focus. While you can make efforts to build stronger relationships with everyone around you and communicate your needs more clearly to them, it makes sense to spend some more time developing specific referral relationships with a small group of people.

In each of these cases, you need to understand how much they want to and are able to refer you. In other words, how much do they trust you and understand what you do? These are the first two areas to focus on, unless they score highly on both these counts you can't start asking them for referrals.

To do so, you have to look at each person individually and ask yourself what will inspire them to want to refer you. How can you get them to trust you more? What do they need to know to understand better what you do and who you do it for?

Each of these steps take time. Some people in your network will be ready and able to refer you straight away. Others need a lot more attention.

It is this attention that provides the answer to Vena's question. In theory as long as a relationship is growing and remains positive, you shouldn't write off anyone as a referral source. However, if a lot of time and effort is required to develop the trust and understanding to a sufficient level for them to refer you, it is time perhaps to consider the return on that investment.

A harsh way to talk about relationships, perhaps, but a necessary evil. If you are investing your business time and resources in cultivating relationships with the intention of generating referrals, you need to have a clear vision of what success will look like.

Think about who people know and the conversations they are likely to have. Once they have reached a sufficient level of trust and understanding to refer you comfortably, are they re in a position to refer you on a regular basis to the people you want to meet? If so, carry on investing the time and effort to get to that stage. If they have a limited network and don't have the type of connections you are looking for, perhaps you should look elsewhere.

Ideal referral sources are in a position to keep introducing you to potential customers and other potential Champions for your business. Your referral strategy will be far more efficient if you develop strong bonds with ten key people who each refer you five or six times a year, than if you try to build relationships with 50 or 60 people who might refer you once.

I don't think you ever need to 'quit building a relationship with a potential referral source', or with anyone with whom you have a rapport. You may, however, choose not to spend as much time developing that particular relationship if the return is outweighed by the investment.


  1. Andy thank you for the quality and quantity of the information you share here. I now know exactly what strategy to use. My business is very personal - I coach people in romance and relationship - often when they are at crisis points, almost 100% of clients come from referrals.

    The point you make about understanding what each individual potential referral source needs to understand is the one that will make the difference for me.

  2. It's not just the strength of the relationship, it's the ability of the person to make the referal. I was going to make this point before Vena explained the delicate nature of what she does. As a Business Coach I have found some people just don't know how to refer me, or are really uncomfortable doing so. It's not due to the relationship, it's because they don't understand well enough what I do or they feel making a referal is implicitly a criticism because it suggests that the person 'can't cope'. These are both my responsibility to address.

    It seems likely that Vena experiences similar issues. As well as making sure they understand what you do, you have to make sure they are comfortable with raising it with others.