How to Make Referrals

In part one of a two-part discussion about developing a business referral strategy, Blair is surprised to hear that David wants to cover how and why we can get better at giving away business, before talking about how to get more referrals.

Transcript

Blair Enns: David Baker, you're an odd bird.

David C. Baker: Yes, tell me something I don't know, and quit calling me Baker. Just say David.

Blair: [laughs] David C. Baker, you're a strange duck because you send me this topic idea, "developing a referral strategy." I think, "Oh, I love this." I've spent some brain power on this, but I don't have anything that I'm really happy with about developing a referral strategy. We'll talk about that later.

David: What's new? I take your rough thoughts and I articulate them so that the public can digest them.

Blair: No, you take the topic and then you take the inverse of it. Because if we publish this title as Developing Referral Strategy, people are going to think, "Oh yes, I want to know. How do I get more referrals?" That's not what you're talking about.

David: No, it's the anti-referral.

Blair: You want to talk about how to give referrals?

David: Yes. Okay, well.

Blair: [chuckles] This is just striking you. [laughs] No, you're talking about how to refer business to other people.

David: Yes, other people. Right.

Blair: Okay, so we've just lost 90% of the people who tuned into this, but I'm going to suggest they come back. We'll do a part two. I'll take the other side of it. How to ask for referrals, how to build a strategy around getting referrals.

David: I hope everybody on LinkedIn listens to that one. God almighty.

Blair: [laughs] Okay, so you want to talk about how to refer business to others and you make lots of referrals, right?

David: Yes, most of them comfortably, every once in a while.

Blair: Every once in a while. Uncomfortably.

David: Yes.

Blair: Why this topic? Why did you want to discuss how to get better at giving away business?

David: If you don't like doing lots of work, this is important.

[laughter]

David: If you'd prefer other people do the work for you-

Blair: -and make the money.

David: -and make the money or send you a little bit of it, depending on your referral strategy. I don't know. I just love having some small role in helping other businesses be successful. I've never really written a list out, but I'll bet there's a couple of dozen where I feel like, "You know what? I had something to do with how successful that business is because I found them or somebody else told me about them and I just kept sending work to them." That just feels good to me.

I just want clients to get the help they need. I don't want the temptation of twisting my service offerings just in response to what somebody needs, right? We all do that, right? We get out of that over time, but it's like, "Oh, there's an opportunity." Yes, I do that when, actually, you've never done it and you're going to regret trying to do it. It's all those things combined. I got this direct message in LinkedIn the other day. Let me just read this to you.

Blair: Oh, this'll be a good one.

David: I think this is a perfectly legitimate request from this guy. It's not my style, but it's a style and it seems reasonable. He said, "Hi, David. I visited your profile on LinkedIn a few days ago, and I have to say that I'm impressed with your accomplishments." That's bullshit, but anyway. "We could both have mutual benefit by connecting and, who knows, maybe opportunities are on the horizon." Now, that's true, right? We could both connect and there might be some mutual benefit, but that's not the kind of thing I want to take the time to do. I'm not saying that that is the wrong way to do it. I'm just saying it's not the way I do it and, I don't know, maybe some people will be interested in my approach to it.

Blair: Yes, the problem with this outreach is, as you said, it's a perfectly valid approach from somebody who is in the early part of their career, they're still building a network and a reputation. They're still building connections and they're looking to connect with somebody else in this reciprocal relationship where maybe, together, they can be helpful to each other. You're at the stage of your career where you're more discerning.

It doesn't make sense for you to hop on a call to explore possibilities with somebody else. There's a misread on the part of the person asking and it's a misunderstanding of their audience. You and the fact that you are in different places, or they know it and they're disingenuous. What they really mean is, "Oh, I'd love to tap into your network." It's one of the two. It's either they're not reading you correctly or they're disingenuous about the ask.

David: I think it was number one. I don't think there was any ill attempt here, but I get these sorts of requests by email or LinkedIn probably 10 a week. I just started. When I got this one, I thought, "Oh, you know what? I've never really articulated a referral strategy. When am I going to refer people? How do I think about that?" Anyway, that's how this topic was born. We'll see what it looks like after it's born.

Blair: All right, so you've delineated some principles that would constitute a philosophy, and your philosophical point about which you'd like people to get aligned or straight on is that you don't need to hoard all the work. Now, again, I'm assuming if you think of two different states of business in the early days, maybe you do need to hoard all the work.

David: Right, yes. The first year or two, so I'm writing this for people that are already pretty well-established. Every one of us has done this, right? Sometimes when you get those requests from somebody, you obviously have a choice. Should I refer them to somebody else that's already well-established? That's probably in the client's best interest. Then other times, you're thinking, "You know what? I've thought about doing more of this."

Maybe I'll just be honest with the client and say, "I've thought a lot about this. I've poked around the edges. I don't currently have a service offering to help you with that, but I'd be happy to work with you," and then maybe it's a little bit less expensive or something. The one that comes up all the time, came up twice today, was somebody who's looking for more of a coaching relationship.

I just sent both of them to somebody else who's a competitor of mine but is going to be a much better fit for them. I couldn't do that if I'm desperate about work where I feel like I've got to turn every opportunity into something. It's just a philosophical thing that I don't know that we're very good at in this industry. It seems like we just cling to opportunity almost as if it's wrong to waste opportunity. That's just a weird perspective.

Blair: Again, that makes sense early on in the business where every dollar is a good one. You're still trying on a bunch of different service offerings where you get an inquiry and you think, "Well, I don't really do that, but I could do that. Maybe this is a sign that the market is saying I should do that, so it makes sense." At some point, you arrive at a focus. Philosophically, you want to stick to this idea of, "No, this is what I do and who I do it for, and the tangential stuff. Unless I'm going to build a business around, it doesn't make sense to take the one-offs, so let's refer to others." Building on that philosophy, what do you think about first when you're thinking about how and to whom to prefer?

David: Well, let me flip this around. You've got people that you think are really good at certain things and you send clients or prospects to them all the time. Have you ever started referring somebody who reached out to you first and you didn't hear about them organically where they just said, "Hey, I do this," if you ever run across somebody or, "Let's connect about this"?

Blair: Yes, "Hey, I do this. If you're ever looking for somebody who needs this, I'd love it if you referred to me." Either that direct or implied.

David: Yes, right. Have you ever done that?

Blair: No, I would never refer an opportunity of any kind to somebody that I didn't know that could deliver and trust, especially if it's from an existing client or somebody you think highly of because my reputation is on the line for every referral I make.

David: Yes, right. I need to hear from multiple places in the marketplace that this person has done good work for somebody and then I'll just start paying more careful attention to it. I may reach out to some of those people and say, "Hey, tell me more about that. I'd be really interested to hear about your experience and where they were really good, how they helped you, what you wish you were a little bit different."

Then I'll connect with that person, the ultimate referral, and then I'll just keep an eye open for them to see if there's a place where you could fit them in, and then I'll monitor that feedback really carefully. I think the best strategy, at least if you're wanting to reach me, is just be really good in the marketplace. I'll hear about it and then I'll follow up. I'll pursue it.

Blair: I'm so obtuse. I finally get the purpose of this podcast. You're tired of saying to people, "Listen, I'm not going to refer business to you. Here, listen to this podcast-"

David: "-and leave me alone."

[laughter]

Blair: I totally get it. Your point that the best way to prove to me that you are a good person or organization to refer opportunities to is to do good work in the market and let the knowledge of that good work come back to me via multiple sources. When I'm hearing from multiple people that you do good work, then you'll go on my refer radar list.

David: Yes, exactly. I blew this. I violated my own standard here. I had somebody reach out to me. They do fractional accounting for firms in this space. It was a fantastic presentation. I tripped over my own regs on this thinking, "Okay, this person will be able to refer work to me too, so this is worth my time." It was a disaster. It was just ugly. The people that I referred that person to, it didn't work well at all. That was just a good reminder like, "Calm down, David. Calm down. Don't be desperate. Just think carefully about this."

Blair: You find this new bright shiny thing. "Oh, my God, my clients could really use this. Yes, I'll start referring business," but you haven't heard from multiple people. You've just got the sales pitch from the organization. Maybe the person is highly pedigreed, so that combination of, "The pitch was really good and their background's really good," but then there's the stories of, "What was it like to work with that person? What was their character like?"

All of those things come out eventually, right? You can't hide that. Can I say this? You shared a story, I guess it was via email today with me and some friends about somebody had said, "Hey, I'm thinking of hiring this web design firm." They said they designed your website. Can you just validate that they did? What did you do?

David: I was like, "No, I've never heard of this firm. They didn't do my website."

Blair: It was an outright lie?

David: Yes, I called the guy out and cussed him out, taught him a few new words, told him, "You can expect a letter from my attorney." That takes a lot of nerve to say, "Well, here are the websites we did. Which one do you like the most? We can emulate that." I'm like, "Wow."

Blair: You also like the idea of having not just one source to which you would refer certain types of business. You want to have multiple places that you can refer clients or inquiries, is that correct?

David: Yes, because recognizing that people's styles are different, the scope, the way they work, and so on. Really selfishly, I don't want to be arranging marriages. Then every time they have a fight, they think about me. It's like, "Here are two people that you might think about." Now, you pick, then I can't be blamed for your choice. It's not just self-protection.

It's also just recognizing that everybody has a different way of working. Here's a source that's maybe 10,000 a month. Here's a source that's more than that. Here's another one that's less than that. Here's what the scope looks like. Here's what it's like to work with them. I like to have multiple. I might have a preferred outcome and I'll probably tell them that, but think about it.

Blair: Right, there's also different geographic locations too. Somebody might be in the UK or Europe, et cetera. Okay, then what do you think about next?

David: I always have a really honest conversation with whoever I'm sending this referral to and saying, "Hey, here's the way I perceive their strengths and weaknesses. Here's what you'll really like. Here's what you may not based on what I know about you." I'm careful when I do that. That kind of information can get out to the wrong people. It can be really damaging to a relationship that you might have to the source you're referring this client to.

I am very conscious when I say those things and I pretend that this person I know well that I'm recommending is on the call with me. They may not like everything I say, but they think, "Yes, it's basically fair." That's a pretty accurate statement. We can own that because sometimes this stuff's going to get back to people. You don't want to paint with too broad a brush. You don't want to take your own perspectives entirely on it. You want to be fair. The best way to do that is just assume they're listening or assume they're going to read the email that you're sending this person that you're talking about. That's what I do.

Blair: Right, that makes sense. Then do you do the introduction yourself?

David: If they want. Usually, they want to look at a website first. That's where it gets a little bit embarrassing where you want to refer somebody to somebody else and they don't even have a website that can be examined. I don't send referrals that way. Sometimes they want to look at it first and then I'll just say, "Listen, if you want an introduction, happy to do it." I would write it to this person and I'll name that person, but I'm not going to do that otherwise.

Then if they do want an introduction, I'll just write a short two-paragraph thing. I've trained all these people to pull me out of the copy things while they email back and forth 17 times trying to find a time to talk. Then I'll text or email the person that I'm referring and say, "Hey, this is what they're like to work with. I'd be cautious about this. Be careful," or "This would make a fantastic client. Here's why I've really enjoyed working with them."

I just download a bunch of more specific stuff just to save them effort. I know enough about the style of the people I'm sending work to that I can usually guess what will work and what won't work. I just do that on the side. Now, if I'm not asked to make an introduction, then after a week or so, I might say, "Hey," whoever the referral source is, "you might hear from such and such. If you do, let me know. I can fill you in," but I'll just leave it at that. I don't want to write an email unless I get permission from somebody.

Blair: You're having open and honest and fair conversations with both parties individually giving your open, honest, and fair assessment of the other party, and then you're not defaulting to an intro. You're asking the person that you are referring to another expert if they would like the introduction.

David: Right.

Blair: Okay, I think one of the most interesting things in your notes, when I was going over this, is the idea that you see your relationship with the expert to whom you were referring the business is more important than the relationship with the client. Do you want to speak to that?

David: Yes. When I wrote that out, I thought, "Do I really mean that?" I really do because I'm going to have an ongoing relationship with this person I'm referring to this firm I'm referring work to for many, many years. Every once in a while too, this gets tested because you send a client to somebody, and that client is very disappointed. You're just a little shocked by that.

You think, "Well, is this just a one-off? Maybe somebody got off on the wrong foot." I had that happen last week where I sent a very good client of mine to somebody that I thought would really serve them. This person wrote me back by email and said, "Man, I am not impressed. The sales process has been rude. They're playing hard to get." Now, this client is not as important to me as his referral source.

I didn't want to be defensive, but I just said, "Well, maybe you feel that way because they're being more honest with you and you're misinterpreting it, but that's odd. I don't get that sort of feedback. I'm not sure what to do. Let me know if you want me to have a conversation." I just left it at that. If I hear that from a bunch of people, then I'm going to be alarmed and I'm going to wonder if I should keep referring. If I just hear it once or twice every once in a while, I'm just going to assume it wasn't a fit.

I'm not going to change my strategy. My relationship with all of my clients as a group is way more important than my relationship with the people I send work to, but the people I send work to, my relationship with them is more important than a single client because I just have this body of evidence of how good the work is that they do. If there's an exception, well, there has to be an exception to that. We're all different kinds of people. Just trying to put it in perspective, I guess.

Blair: Sometimes the stars just don't align between two parties for whatever reason. It might be a personality clash, might be somebody's having a bad day.

David: Yes, or even how I introduced them. Who knows?

Blair: Yes, that's interesting. I was referred a while ago. Somebody referred some business to me in an email. I didn't know it was coming. When I read the email, I cringed and I thought, "Oh, there's no way." The person referring a prospective client to me thought they were doing both of us a favor. The way the email and the referral was crafted, it was like, "Oh, you haven't even had a conversation with this person. You basically said, 'You have a problem and meet the guy who can fix it.'"

I was really delicate with this one. I let it sit in my inbox for a while and then I was just super delicate. The feedback that I got back from the person referring was negative feedback about my approach. I didn't respond. I just said, "Oh, sorry. Sometimes these things don't work out." The real problem was the way it was referred in. It's like somebody showing up uninvited saying, "You have a problem and I'm here to help. Here, Blair is going to help you." It's like the odds of me being able to recover from that are really low.

David: You just want to have this constellation of great sources to refer your clients to that you know, generally, they're going to get very good work, good value, but you can't be in the business of defending somebody else's reputation too. It's just exhausting. It's enough work just to defend my reputation, let alone somebody else's.

[laughter]

David: That's half my job is defending your right. We got one and a half people working full-time on this. It's a tough job. It doesn't pay well.

Blair: I really like your point, though, that the expert to whom you're referring the business is that relationship is more important than the person that you are referring your client. On a whole, your clients are more valuable than the outside expert to whom you're referring business. That's a great way to think about it. I never thought of it that way before. Can we talk about referral fees?

David: Yes, are we going to get in trouble here?

Blair: Are we? I don't know.

David: I personally know quite a few of my competitors who take referral fees and it's usually 10% to 15% of the first years. I have been offered them many times and I've always turned them down, well, except 29 years ago. [chuckles] I have had many people ask for referral fees. Every once in a while, I will grant it, but there has to be total transparency. It's never going to be under the table.

The client's going to know that I got because my reputation for doing things because they're right is way more important than any kind of money that's attached to it. I just don't take referral fees. That could very well be just an acknowledgment of how weak I am. I would start making referrals because of the money. I don't know. It may not be a compliment at all. What's your perspective on referral fees?

Blair: I have the same character flaw as you. I have never been paid a referral fee and that's a point of pride for me. I've thought about it. I've even had a conversation with somebody recently where I said, "Yes, I'm willing to explore this." I don't think it's necessarily a bad thing for people in our position. If you're running any sort of expert practice of any kind, I don't think it's a bad thing to pay referrals or to take referrals, I think, as long as it's on the table.

I think you have to look at referral fees in terms of collecting referral fees as it's got to be really worth it, almost to the point where you're going to build your marketing strategy around it. You and I have books that sell for hundreds of dollars. Their products and we have other products that we sell that are pretty ripe for an affiliate marketing program. I've had more than a dozen people ask me about Pricing Creativity, my book, if they could get an affiliate link and they could earn a commission on that.

I've come back to that question so many times over the last five or six years. "Should we? Shouldn't we? Should we? Shouldn't we?" I can see the legitimacy in taking that approach and pursuing some massive scale as long as you're not trying to hide it from anybody. My own personal preference, it's probably just also a reflection on the state of my business and my-- What's the euphemism for old age?

David: Dead?

Blair: [chuckles] It wouldn't be a meaningful amount of money, so it doesn't even make sense. If somebody came to me with a strategy and said, "Okay, we could double your business. You could start earning seven figures more through this referral approach," I would listen to it. My father was a police officer and he ran commercial crime, corporate fraud for years. He used to say that the legal definition of a kickback is a secret commission. That's always stuck with me. If any commissions are being paid, any referrals or fees are being paid, they cannot be hidden. It can't be something that you feel like you have to be quiet about.

David: I've been offered quite a few of those. They always make me a little bit nervous. Yes, no referral fees. I frequently tell my clients. Before, I'll say, "Hey, here are three people that would be really good at what you're looking for. I don't do any of that. Just so you know, I don't take any money for any referrals. I just want to keep this clean." I feel like they listen more carefully. Maybe it would never have occurred to them that I was taking a referral fee, but I like to be able to say that. It's about right.

I wish the world was a little bit more transparent. We had a client of ours who wanted to refer an M&A client to us two weeks ago and said, "Hey, what's your referral fee thing?" We explained it to them and said, "Listen, we could probably do something here, but it would have to be very transparent to the person that you're referring us to." We couldn't do this underhanded, almost like a realtor commission fee, kind of thing. I'm okay with that, but I want people to never think that the referral I'm making has something to do with money.

I just want to keep things clean. Now, like I said, 29 years ago, I did have a referral source. I didn't even realize this was going to be a problem. I was giving the editor of a publication 10% of everything I made. He was advertising my work in his publication. It was my only source of work too. I realized, "Oh, my God, what if something happens to him?" We never disclosed it to anybody, which I think was wrong. What if something happens to him?

I called him up one day and I said, "Hey, I want to give you 15% instead of 10%." Of course, he was expecting the opposite because I told him I wanted to talk about our referral fee arrangement. He said, "Wait, you want to raise it?" I said, "Yes, because I got to get rid of it. I've got to make it so painful that I am dreading getting work from you because it's not as profitable." That's the only way I'll develop the muscle of building my own legion plan. That was the only time I've done a referral fee.

Blair: Were you paying for the ad?

David: No, the ad was free. I guess you could say it was maybe an exchange thing, but the ad was free. He offered to do it.

Blair: It was simply performance pricing. It was value-based pricing.

David: [laughs]

Blair: You call him back. You put that deal back on the table. Is the publication still around? [laughs]

David: No, went out of business.

Blair: Baker, you need to call me before you do these stupid things.

David: [laughs] No, he was a really good guy. The whole reason I'm in the consulting business was his idea. He said, "Hey, I'll put an ad in the paper. Just give me 10%." I said, "Okay." I didn't think it would happen. I'm an accidental consultant.

Blair: I think you're over-indexing on the caution side on this thing. I get it as an expert advisor. Your reputation is everything. You don't want to go anywhere near that line where somebody would start to question the motivation behind your recommendations.

David: Are you intending in part B of this thing to flip this around? Is that your intent?

Blair: Well, I think if we want to do the other side of it, how do you get better at getting referrals instead of giving? I think that's a topic that we should explore.

David: I'd love to learn that.

Blair: Yes, so would I. Why don't I learn it and then we'll talk about it? [chuckles]

David: If you can't learn it, I've got some people that I could refer this to.

Blair: [laughs] They're probably not any good. I really liked this topic. Philosophically, you start off by saying, "Well, I don't want all the work." I know this about you. You take a lot of pleasure in referring business to other good businesses and helping them out. You want to see good businesses succeed. Also, you're serving your clients well. I think you're probably the only person in this whole expert advisor space who would ever think to talk about this topic from this point of view rather than the more common point of view, which we'll talk about next time.

David: I look forward to that one.

Blair: Thanks, David.

David: Thanks, Blair.