Five Steps to Building an Effective Referral Network

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For many small-business owners, the thought of attending a networking event is enough to make them cringe. After all, many are overworked and do not enjoy spending their small amount of free time in a crowded room of people, making small talk with complete strangers, attempting to sell company products or services to disinterested prospects, and often having little to show for their time investment. And in fact, that notion of networking may be accurate, which is why smart business owners network in a way that opens referral sources rather than focusing on a direct sale.

Instead of networking with potential clients, consider networking with other businesses that can help you succeed. When you network with other businesses, you're looking for ways to meet new clients — through the other company's referrals — and to create strategic alliances, thus increasing your business's perceived capabilities. You're developing a referral network of sorts, meaning everyone within your circle of influence sends clients to each other and uses the skills and expertise of each other to build their own business.

For example, a plumber can form an alliance with a carpenter. Then, when the carpenter has a job to do — like installing new kitchen cabinets in a home — he can refer the plumber to the homeowner to help install the new sink or move any existing water lines. Since the homeowner knows, likes, and trusts the carpenter, he or she takes the referral as a sincere recommendation and a testimony to the plumber's skills, and is more likely to call the plumber for the job. While this is a simplistic example, the concept works for any profession. A graphic designer can network with advertising firms; a restaurant owner can network with hotel owners; a car insurance agent can network with car dealers or auto body repair shops…the possibilities are endless.

If the idea of networking with other businesses sounds more appealing than chasing down clients all the time, consider the following guidelines to make your networking endeavors a success.

1. Know Thyself

Before you attempt to network, you first need to know your business and what makes it unique. Why would someone choose you over your competitors? What do you do or offer that no one else can match? The idea is to precisely pinpoint why another business would want to partner with you and refer their clients to you. Think in terms of how you can make the other business's client's life easier. Be specific. Simply saying you offer "great customer service" or "lower prices" is not unique. However, offering a lifetime guarantee or same-day delivery may be key factors that set you apart.

2. Be Clear about Your Wants

You need to know your goals and objectives before you contact another business. What do you hope this business can do for you? What kind of referral are you looking for? Again, be specific. A bunch of referrals that do not meet your company's target client profile is useless. So if you're looking for referrals who are dog owners, live on the north side of town, and earn over $50,000 per year, state that. By doing so, you can better team up with other companies that can give you that specific type of referral.

3. Network Face-to-Face

Now that you're clear on who you are and what you want, it's time to make some contacts. You can do this by going to chamber of commerce events, forming a mastermind group with other businesses, or joining a referral or networking club. You can even just go to the office of another business owner and introduce yourself. When you initially meet new business owners, be sure to have your thirty-second elevator speech memorized. This short speech should cover who you are, who you help, what you do, and how you do it — all in thirty seconds or less. Also, when you network, make sure you do it face-to-face, not through emails or phone calls. You need to see and gauge body language, facial expressions, and eye contact to know if you've truly made a connection and a valid networking contact. Finally, ask the other person questions, and listen more than you talk. This way you can find out if the person can help you get referrals. The idea is not to sell your business, but rather to sell your relationship.

4. Follow Up

As with any networking endeavor, follow-up is extremely important. Chances are, someone won't remember you after one brief meeting. You'll need to remind the person of your business and re-state what you said you could do. Also realize that sometimes following up with someone doesn't involve business talk at all. You may need to conduct some social meetings for breakfast or lunch, and just talk as people, not as business contacts. That kind of personal touch will greatly enhance the relationship.

5. Give as Well as Get

No relationship can be one-sided and successful. You have to give referrals to those you've built alliances with as well as get referrals. If you're always on the getting end and never giving, the other business owners will perceive you as greedy and as misusing the relationships. So be sure you're constantly giving referrals. On the flip side, if you're always giving referrals and never getting them, you need to re-consider the relationship and whether it is truly beneficial to you. Finally, when you do get a referral from someone, whether the referral pans out or not, be sure to thank the referring party for the opportunity. Gratitude goes a long way to building your future success.

Network to Win

While networking with an individual client may give you some quick rewards, networking with other businesses and creating referral sources will give you long-term results. Think about it…you can only prospect so many clients at a time. But if you have alliances with ten other businesses, you've just expanded your potential client outreach by ten times. At the same time, you can likely devote less money to advertising because you have the power of word-of-mouth (the very best form of advertising) working for you. So begin thinking about the kind of businesses that can help you, as well as those you can help. Network with the owner or decision maker, build the relationship, and then watch your business grow. You'll quickly discover that networking with other businesses is the quickest path to your future success.

About the Author

Alan Bayham is a sought-after business coach and consultant with a master's degree in organizational management combined with more than 30 years of experience in leadership, management, and marketing training. As the president of Bayham Consulting, LLC, he has worked with companies ranging from small- and medium-sized businesses to Fortune 500 companies. For more information, contact Alan at 504-259-8682 or visit
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