How a Great Referral Strategy Helps Service Offering Design — David C. Baker


Picture this for a minute. You look at all the service offerings you make available to clients and all of a sudden it looks more like a Luby’s Cafeteria than the Prix Fixe menu at the famous restaurant that makes you wait nine weeks for a reservation. How in the world did you end up offering all these dozens of different things? (By the way, having an entire department sit around because the client didn’t want to buy “that” from you is also the easiest way to lose money.)

Some of the wacky service offering menus I see stem from a lack of positioning, a desperation about getting enough work, or the lack of a carefully constructed referral strategy.

“Hold on,” you’re thinking right now. Being everything to everyone and not having a marketing plan makes sense, but how in the heck does a referral strategy have anything to do with out of control service offerings?

Here’s the connection: the best firms have a slimmed down list of the things they do exceptionally well, and they don’t hesitate to refer clients to other experts when it’s appropriate, rather than using every new request as an attempt to corner more of the market. I’ll leave that thought alone for now, but read this if you’d like to explore more about service offering design.

So how do you think about making referrals to other experts? I’ve made thousands of them, and it’s one of my favorite things about running a business. Why?

  1. I don’t want to do all the work. To be more specific, I only want to do work where I think I’m deeply qualified to help someone. I don’t mind being out ahead of my skis to keep things exciting from time to time, but I’m not a coach, I don’t teach sales strategy, I don’t do advising around accounting, etc.
  2. I love to help other businesses succeed. On a related note, I remember being told by a half dozen people that I was crazy to invite my competitors to speak at the first ever MYOB, but that comes from a silly defensiveness and you’ll see a bunch of them at this year’s conference, again, too.
  3. When you honestly tell clients what you are not all that good at, they’re far more likely to believe you when you tell them that you are good at something. Think of yourself as a helpful, objective source for your client…and their relationship will be much stronger with you.

So that’s why I think it’s important to do this well, and if you agree, maybe borrow a few of the principles I use to put a policy in place.

  • A strong referral strategy relies on a fair, deserved confidence. If you don’t have that, you’ll replace that healthy confidence with defensiveness. It won’t be what’s legally called “tortuous interference” but you’ll be like the guy who’s uncomfortable when someone else wants to dance with the girl he brought to the party. I’ll go further and say this: if you are frequently nervous about competition, you probably aren’t as well positioned as you should be. Yes, strong positioning work will still leave you with some competition, but even then there are second- and third-order differentiators (process, IP, mix of service offerings, size, etc.).
  • I don’t begin regularly sending referrals to a trusted source until I hear about them multiple times, and usually organically. Maybe your experience is different, but I can’t think of a single time I’ve developed a referral relationship with someone who reached out to me (on LinkedIn or email) who said something like, “hey, we should have a quick call to see how we can help each other’s businesses.” While I seldom take those calls, I believe that there is a meaningful role for them when both parties are building their businesses.
  • Having said that, I usually want to have multiple referrals for the same thing. Every client is a bit different, and even if the work that both do is the same, their styles might be different. But even more importantly, I want my client to make their own choice. I don’t want to arrange marriages and then get lambasted whenever they have a little fight. Give them options and let them choose.
  • When I do have multiple options for them to consider, I’ll give them an honest assessment of the strengths and weaknesses of each. One might be expansive, complete, driven by systems, but very expensive. Another might be one-half the price and plenty good enough.
  • Next comes a simple question, to my client: “Would you like a specific email introduction?” Sometimes they do, thinking that it’ll smooth the possible relationship, but other times they don’t, thinking that they don’t want to (yet) set any expectation that they’ll work together. They may want to ask around for other options, do some research about the recommendation I’ve made, or whatever. I’m only going to make a referral if someone wants me to. No pushing people toward working together.
  • If I do make that referral, I’ll then follow up with the firm I’ve made the referral to with more specific, private information. Background, what they are like to work with, some suggestions about what they might need, etc. This is merely meant to smooth the possible relationship.
  • Now here’s something that’s pretty important. In the scheme of things, here’s how I rank all those relationships. My relationship with my clients as a whole is far more important than any referral source I might send work to, but my relationship with that referral source is more important than any individual client. That sounds weird, so let me explain. If I hear that they disappointed a client of mine, I’ll try to understand why and how objective their perspective is and then act accordingly. We all need to account for the truism that no one makes 100% of their clients happy (I’d guess that 10% of mine are unhappy), and the client is absolutely not always right.
  • Finally, I do not normally take…or give…any referral fee, though I have been offered it many, many times. Some of my colleagues do, which I think isn’t ideal, but that’s their choice. For me, I don’t want any “noise” in this referral. My reputation is way more important than money, and I never want to make a referral that isn’t honest, and I know what money can do to all of us. On the rare occasion I might, the whole thing is very transparent to all parties.

There you go. Maybe there’s something in here that’ll help you think through your own strategy and be intentional about it. And keep your service offering menu slim and professional.