THE BLOG

5 Formalized Referral Systems to Grow Your Sales

02/04/2015 10:54 pm ET | Updated Sep 25, 2015

I was talking with a business owner earlier today who runs a family owned business which has been in operation for over 25 years.

And to put it bluntly, he was really struggling with lower sales and cash flow issues.

"David, we've been in business for a lot of years, but it seems like now a lot of how we used to generate leads just isn't working the way it used to."

This is a common challenge. With the shift from traditional advertising to more digital, online means, many business owners are left in a daze about what to do to grow their companies.

Here is a concrete way you can tap into the rich relationships you have earned over the years by building up your client base.

The strategy is called a "formalized referral system". Note that all important word - formalized. We are not talking about passive word of mouth leads, but rather a formal, active strategy that you control to prompt your customers to help you generate more customers.

Take the example of Bill, who owns a driver's education company on the east coast that primarily teaches teens safe driving skills through on-the-road, one-to-one driver's instruction.

The primary reason parents sign their teens up for and pay for these lessons is because they want to prevent their kids from getting in an accident.

We suggested that Bill tap into this desire to protect their teens from auto accidents by creating a "Safety Circle Program." After the second lesson with a teen, Bill meets with their parents and explains that their son or daughter is more likely to be driven by one of their three or four closest friends then they are to be the one driving. To really protect their teens, then it's not enough for their teen to get trained; his or her closest friends need to get the same training so that when their teen is driving with these friends, parents can feel confident that they've done all they can to keep their teens safe.

To this end, Bill goes on to explain, his company created the Safety Circle Program. Bill helps the parents identify the four closest friends of their teen and gives them a special coupon certificate that their friends' parents can use when they bring in their teens to get trained. Bill shares the certificate and a simple one-page flyer, then coaches the teen's parents on how to have a direct conversation with the parents of the other teens, suggesting that they work with Bill's company to get their teens trained too. The net result is that Bill turns his customers into an ally in generating more business for his driving school.

Here are several potential referral systems to spark you to think about how you can design a formalized referral system (or systems) to help you grow your business. The key is that these are systematic, automatic, reliably run processes that you use to generate referral business versus "one off" individual efforts.

They are all low cost or free, and will dramatically enhance your sales and your client base.

The typical referral client buys more, refers more, and stays with you longer. Plus they are higher net customers since your cost to acquire a referral customer is relatively so much lower.

1. Point of Purchase Straight Referral Request: The best time to ask for a referral is often right at the time your customer buys. Have a scripted out referral question that you AUTOMATICALLY ask every customer who buys.

"Thanks Sam for choosing us to redo your landscaping, we take it as a real compliment that you chose us to work with. May I ask you a question, who are two other people you know who are looking to remake their yard and create a stunning landscaping like you?"

2. Point of Purchase "Gift for Your Friend" Campaign:

"Thanks Susan for shopping with us today. I know you'll love our "Spoil Yourself Bath Kit". Who are two of your friends that you'd like to give a complimentary "Bath Spa Sampler Kit" to? Normally it's $19.95 for the kit, but for a limited time we have two complimentary gift certificates that you can give out to your friends today."

3. The "Compliment" Campaign: Every time one of your clients says a nice thing about your business, ask your power referral question. This question should be scripted out and memorized by all your team members.

"Erin, I really appreciate what you just said. It means a lot to us that you get great value from our business coaching program. May I ask you, who are two business owners you know who like you are serious about growing their business by reducing its reliance on them the owner?"

4. Forward to a Friend Campaign: If you do an eletter, ask your clients to forward your eletter to those friends or colleagues they have who they think will benefit.

"P.S. Please feel free to forward this eletter to your friends who are interested in buying designer jewelry at wholesale prices."

5. Referral "Tools" Campaign: If you already send physical stuff to your customers, send them a few extra to give out to friends in an attractive "mini kit" or packaging that encourages the friend with some incentive to try your product or service.

For example, we send our business coaching clients a gift every quarter, and often include free physical tickets for a qualified business owner to attend an event as their guest at no cost to experience what it would be like to work with us to grow their company.

The bottom line is for you make sure asking for referrals is a systematized, automatic part of your business.

P.S. If you liked this article, why not click on one of the social media buttons to share it with your circle of influence? (Hint: that was a referral request!)

For more ideas on growing your business, including a free tool kit with 21 in-depth video trainings to help you scale your business and get your life back, click here.