The Power of Referral Business
“I used to never refer people,” stated Bill Welch, owner of Northern Lights Electric, a 40-plus year resident of Sonoma. “You couldn’t trust people,” he explained. I asked him to explain how it was that in more than 40 years of business in Sonoma he felt he couldn’t trust another contractor to refer work to them? After all, according to Nielsen, ninety-two percent of consumers trust referrals from people they know. “Well, my reputation’s on the line! The couple of times I tried to refer someone, they either didn’t follow up on the referral, or they botched the job so much it embarrassed me.”
Bill’s experience probably isn’t unlike too many others’: A client or a friend asks for a referral to a trusted vendor. (“Hey, Bill, I’ve still got that problem with the upstairs bathtub. Do you know a good plumber I could call?) He wants to be helpful. He wants to be valued by his client for his connections to other, qualified vendors. And yet, he hesitates to refer someone…
Recently we’ve seen a revolution in how the world does business. Want to know if you should buy that coffeemaker on Amazon? Read its reviews. Should you stay at that new hotel? Read its reviews on TripAdvisor. Should you trust that contractor to have free rein of your home on that major remodel you’re planning? Check his reviews on Yelp and Houzz.
We’ve all seen the TV commercials where one friend asks another if they can refer a roofer and proceeds to ask them to check the referred roofer’s credentials and get estimates. The request generally produces a reaction of mild horror on the part of the referrer for being asked to do the work of vetting the prospective contractor. In fact, that same company was in the national headlines recently for failing to check referred vendors’ criminal history, as advertised. They had to do some considerable damage control with their own reputation now on the line.
How can we trust contractors and business professionals to do quality work? Are 5-star reviews in Google, Amazon and Yelp adequate to ensure your project will come off without a hitch?
“I refer a lot of people now,” Bill Welch stated with a smile. “It’s really nice to be able to help out my clients and be of greater value to them. And I also get to send business to good friends and colleagues whom I can trust to do a good job. It makes all the difference in the world!” Bill looked like the cat that swallowed the canary.
“How did you turn it around?” I queried him hesitantly.
“Well, I learned a methodology for ensuring those I referred would deliver the goods,” he explained. Bill went on to explain that he never refers anyone he doesn’t know well. “It’s a recipe for disaster! There’s no accountability, which means the contractor may or may not bother to take care of my customer.” It turns out there is a way to guarantee that those you refer do a good job. But it takes time and effort to build a relationship with like-minded professionals to ensure it works out.
“I built my entire business by referral,” offered Chris Stately, owner of Sonoma’s Stately Construction. “Traditional advertising is expensive and slow. Plus, in this industry where we’re in the home all the time, building trust is the single-most important thing for me to do with clients. It means that when the job’s finished they’ll be willing to refer me to their friends who may need an addition built on their home. That referral saves enormous time in the sales cycle.”
I asked if growing his business by referral was easy. “Yes and no. I made a few mistakes along the way like anyone would. But once I learned how to build and maintain solid relationships with customers and colleagues, it was easier. I didn’t realize at first that I needed to check in with folks more frequently to develop strong trust. I was less aware of the process being a two-way street and that I had to continually nurture the business relationship to ensure I was referable,” he explained. “The other thing I learned was how different all my clients’ and colleagues’ communication styles are. It’s easy to have a relationship with someone go off the rails over a simple mis-understanding. But I learned to spot those different styles and tune my own communication into the way they needed to hear information.”
Their advice to those desiring a referral-based business model: “You have to work the system,” stated Bill Welch. “What I mean by that is you’ve gotta work the relationships with the people you want to refer. You have to stay in contact and work the relationships so that those referral partners will want to do good work for your clients.”
Chris Stately echoed Welch’s sentiment, “I can’t refer someone I don’t have a trustworthy relationship with. My reputation is on the line if he screws up. So accountability of referral partners is crucial to the success of this business model.” I asked how he’s certain the other guy will meet deadlines and quality standards. “For one thing, if one of my referral partners falls through on a job, I can’t refer him or her again. So they have an incentive to do good work, on time. It’s a small community here; our reputations are everything.”
