Why You Should Be Building a Referral Network With Purpose

Why You Should Be Building a Referral Network With Purpose

Friends, friends of friends, 12 mutual friends. This terminology is apparent for a social networking site. You grow your network of friends by connecting with like-minded people on such sites. A business referral network, in essence, is the same, but by connecting with industry professionals, you improve the chances of furthering your skills, widening your network of vendors, suppliers, and investors, and growing your business.

When you launch your business, your first few connections are your friends, family members, neighbors, and acquaintances. With your investment in marketing, you start getting customers, and your business gets increased exposure due to word of mouth. Clients who are happy with your services might recommend you to their circle. This is also called a referral, and it gets you new clients and more business. The stronger your connection is with your clients, the stronger your network will be and the more clients you'll be able to get.

The type of referrals explained above is just one kind. You cannot control these random referrals, and their impact on your business is not as strong as a formal referral network. Below, we will explain in detail how a purpose-built referral network can be advantageous for you and how to build one. 

Why Are You Networking?

Before you set out to grow a referral network of your own, you must define your goals and acknowledge in advance what you're aiming to get out of this networking. Everyone has their preferences, but the most common reasons for networking are to learn new or improve (a) skill(s), meet new people, develop professional relationships, and find working leads for business development. You must keep a check and revisit your goals at every stage of your business and see how far you are from achieving them.

What Is a Referral Network?

A referral network is a collection or group of individuals or organizations that generate referrals within a specific industry. They have connections with multiple businesses and help each other by giving them a shout out whenever they are asked for a reference.

To understand it better, a real estate agent can have a referral network consisting of interior designers, plumbers, carpenters, mortgage brokers, packers and movers, and more. They can refer each other whenever their client expresses interest in using their service. 

After purchasing their house from a real estate agent, a customer may express their worry about finding a reliable moving company. They can refer the movers from their network and create a referral for them. 

The same moving company can refer the carpenters in their network should their client be concerned about the woodwork at their new place. Customers do inquire about different services from their service provider. Having the answers to their questions and guiding them in the right direction adds value to your own business and creates a referral network for multiple businesses.

The beauty of a referral network is that you might end up signing a project with a much larger business than yourself and make new contacts/referrals. Large companies or businesses have a set criterion for accepting business proposals, but they may sometimes sign contracts with potential customers and refer them to smaller businesses. This ensures that their customers stay satisfied, business is generated, you make new contacts, and you earn well. Win-win for everyone involved!

The beauty of this all is – you don't even have to do most of the grunt work. The customers who trust you and partners from your referral network do that for you.

Why are Referral Networks Important?

Cultivating personal connections has always been important, but nowadays, the competitive nature of today's business has made this even more necessary. Referrals in the form of personal references are an asset that, if leveraged, can boost your business. 

The reason businesses thrive by investing in referral networks is because the network consists of professionals and businesses that belong to the same industry but do not compete with each other for business generation. 

A plumber doesn't need to worry about a carpenter stealing his business and vice versa. Instead, they add additional value to their business by being knowledgeable about other service providers and helping their clients by providing applicable referrals.

Businesses with big and small but purpose-driven referral networks understand the key point that their targeted customers are the same. This helps drive the competition away and gives way to strategic partnerships.

Who Should Use/Build a Referral Network?

If referrals come in handy for your business, having a referral network could be a game-changer for you. Service providers especially thrive with having a referral network of their own because personal recommendations go a long way in this field. 

The complementary professionals of the same industry band together to form a referral network and refer one another's service through word of mouth, by handing over a calling card or sharing social media links while generating a referral.

Despite offering different products or services, every business with a commonly targeted audience can benefit from this mode. A cook or chef may recommend a pots and pans dealer, and a painter may refer a store or business that deals with paints and canvases. 

Recommending someone doesn't lessen your value; rather, it becomes a source of added value for your clients and generates additional referrals, forming a mutually beneficial relationship for all parties involved.

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