How referrals are the lifeblood of most businesses
What is a referral? We may ask ourselves this question when we’re looking at acquiring new business. Some may think a referral is where someone you know introduces you to another business and recommends you; however, it’s much more than that.
In a true referral, the person introducing you will have done most of the work for you already. Typically, they will have won 95% of the business on your behalf, leaving you to fulfil the last 5% by closing the sale.
So, why is this more effective?
We can spend an inordinate amount of time chasing business—sometimes, more than actually delivering what we offer. If you have a number of referral partners securing sales for you, this saves time. It’s also much better that a third-party gushes about your skills, knowledge and expertise; it has more gravitas when it comes from the mouth of someone else than if you were to say exactly the same thing.
It all centres around recommending people/businesses that you know, like and trust. The biggest of those steps is gaining trust.
In the average business, one in twenty prospects are likely to buy from you; however, one in six prospects will buy from you if referred. Referred clients are four times more loyal and, on average, they buy from you 3-4 times more in their first year. They are also twice as likely to refer you to people in their own networks. It’s a bit like having your own sales team!
Sales versus relationships
Think of two triangles. One is the right way up, the other is shaped like a funnel.
In the first triangle you would spend, on average, 15 minutes building rapport, 45 minutes identifying needs and 7 hours overcoming objections, such as pricing, etc. When you look at the conversion rate for each customer, you could spend up to 8 hours winning their business.
If we turn this on its head and invest 7 hours into building relationships, and 45 minutes on needs analysis (this is what we would do with referral partners), then let the client buy from us, which should take just 15 minutes, we would spend significantly less time acquiring the same amount of clients.
How much better is that? If you could save that amount of time every week/month in your business, how would you spend that time? You could either make more items (if that’s what you do) or take some time back for you and your family.
To summarise, having a referral strategy in place for your business could not only increase your sales, but save you time, too. It’s certainly worth the investment.
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