Good word of mouth won’t cut it


Many who operate a business believe that if they offer an excellent product or service, referrals will automatically flow in. Strong word of mouth is the best referral, but you can’t orchestrate it. You may get a referral now and then, but I’m talking about getting a steady stream of three to four per month — month after month.  Like any business  strategy, this takes planning, a budget and smart execution.

Building a robust referral pipeline

Studies show most Americans know about 100 people by their first names. At least 10 of those have large networks of 100 or more people. That’s potentially 1,000 referral prospects, 10 percent of whom may be qualified prospects — 100 qualified prospects that need your product or service.

Business development can be expensive and the results difficult to measure. Where do you invest your sales and marketing budgets? Social media, print, online, brochures, TV, radio? Should you hire a staff of sales people? A salesforce takes training and careful management, and inevitably involves costly turnover. I once invested in a booth at the National Restaurant Show in Chicago and staffed it with my salespeople. While I was back at the office, my main competitor came by the booth and recruited my top salesperson. This hurt, but it motivated me to develop a strategy to expand my referral pipeline and depend less on direct sales.

Here’s what my successful strategy entails: Identify 12 people who qualify as spheres of influence from your network. These are people who you know have their own large personal networks. A sphere can be a customer, a professional (like your attorney or accountant), a fellow businessperson, or a friend. Take one of these key people to breakfast or a lunch each month for a year.    

Now for the hard part

Asking for referrals is tricky. It feels uncomfortable. That’s why most business owners fail to make this part of their business development strategy. We all fear rejection.

Don’t talk business over your burgers. Catch up with news about families, vacations, politics (carefully), current events, sports, pets, kids or grandkids. Focus on them but balance the conversation with your stories. Do some basic research about their business and their markets or industry. Listen carefully. Spend the hour building or reaffirming the relationship, not promoting your business. Before leaving, do what I believe is the key to all personal relationships: Make them feel good about themselves. I will delve into this important concept in a future column.

Lessons from your life

Think about your most rewarding/successful relationships. Your long-term close friends share this skill. They make you feel good about yourself because they connect with you and you connect with them. We feel good when the people in our lives show they know us well, that they have heard what we have told them, and what is important to us. You can do this in the course of an hour over a simple lunch. It sounds like Psych 101, I know, but it works — especially in this hyper-fast-paced digital world where we are bombarded with distractions. (By the way, turn your digital devices off during lunch.)

I cold-called nonstop in my first business. I suffered major stress. I also alienated 100 prospects in order to get two new accounts. It was a disaster for my brand development in the close-knit city of Des Moines, Iowa. After six months, having had enough of this, my brand was damaged in the community. But, after that time I had 180 new accounts. My business was off and running. That’s when I decided to leverage my client base by focusing on referral development.

My next column will focus on customer relationships. Once you have new accounts, what can you do to get their referrals?

Ed Reedholm is a local consultant and entrepreneur. He has grown several companies using the concept of building deep relationships and maximizing a firm’s productivity. He can be reached at 719-963-1440 or