Sellers love referrals. They are the sincerest form of praise and a remarkably profitable route for new business.

The idea of ​​attracting referrals is so popular that sales coaches who bill themselves as referral gurus make fortunes promoting magic systems that supposedly bring in more referrals than an agent can handle, all in exchange for seminar enrollment. of three days. What they talk about for three days is a mystery to me. References are really quite simple things. Much of this you can only acquire through perfect practice of your scripts, over and over again, of referral generation and nurturing tactics.

Reference Truths and Consequences

Before you divert even a moment of effort from prospecting activities and before you pin all your hopes on winning business through a complete referral generation program, keep in mind that in addition to all the benefits that come with referrals, a 100% referrals The business based on has some disadvantages. Proceed with the awareness of these iron truths:

o Truth #1: Especially for newer agents, over-reliance on referrals results in slow growth simply because early in an agent’s career there isn’t a large enough database of existing customers and contacts to which to turn.

o Truth #2: Relying completely on referrals for client development is a limited, exclusive, and unbalanced approach. For one, if incoming referrals drop, you won’t have other prospecting systems to get your business out of trouble. What’s more, when referrals come in, most will be potential buyers rather than potential sellers. What referral gurus never say is that their approach develops buyers’ agents, when sellers’ agents experience the most success and build the strongest real estate sales businesses over the long term.

Building a referral-based clientele

A referral-based business is a business that generates the majority of its leads as a result of leads provided by friends, family, clients, colleagues, and other associates. Sounds great, right? It’s great if, and here’s a big if, you have a large sphere of influence and enough patience to wait for a time span of at least 90 days, and most times longer, between the time you start cultivating referrals and when referrals start generating income for your business.

Building a clientele based on referrals is a long-term strategy rather than a quick-fix tactic. If you’re looking for short-term results (and what newer agent isn’t?), you’re better off developing clients through a traditional lead development program that involves prospecting, FSBO and expired listing conversion, and door days. open.

Relying exclusively on referrals, especially when you’re a new agent with little capital, is a quick form of business suicide that will get you out of the real estate industry within a year, guaranteed. Instead, consider referrals a second-stage strategy, one that follows your initial round of business development and contributes to the long-term growth and health of your business.

What is a referral?

In essence, a referral is a recommendation.

In its best form, a referral is a high-quality lead and high-probability prospect introduced to you by someone who is highly valued by both you and the prospect.

Referrals can come from family, friends, business associates, social and business contacts, or current and past clients.

referral sources

Most referrals come from current clients, past clients, people you’ve met through networking situations, and people you meet through social or business relationships. The next few sections provide information for working with each group of potential referral contacts.

Current customers

Current clients are people you are actively representing, right now, in real estate transactions. Current clients are a rich group of referral opportunities primarily because, more than any other group, they have real estate on their minds. They are in the middle of agreements that they constantly talk about with their friends, associates, family and neighbors. Their conversations revolve around your real estate wants and needs, your moving plans, real estate trends, and market activity.

If you don’t ask your current customers to refer you to their friends or refer their friends to follow up, you’re really missing out on a great opportunity to reach potential leads. You can bet your name pops up in your customers’ conversations, even if it’s just to say they have an appointment or are waiting for information from you. Putting some nice words in their name would be a natural and easy thing for them to do. You just have to ask. He talks to his clients regularly to let them know about their home sale, home search, the progress of their transaction, or progress toward closing. During the course of those conversations, ask for references.

previous clients

These are the people you have helped through real estate transactions in the past. They know first-hand the quality of service you provide. You need to tell them that you would like to provide the same level of great service to your friends and family by asking for their referrals.

The clients you recently served provide the most fertile opportunity, both because their experiences are fresh in their minds and because they are still talking about their recent move to everyone they know in the world.

networks

In sales, networking is a buzzword for building business contacts in referral alliances.

The goal of networking is to meet success-oriented people with whom you can exchange referrals, tips, advice, contacts, and even wisdom. Ideally, networking results in professional relationships with others who are committed to not only your success, but your success as well.

The truth is, most marketers talk more about networking than they actually do. They attend a Chamber of Commerce or Rotary Club meeting, have a nice lunch, visit with some friends, and spend time “networking” even though no new alliances were formed, existing alliances were not deepened, and no referral resources provided. generated. In other words, no networking took place.

To make networking work for you, follow these tips:

o Network with the right mindset. When networking, set your mind to developing prospect recommendations, not just prospect names.

Many referral alliances are established for the sole purpose of generating leads. Attendees learn the names of new businesses, new managers, newly arrived residents, or others who are potential future contacts. Now a referral alliance lead is better than no leads at all, but it’s a long shout out of a lead’s name provided by a networking partner who shares extensive experience and then offers to say a few good words on your behalf. Name.

o Acquire warm references. A warm referral begins when a networking partner contacts a person who is in the market for your services on your behalf. Warm referrals involve calls or correspondence that convey your qualifications, the quality of your service, and the reasons why prospects should at least interview you for the opportunity to represent their interests in real estate transactions.

When establishing networking relationships or referral alliances, work to get mutual agreement so that those in the network engage in the practice of exchanging warm leads.

Business and social contacts

Many people you meet socially or through business will never become customers. They may have previously established agent relationships or may not be in the market for a real estate transaction. However, they are important to your business because they are in a position to give and receive referrals.

Notice the words “give and take” in the award above. The law of reciprocity is alive and well in 21st century business circles. It’s the old “I’ll scratch your back if you scratch mine” principle.

In his book The Seven Habits of Highly Effective People, Stephen Covey discusses emotional bank accounts that successful people must make deposits into before withdrawing money. Apply that wisdom as you build your referral network. Start by sharing business references, advice, help, and wisdom with others, and before long, the recipients of your kindness will be rewarding you with similar efforts. By helping your friends, family and associates build their businesses, they will eventually help you build yours.

When dealing with your referral sources, make it your goal to deliver service and value above expectations and keep your accounts with others in the black, rather than the red.