While it is indeed true that you want to get a good number of referrals, it is true only up to a point. Taking it to the extreme, you can get as many referrals as you could conceivably handle, but if nearly all of them are of low quality—hard to close or not very valuable when closed—you’re no better off than if you simply sat at your desk and spent all day cold-calling. The same is true if you get so many referrals that you can’t handle them at the level of quality and professionalism your prospects and your referral sources expect.
Of course, at the other extreme, you might get too few referrals to keep your business healthy and growing. You might close a high percentage of them and provide top-notch service, but if you’re not getting new referrals, your business may be stagnant and in danger of starving.
Where you want to be is somewhere between these two extremes. You want a decent number of referrals, but not more than you can comfortably handle, and you want to be able to close a good percentage of them for substantial amounts of business. You also need to have the time and the ability to turn marginal referrals into high-quality referrals using your sales skills—and this is something you’re not as capable of doing if you’re desperate with worry about the number of rejections you’re chalking up.
A side note about time: One of the most important things a new – or seasoned – entrepreneur must do is to allow enough time to keep the proverbial pipeline filled. A common mistake of many (particularly those who work alone, with no employees or assistants) is to rush to work one’s “new” or “hot” referrals or new clients, and spend all available time on those, forgetting that there is a lag time on not only finding new “prospects” but in turning those “prospects” to closed sales! Time management is key, and you should make sure that you allot enough time every single week to keeping that pipeline filled!
There’s a certain psychological illusion that occurs in sales, as well as in referral marketing, to which inexperienced or untrained individuals often fall prey. If you get two referrals and your closure rate is 50 percent, that’s one sale. If you get ten referrals and have a closure rate of 30 percent, that’s three sales. In the first case, you get one refusal; in the second case, you get seven. Even though you’re doing three times as much real business, the seven turndowns can create the illusion that you’re failing. Being rejected so often can be demoralizing. To compensate, you seek more and more referrals, and your percentage falls even lower.
It takes a certain amount of experience and self-discipline, backed up by a sound measurement system, to limit yourself to exactly the number of referrals you need, at a known and achievable percentage of closure. The self-discipline comes more naturally if you can get referrals to arrive when you need them and when you expect them. A predictable and regular supply of high-quality referrals also helps you raise your closure rate, giving your referral source more confidence in your ability to convert an appointment into a sale.
As we mentioned in our last article, we do know it is possible to create a system that supplies referrals in a reliable, predictable stream, because we’ve done it. In this system, you develop strategic alliances with referral sources and provide referrals to each other from your database of contacts in an orderly, predictable flow—a virtual pipeline of high-quality referrals. Having control of your referral business—and having a tracking system that tells you exactly how many referrals you’re closing over time—is a great confidence booster. If you know that you’re going to close 25 percent of your referrals, then you can shrug off the ones you don’t close.
A tracking system tells you what each referral is worth to you. Suppose your average sale is worth $1,000. If your overall closing ratio is 25 percent, then one out of every four appointments you get will bring you $1,000. This means that every referral you get is worth $250. So you should treat each referral as a thing of value and show your appreciation to the referral giver, whether you close the sale or not.
What are some of the ways you can show appreciation? There are many, actually. A simple phone call always works, or a quick email. However, one of the best ways to show your appreciation is a handwritten thank-you card! In this day of voice mail and email, a good old-fashioned “snail mail” piece, addressed by hand, will certainly make a far greater impression, and keep you in the mind of the receiver (your referral source) far longer! For those of you who may have all good intentions of sending out a thank-you card but just can’t seem to get around to it, there are online services (such as www.sendoutcards.com) that actually do the work for you – including sending your card in a hand-stamped envelope!
Remember: It’s not about getting more referrals; it’s about showing your appreciation for the ones you get and making the most of the opportunity, while strengthening your referral relationships to ensure that your referral pipeline flows steadily and reliably.