If you’re looking to make some extra cash on the side, you should definitely consider referring people to businesses. It is pretty much like free money. For example, over the weekend I received a promo email from Acorns. If I referred three friends, I would get a $600 bonus. Sweet.
Of course, Acorns isn’t the only company that offers a referral service. In fact, a wide range of companies offer lucrative bonuses when you invite others to join. Robinhood, Rakuten, SoFi, Swagbucks, Xfinity, T-Mobile, Dropbox, Coinbase, Fiverr, and TurboTax are just some of the best referral programs out there.
While these programs are an easy way to make some cash on the side, referrals aren’t going to make you wealthy. But, if you up your game, it’s totally possible to make six figures referring business.
1. Decide who you want to refer.
Your first order of businesses? Determine what businesses you want to refer to others. Ideally, these should be businesses that you not only patronize but are enthusiastic about.
A contractor referral service, for example, might be something you’d enjoy starting if you dig home improvements. Maybe you should consider using a tutor referral service if you are a teacher or retired educator. Or, perhaps a business went above and behind and you went to spread the word about them. For instance, I still rave about my mechanic. Besides being a quality mechanic, he’s speedy, affordable, and is always transparent.
At the same, don’t just consider your expertise or personal preferences when choosing businesses to refer to others. If you want to expand your business and reach more customers, you should also take into account your community. As an example, if there is a growing number of seniors moving into the area then you need to focus on businesses that cater to that demographic.
2. Do your research.
Next, you will need to find out what the licensing and insurance requirements are for the service providers you are referring to. And, after that, create an exhaustive screening procedure based on that information.
To ensure the highest level of customer satisfaction, every business in your network needs to be thoroughly vetted. Why? Because it’s your reputation on the line.
Let’s say that your niche is home repair. Referrals are of little value if you let just any contractors, plumber, or electrician join your referral business. Sure, some of them may do excellent work. But, others may be shoddy and end up causing thousands of dollars in damages.
In order for both service providers and customers to be interested in working with you, they have to be worth something. So, make sure that you can personally vouch for these businesses. If not, you should get recommendations from others you trust or by checking out online review sites.
What’s more, you should also check around and see if there are any other competitors. There might already be an established referral service in your niche or community. If that’s that case, you want to make sure that a second service is viable and financially successful.
3. Establish your payment method.
Due to the nature of this business, it can be tricky to quantify how much you may earn. However, usually, referral businesses operate in the following ways;
- Each business that wants to join your network pays a fee — usually around $200-$500.
- The referral business charges a fee from the consumer for getting their list of recommended businesses. The usual range is $10-$50, though it is likely you will sell more of these if the information is valuable.
- In exchange for referrals, the business offers free services.
It is possible to run a referral business that combines all three elements. However, you can also be commission-based, be paid per lead, or charge a flat monthly fee.
The best compensation model for your business will be determined by researching similar referral companies in the same field. Also, it wouldn’t hurt to ask a few professionals in the referral service industry about the type of compensation that is fair and or standard.
4. Build meaningful relationships.
Here’s the truth. If you want to succeed at referring businesses to others, then you need to be a people person.
“This may sound like a daunting truth to the non-networker or introvert, but here’s good news,” writes Randy Garn in Entrepreneur. “I’ve created and proven a winning formula after years of experience and trial and error. It’s gone through many iterations, but these are the steps that lead to what I call the Velocity of Relationships.”
- Become a habitual networker. “Make a list of people, then be strategic in the way you build relationships with them,” he suggests. “Create connection points and prioritize your time.” For example, join Linkedin Groups, attend local trade shows, or host business events.
- Understand that relationships are built on knowledge. Invest the time and effort in learning the insights that are hidden beneath the surface.
- Make meaningful memories. When possible, spend time outside business to create strong bonds and lasting relationships.
- Never gossip. “When a conversation turns stagnant, we often turn from discussing ideas to dissing people,” says Garn. In turn, this kills trust. Instead, offer praise.
- Get in the habit of being happy. People who are negative are not desirable to work with, let alone spend free time with, he adds. Your network needs your positive attitude, your zest for life, and your optimism. “So, take care of yourself, take time for yourself, then give your positivity to others.”
- Treat taxi drivers and CEOs the same. The poor treatment of a receptionist led to the failure of multi-million dollar deals. In contrast, multi-million dollar deals have come from the mind of a customer service representative. Status does not matter, especially when you see the potential within everyone. “Treat every individual as if they’re a CEO. One day, they just might be,” Garn advises.
5. Pinpoint your target audience.
You will need to determine who your customers are and how you will get in touch with them after you have established a network of providers.
Prepare a market segmentation study and identify your ideal customers’ key characteristics. Where, for instance, are your potential clients located? Do you have both male and female prospects? What is their age? Do you cater to families with children or seniors?
6. Follow the 80/20 rule.
Alternatively, ask anyone who has owned a business for a while and they’ll tell you that it’s rare to get new referrals from existing customers. That’s just how the cookie crumbles.
According to the philosopher Pareto, though, 80% of your results were the result of 20% of your efforts. And, that principle also holds true for any client base. In other words, for businesses you’re going to get 80% of your referrals from 20% of your customers. These are those loyal, raving fans that are going to tell their friends about a product or service they love.
In order to increase your referral network, you will need to identify and connect with that group of customers. And, eventually, you can refer them to other businesses that they would be supportive of.
Remember, people who hear friends or family talking about a product or service will instantly trust them. After all, it’s impossible for any other marketing method to match. In fact, it’s been found that when it comes to seeking our trusted brand information 93% of people trust friends and family the most.
7. Provide integrity and value.
Obviously, you need to promote your referral service. And, the best possible way is through a well-designed website. More importantly, though, it should have valuable content that not only details the services that you provide but also why others should trust the businesses that you’re referring to.
For example, your blog could feature reviews of the products and services you use. You could even have guest posts from the businesses you’re referring to others. In these posts, they could share what they offer, contact information, and why they deserve your business.
In addition to a blog, you could have a monthly e-newsletter or launch a social media campaign. If you’re staying local, you could embark on offline promotions like direct mail to prospective clients or place yard signs of the business you’re referring to in your front yard.
8. Introduce additional revenue streams.
Speaking of promotion, did you know that it’s possible to make a profit promoting others? The most obvious example would be through affiliate marketing.
The affiliate marketing process is quite straightforward. A link on your website points to a product or service on another company’s site. There is a unique code that identifies you in the link. If someone clicks on that link and buys something, that sale is credited to you. That means your business will get a commission.
If you have enough traffic to your site, you could accept sponsored posts. Examples include brand mentions, product reviews, or a link back to their website. You could promote products or services that complement other businesses, like connecting vets with pet stores.
Outside of promoting other businesses, you can also earn a passive income by referring businesses to others. How? While, if you’re successful at it, then you can share this knowledge with others.
Take, for example, Lewis Howes. He made a full-time gig out of connecting people on LinkedIn. Because of his success, he started coaching others on how to do the same. This led to his first webinar where he made $6,200. From there, his business earned $2.5 million annually for three years in a row.
Howes has since sold his business. But, he has gone on to write three books, hosts a popular podcast, and coaches other entrepreneurs to earn a passive income.
Frequently Asked Questions About Six Figures Referring Business
What is a referral service business?
Basically, you will help connect those who would like to buy a product or service with those who would like to sell it.
It’s up to you to decide what type of referral business you’ll have. It could be from a dentist-to-client program (like the old 1800 Dentist program) to a service where you help connect people looking for writers with those willing to work (like Text Brokers).
How much does it cost to start a referral service business?
According to Entrepreneur, startup costs for referral service businesses are between $2,000 to $10,000.
What are the different types of referrals.
Generally, there are four types of referrals;
- Word-of-mouth referrals. Word-of-mouth referrals remain the most-trusted method of attracting new prospects.
- Online reviews. Online reviews are just as trusted as personal recommendations from friends and family, according to 88 percent of consumers.
- Social recommendations and sharing. Through social channels, you can network, nurture relationships, and share valuable content.
- Email referrals. The same principles that work on social media also apply to email. Sometimes it even works better. One of the best ways to increase awareness, acquisition, conversion, and retention is through email. It’s easy to understand why with a return on investment of 4,400 percent.
How to ask for referrals.
While there is no one-size-fits-all approach, here are four tips you should use when asking for referrals;
- Reach out to the right businesses. Depending on your needs, you may reach out to an extensive list, or just a select few. In either case, be thoughtful about whom you approach.
- The ask should feel natural. Developing a relationship with a customer should lead to asking for a referral. When you meet with a new customer, it shouldn’t be your first interaction. Typically, we don’t like being asked to join something or do something after meeting someone for the first time.
- Ask at an appropriate time. When should you invite others to your referral program? Despite there being no right or wrong answer, certain times lead to a higher conversion rate. As an example, promoting a lawn care business during the warmer months of the year.
- Don’t be pushy. Referrals can be strongly suggested without making others feel pressured. Try asking them, “Is there anyone else you know I can help?” It’s a small request without them having to commit to your referral business.
This post was originally posted here.