Sneak Peek

It was from that fairly awkward and humble beginning that I started my journey in learning about business. I've always been a curious sort anyway and I started asking questions of the insurance companies we worked with, our customers, our vendors—pretty much anyone who would talk to me.

I kept answering the phone and opening the mail and eventually got the computer to do something other than act as paperweight, all the while asking questions.

One thing my bosses did exceptionally well . . .

they let me fail.

If it didn't cost the agency money, they pretty much let me try it. They did want me to get a license since that's what they advertised in the first place, and they were willing to pay for it as long as I passed the test the first time. I was able to breeze through the licensing in pretty short order.

I quickly figured out that everybody seemed to love to talk about themselves and their businesses, especially about how they want to grow their businesses. I kept asking questions and kept learning.

Fast-forward a few years . . .

Take time to learn

Years ago I was introduced to Dave Hatzung of Hatzung Insurance, who said something that pierced my heart and soul in a way that few others have before or since. He said, "Most people finish school and believe that their education obligations have been filled, that they are done learning. I've come to the realization that we get to decide every day whether we want to be learners or not."

At that breakfast meeting on a snowy day in Edina, Minnesota, I committed to a lifetime of learning. It was a gift: Dave gave clarity to what I was already drawn to.

How about you?

It's a given that you need to be good enough that people will be willing to refer someone to you or your business.

Do you know how many referrals you receive?

Especially in professional service firms, it's always fascinating to me that, with rare exceptions, when I ask people where they get most of their business they say "Referrals," but when questioned further, most people have no idea how often they receive referrals or have a system to track referrals.

Over the last decade my follow-up question has been, "How many referrals do you get a year?" After looking into the air for an answer they either make one up or give a nondescript answer like "A lot." If they know and track the referrals, I applaud them. If they admit to their own ignorance—and the good ones do—I ask, "How do you know it's a key source of business if you don't track the referrals and have no way to foster them?"

This begins the litany of descriptions about why their business is "different," how tracking "doesn't really translate," that the results from a referral might take longer to realize or cash in on than other businesses, why they can't really incentivize or systematize referrals, etc.

To this I would argue that they are missing the greatest advantage they can ever give their businesses. Professional service firms, in particular, grow dramatically 9 from having customer referral systems in place; most of us are just too busy running around shaking hands and slapping people on the back like politicians to stop long enough to quantify the volume and organize the best methodology to grow our businesses through referrals, even though that growth can be exponential.

Good news for you today, ladies and gentlemen, because I've done it and will share what I've learned with you.

Getting referrals is simple, but converting referrals into clients is what matters!

Everybody says they grow and succeed with referrals. You're going to be able to grow and prove it to yourself, your employees, and your banker, and you'll gain more freedom from worry while you're doing it.

It is possible to carve out a successful career without a definitive process or system for referrals. It's called the willy-nilly, hope-and-chance method. I'm not too keen on that.

The number of wasted referrals each and every year is staggering. It's estimated that 79% of referrals are never even contacted! Of the referrals that are contacted (remember, that's only 21%), nearly 91% are only contacted once and then forgotten. What we'll illustrate in this book is how to dramatically and systematically increase the number of referrals you receive and, better yet, how to convert those referrals into long-term lucrative relationships with people who will, in turn, refer you more . . . Convertible Referrals.

A few years after I got my insurance license one of my very first coworkers and I got a huge laugh when a salesman who had lived in Minnesota his entire life told her that the only reason I had the most sales in the company was because of all the people I knew. Huh?

Now, then, and frankly anytime, the only barrier to meeting the people you want to meet and do business with is your process for getting introduced to them.

Let's face it: At some level most of us are technicians of some sort. Oh please, I can hear you now: "No I'm not. I'm an artist (or an engineer, designer, lawyer, or other 'professional).'" What I mean by "technician" is that we're drawn to the work we do, but not necessarily to the type of work we need to do to attract more work. It's easy to put our nose down and focus on getting the work we have in front of us done, instead of allocating time and energy to generate future work.

Some people find any excuse in the world to not engage in the business of gaining new customers. People do it in fits and spurts or try to delegate it to the "marketing" department. Author Dan S. Kennedy's "No B.S. Marketing" maxim of not ending any business day without at least one activity that will lead to a new client is an excellent strategy for each of us to practice. Knowing your math makes it that much more meaningful to pursue.

If I asked you right now to tell me the average value of each of your customer relationships, how long would it take you to come up with an answer? What if I asked you the average value for customer relationships you've added in the last three years?

Could you find the answers in less than ten minutes for either one of those questions? I hope so because it's the building block not only for a referral process but also for any marketing program you're going to pursue.

Let's stick with "referral math" for a minute. Is your conversion ratio from a referral going to be higher than from other prospect sources? In my experience, the answer is a resounding yes.

The answer often gets somewhat murky when I ask a business owner or salesperson what their conversion ratios are for referrals and other sources of leads. It's not critical for this discussion to know the conversion percentages for all lead sources if you can buy into the premise that it will be higher, or better than satisfactory, with referrals, but you should do your math on all of your lead sources.

What are you willing to spend to attract referrals? Start with a quick look at where your new customer relationships have come from in the last two years. Add up the number of referrals you converted into customers, their average value, and the total. Depending on your business, there will be multiple transactions over the lifetime of a client; add/multiply the lifetime value of a client.

For our business, which is rich in aggregated industry statistics, a conservative lifetime value is 7.5 times the one-year revenue of the first transaction. You should be able to find credible statistics for your industry through industry associations or the experience of your own organization. Our average is actually over 20% better than the industry average but I use the more conservative measure for calculating return on investment (ROI). I also don't include the referral multiplier value that comes with each referral conversion.

Our statistics show that a person who came to us through a referral introduction is five times as likely to refer someone else, compared to someone who came from another lead source. That starts to be really fancy math, which isn't necessary to make the point that a commitment to a referral process needs to become part of your corporate culture.

Referrals have meant millions in revenue for our relatively small organization and we have the math and new customers to prove it. A big reason our retention and lifetime value is higher than our industry's average is because of the psychological power of referrals and our public referral process.

Do you suppose it's easier or harder to break a relationship after you've referred your friend, relative, or coworker to that company? Of course it's much harder to quit on that relationship after you validated it by referring someone to their company. Now, does it make it even harder to leave the relationship when you are publicly acknowledged for the referral and receive thanks in multiple steps and media forms?

You walk a loyalty ladder from transaction to raving fan in emotional sequences that you're not even aware are happening. It happens in our lives in so many settings that we don't even think about it, but they are deeply affecting our emotional/reptilian brains.

Without an organizational commitment to a referral process, it is scattershot at best and territorial at worst. Even people who don't refer others will be more likely to stay longer because you publicly acknowledge those who refer. They see people continue to refer you, people like them, and it validates their staying with you.

Along with public acknowledgment you should have a referral reward process that is both an attraction and retention tool. Measure the results based on increased new relationships and I am extremely confident you will find your math to be eye-poppingly favorable. Here's an example of our math for a one-year period.

When our company takes on a new customer, one of our checklist items is to ask them how they create sales. Who are their customers and where do they come from? What do they do to encourage referrals?

It gives us an opportunity to introduce our referral program, to discuss at length how it helps us grow, the industry average for the length of time that people remain clients, our average, and most importantly, their business model for growth and success. Explaining our business and giving them a look behind the curtain (something nobody has ever explained to them before) opens a dialogue of trust and communication that often isn't possible otherwise. It also creates an open discussion that allows us to help them succeed or, at a minimum, to let them know that we'll do all we can to help them succeed.

Use your marketing skills (and the ones you learn from this book) to help your customers develop their own referral reward program.

I will admit that I have always found this far simpler than our sales team. I've discovered over the years that this is definitely not Sales 101. I'm not sure if it's graduate level or not, but be prepared for three things:

1. It will take a considerable amount of time, training, and follow-up with your sales team to have them effectively execute this strategy.
2. The salespeople you take the time to train will get more referrals than ever before.
3. Customers you effectively execute this strategy with will be customers for life.

I can say Number 3 emphatically from our own experience. Our industry average for length of customer relationship is 7.5 years. Our Top 50 customers have been with us an average of 19 years and most of them are in concert with us in helping one another succeed. We spend more time talking about how we can successfully utilize each other's systems than anything else we do. One of our key customers said it best: "Shaun, I consider you part of our team. You are consistently helping us to be successful and grow. You anticipate our needs because you know what's going on with us and know us so well."

Getting long-term profitable and successful customers means long-term success for you and your organization but it leads you to completely different conversations with your customers that often have nothing to do with the product or service you provide them.

Recently, one of our clients, who had a wellthought- out idea of who his ideal client is, was lamenting his inability to find someone to set the table for identifying those prospective customers. It was exciting to hear how they determined the ideal customer and other factors—how many employees they would need, distance to parking availability, ability to do a payroll deduction pre-tax for transportation costs, etc. That alone was incredibly worthwhile for me as a business owner. But even better, because of the discussion, I had a way I could help them.

One of our offices is located just a few blocks from a major university with 30,000 students. We have a research assistant and what our customer was describing seemed perfectly aligned with the interests of our student employee. We set up a lunch to get the table set and within a month the research was done and delivered to our client for next to nothing. This story may seem to be a tangent that has nothing to do with making your referral process transferable but it's entirely part of the process.

Understanding how your customers succeed and produce sales will bring you closer to them. If you do this well, and listen with an open mind, you'll also be able to add some of their methods to your current attraction, conversion, and retention processes.

The often reported mantra of "Our business is different" is a tired cliché and an excuse for the laziness of not wanting to do the work, the stubbornness of thinking your own way is the only way, and a lack of creativity to incorporate other people's ideas and processes with your own for even greater success. Clearly delineated steps in your referral process will enable you to describe it better for your team and your customers and transfer it to them.

Every businessperson you meet can add value to your referral system. Start an idea folder. Ask yourself:

Do the businesses you deal with rely on big referrals or multiple small ones?

Where do they get the bulk of their new business sales?

Who are their circles of influence?

Do they ask their customers how they succeed?

What's the timeline from referral to adding that referral as a customer?

What's the payoff or expected lifetime value of each client relationship for them?

How often do clients use them once they are hired?

Questions like these will help you to understand your customers' businesses and help them adopt some form of your own referral program for their success.

The more you listen the more you can take pieces of their success template and incorporate them into your own business and multiply your success. Make sure they know it if you add an element of their program to yours. Imitation is the sincerest form of flattery. I guarantee if you have a "marketing" session with your key clients, your relationship will last longer and will be more fruitful and open than any transactional relationships you have.

Business owners and leaders too often feel that nobody cares about their business and success. It can be very lonely. Business owners can't share everything with their employees because they need to confidently forge ahead but more often than not, when I've gotten a CEO comfortable enough to open up, I found a man or woman who welcomed having the ear of someone "safe" to discuss things with.

There are countless phrases that sum up the law of reciprocity: What goes around comes around; Karma; the rubber band (a TV show called "Becker" had a really funny episode on this); invite the best.

They're not just phrases; it's true. We have every reason to be grateful and help others, not only because it's the right thing to do, but you can do so fearlessly because it will return to you in kind. It's happened countless times to me in practice but you don't need to believe me to know it's true. Try it on for size or think back to the times you've given selflessly.

The pursuit of money isn't enough for many of us because we understand the gifts we've been given by others. Giving away your "secrets" is a testament to how many people have taught you over the years. Giving away your time and money is simply the right thing to do.

It's been said that finding the big-enough reason lifts all barriers in getting things done. We hear it time after time in immigrants' stories around the world, people who work two or three jobs to send money home; people who have scrimped and saved and lived together so they could bring their families to America, Europe, or wherever.

When I was a young college student I met a man, Luc, from the Philippines. He worked at night cleaning the building where I was a computer operator. He was a friendly guy and we chatted quite a few times. I learned he was a college-educated engineer who had made it to America nine years earlier. There had been, and continued to be, political upheaval in his native Philippines so he wanted a better life for his family. His solution was to forgo his professional career, come to America and work three jobs, none of them anywhere near the money his education or training warranted, and send that money home so his siblings could come, one by one, to America with their families.

He didn't share his story with me for a pity-party, mostly it came in bits and pieces as I got to know him better. He believed that America gave him so much by giving him his freedom that he desperately wanted to give it to everyone in his family. It affected me deeply, that the gift of freedom was so monumental that he was compelled to give it to others.

All of our treasures, most of all our freedom, have been given to us by someone else.

Certainly we don't attain any financial, emotional, or spiritual well-being without the help of too many people to ever count. Find what you value most and find a way to give it away. Teach, volunteer, write checks, share your passion—all of them will multiply the well-being of others and you, more than you will ever know.

"Give it away" sounds revolutionary until you sit down a year after sharing your entire marketing strategy with someone who loved it, related to it, and had every intention of implementing it but you find out they didn't. You could give away your entire business plan and strategy to your competitors every year and 99% of them wouldn't do a thing with it. The 1% would normally be willing to tell you what's working for them and be the better for it as well. Giving it away to your customers just stands to build goodwill and more successful relationships.

It's extremely gratifying to see what you've given work for someone else. A local nonprofit we support, the Cookie Cart, www.cookiecart.org, gives inner-city teens, ages 14–17, their first paid job experiences and training through a commercial/referral bakery. To most people it sounds odd that this would be a critical need because they have parents to shepherd them and teach them, but too many of these youngsters have never, or rarely, had someone leave for work every morning to show them the way through modeling a work ethic.

So many things that we might take for granted due to our upbringing—good health, proximity to excellent transportation, or education—are not part of a growing number of people's experiences in their formative years. You can give your abundant energy, talent, or money to organizations or people for research into diseases near and dear to your heart, or to help folks, for example, with developmental disabilities, who will never have the capacity to be in highly functioning intellectual positions but nonetheless deserve our best efforts to respectfully address their wants, needs, and their shot at a relatively full life.

A dear friend, mentor, and successful business leader, Bob Klas, one of the founders of the Tapemark Charity Pro-Am golf tournament, likes to tell me that even when people give selfishly they realize just how good it feels to do good for others.

Two families decided over forty years ago to do something to help people with developmental disabilities. They started modestly with fairly limited goals to help folks with developmental disabilities get a better shake in the world.

Think of the context of those times. The government had recently deinstitutionalized thousands of people with developmental disabilities after counseling parents for decades that the best place for their children with developmental disabilities was in government- run or privately run institutions where they could be with people "like them." That turned out to be a monumental failure and when the government undid it and sent these folks out into the world, there were few support structures or mechanisms in place for dealing with even their basic needs. As often happens, the ripple effect and unintended consequences continue to be felt over 45 years later.

The Tapemark Charity Pro-Am has raised over $6.5 million in the last forty years for nonprofit agencies serving Minnesota children and adults living with developmental disabilities and their families. It has grown to be recognized as a distinctive signature charitable golf event for the Midwest. Seeking to give it away in a small way grew and multiplied into an event impacting thousands of lives.

Your impact can be similarly felt by more people than you will ever know. Find something that interests you or moves your heart and you will be amazed at what you can give away.

The very best way to convert every referral is to go back to Jacques' maxim:

Show up on time! Do what you say you're going to do!
Finish what you start!
Say "Please" and "Thank You!"

If you fully concentrate on helping the person who is calling you to solve their problem or get them on the path to solving their situation, you've converted the referral for good. This might sound too soft for you, not hard-boiled-business enough for you, and too simplistic. Remember, I started with nothing, actually less than nothing because I owed money. Referrals have meant multi-millions to our business. I know it works and I know it will work for you too. It's difficult only in that you have to listen, care, and be genuine in trying to help them.

The noise of the world and the chaos surrounding us have people craving a real connection, someone who will slow down and listen, who they know hears them and cares, and who they know will be there the next time they need them. That doesn't mean that if you can't do it, you should just blow them off and move on. It means listening intently and thinking about what help would you want if you were in their situation, and asking yourself if you know how to find it for them. More times than not you'll be able to move them forward on the path to the solution, whether it's you or not.

The magic comes in communicating your results to the person who referred them and then repeating it over and over and over until you convince yourself that it's a phenomenal way to build a remarkable business made up of friends who think just like you.