Before we get into building a strong referral network, we have one quick bit of financial advice and – yay – more scams, specifically related to Employee Retention Credit Claims. Check out this link, the headline of which reads:
IRS opens 2023 Dirty Dozen with warning about Employee Retention Credit claims; increased scrutiny follows aggressive promoters making offers too good to be true.
One of these strategies is offering extravagant referral fees. We’re not opposed to a nice referral bonus, but the larger it gets, the greater the likelihood it’s too good to be true. Besides, when you work ethically and professionally with vendors, clients, and other businesses, good things come naturally. More on that below.
But first, quick financial tips:
Wherever you deposit your money, remember that $250,000 in FDIC insured US bank accounts are secured, and joint accounts are covered up to $500,000.
From there, if you don’t have a specific reason to have that much money on hand, keep a checking account for monthly income and expenses at a comfortable level, and emergency savings in a high yield savings account (HYSA). In your HYSA, keep about six months to one year’s worth of your usual expenditures and bills, which, when at an institution insured by the FDIC, is generally safe.
Then schedule a call with our financial advising arm, TCG Prosperity. Discuss bonds, treasury bills and CDs, and don’t be afraid to ask TCG Prosperity about investing in the stock market, too.
This is the advice we give to small business owners in all times, good and bad. Not just right now.
Now for your regularly scheduled business advice: What does building a referral network mean for you?
The TCG Accounting Team’s “Real World” Business Strategy Note
An Effective Word-of-Mouth Advertising Tool
”You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you.” – Dale Carnegie
Everybody knows about customer and employee referral programs. They offer a quick, monetized reward for sending business your way. They’re great when they work well. We have one of our own!
As small business owners, we know referrals are gold. Customers who have a good experience with a company will recommend that company. Leads from those referrals tend to be worth more in both the short and long term, and people trust referrals from people they know.
Other businesses may be willing to recommend your company, too. You, of course, should recommend your customers to them in return. You may even create an unofficial partnership for this. To formalize it, keep reading:
Who to approach?
Ideally, you want a team of about six or so networks from companies that complement, but do not compete with, your business. Prospective team members are determined by your opinion of each other, your company’s goals, your market and industry, and, of course, who is most willing to refer you.
There is wiggle room when it comes to competitors. Using accounting as an example, one accounting firm may only do tax preparation and make an excellent referral partner for a firm that does advisory.
Maybe your competitor isn’t taking new clients, or a sole business owner is preparing to take a lengthy leave and wants to set up their clients for success in their absence. Consider formalizing this kind of referral arrangement if you find yourself in one of those situations down the road.
Using accounting as an example for a solid referral program, an accounting firm that handles tax and accounting may find good referral partners in lawyers, insurance agents, IT providers and the like.
The point is to create a steady, two-way flow of new customers. An effective referral team is also usually a small one. That’s the best way to hold every member, including you, accountable for sending referrals to each other.
Make sure your company is ready to participate in this network and handle the new business. If you have any problems handling the business coming through your door already or any customer service issues you’ve been meaning to clean up, now is the time! You do not want referral partners referring customers to you just for those new relationships to consistently go south — there’s no quicker way to see your referral team unravel.
Going formal
A referral partner makes an informal referral arrangement into an official reciprocal relationship. Here are some tips:
- We wouldn’t go so far as to say use a contract, but you can get all parties to sign a written referral agreement (here’s a sample) that defines a valid, successful referral.
- This agreement also makes a handy prop to show new, prospective referral partners, not to mention documentation if needed.
- Your agreement should be dynamic and can be used it to add details as your referral network gets rolling.
- Check in with your referral partners every so often. Don’t forget to share your company’s marketing materials, including videos and social media posts, and tag each other if you share their content on social media.
Track your team’s referrals, including dates, clients, contact info and so on, so details don’t become lost in impressions and misremembering. A notebook or Excel doc works great, but software does exists for this function, too.
Patience is a virtue
Building a referral team takes time. You may have to talk to several people, and you may find varied success in referral partners until you find the best match. But it is all worth it for new business.
Who doesn’t love referrals?
Always On Your Team,
The TCG Accounting Team
