How to Grow Your Business with a Referral Scheme

As a small business coach, one of my favourite business growth strategies is a Referral Scheme. It is the first thing that I teach in my Success Clubs as it is so easy to implement. Assuming you are providing a great product or service and fantastic value to your clients, it can have immediate effects. Done right, this can make a big difference in your business, bringing you better quality clients, decreasing the amount of time you spend working, and increasing the profit that your business is making.


What is a Referral Scheme

A referral scheme is basically a systemized way of getting your existing clients or contacts to have a think about who they know that could benefit from your product or service, and to introduce you. It's that simple.


Obviously, it needs to be done well to be effective. I regularly hear from prospective clients that they have a referral scheme and it doesn’t work. If this is you, then I highly suggest you review it and make some (or many!) tweaks until it is working well because it should become one of your top sources of quality leads.


Why Implement a Referral Scheme

We all expect referrals from satisfied customers but without a proper system, we are probably not getting anywhere near as many as we deserve. Unfortunately your clients don’t spend much time thinking of who to introduce to your services, but with a referral system in place, we can nudge this idea forwards in their mind. With some simple systems, (and assuming you are providing a great service) you should see a steady flow of quality referrals coming your way. The prospects will be better qualified and turn into better quality clients. This in turn will increase the efficiency with which you run your business as prospects will have been introduced to you by an existing client or contact, who already knows, likes and trusts you. This will speed up the conversion process as the prospect will trust you by association.


One of the biggest wins when growing your business through referrals is that you are far less likely to be competing on price, and the referral process even strengthens the relationship with your existing client as you build relationships with, and add value to their network. It’s a win, win, win!


Incentivising a Referral

It’s worth giving significant thought as to how you incentivise referrals. With any marketing activity, you need to be mindful of the lifetime value of your client. That is, how much income they bring into your business over the lifetime of your relationship with them. Obviously this varies from client to client, but it’s worth working out the average. All new customer acquisitions have a cost, whether it’s financial, time or usually both. Knowing this information, you are then well placed to choose a suitable incentive.


In my experience, the best incentives provide something of value for free. I have personally received vouchers, a development or business growth book of my choice (very low cost but hugely valuable and this really resonates with me), bottles of wine, and even crates of champagne. It depends on the business, and the lifetime customer value. My favourite incentives have always been a complimentary service, such as a complimentary brand audit or a complimentary month of membership to a programme. Incentives like this can be extremely successful given by service providers. The client gains further experience of your product or service himself, and the complimentary session can often result in further direct business from the client, alongside the referral, at little cost to the business.


If you are unsure what a good incentive would be, why not ask one of your clients?


I must note that a pet hate of mine is cash incentive based referrals. They are awkward and I have yet to meet someone whom they are working for.


Keep Them Updated

Be sure to keep your client updated about the referral and be sure to thank them, even if it doesn’t go anywhere. Not only does this keep you fresh in the referrer’s mind, but it serves to further strengthen the relationship with them and paves the way for further referrals in the future.


Systemise The Referral Scheme

It is essential that your referral scheme is systemised so that staff, clients and contacts are aware of it, and it is easily implemented.


Awareness is one of the most essential elements of a good referral system - it doesn’t matter how strong your scheme is, if noone knows and remembers about it, it is unlikely to work. I personally have my referral scheme mentioned in hot pink on my email signature (it’s a little Marmite, but it gets noticed). The scheme is also mentioned on my invoice footers so my clients are reminded every time they go to pay me that their next coaching session could be complimentary with a referral. There is also a page on my website, detailing the scheme and it’s Ts and Cs. These three things, alongside regular mentions across my social media channels have proven to be extremely effective.


The Practicalities

How do you actually do it? Let’s take a look at the system I use myself - it’s pretty basic but it works well and can duplicate into many businesses. On my email signature and at the bottom of my invoices, I have the following wording:


“Want a free coaching session? My best clients come from referrals so refer a friend or colleague, and your next session is on me. Email me now to take advantage of this generous offer.”


Short, simple and attractive. I also have terms and conditions on my website which you are welcome to check out.


How to ask for a referral?

You should always give reasons why you want referrals - don’t beg for them. I personally use the following when asking my own clients that I love working with:

- I only have space for [3] more clients.

- You are one of my best/favourite clients and I’d love to work with more people like you.

- I appreciate referrals because I don’t need to advertise and can spend my time focused on delivering more value to my existing clients and my community.


It’s also useful to remind clients of the benefits they gain from working with you as this prepares them to give referrals.


There are different ways of asking for referrals - you could pick up the phone or send a letter, or mention your referral scheme at the end of a meeting.


If you are running an event, you might have a referral offer of “bring two friends and your ticket is free”. There may also be opportunities for cross promotion with other non-competing local businesses, such as a florist and luxury chocolate shop.


One of my favourite referral asks is “I’m in the area, who do you know that might benefit”. This is particularly useful for anyone who travels around, for example financial advisors, mobile hairdressers or gardeners.


Be aware that not everyone referred to you will become a client immediately, but add them to your mailing list (with their permission!) to stay in touch and you just never know in the future.


Done right, referral schemes have the potential to massively grow your business, so I encourage you to have a think about what type of referral scheme might work best for you, and implement it! Test and measure what works and keep making small changes until you are getting a steady stream of quality referrals into your business.