Monday, September 9, 2013

How To Get Referrals


My friend, Brian, was born into real estate. His father created a very large, and successful, Prudential operation which included mortgage, title, etc. So naturally, when Brian graduated from Villanova University, he joined his family's business. Before long he was making a great income. Being such a young man, he really thought he had the world in the palm of his hand. But something kept gnawing at him. Brian watched as both his father and brother had stress-induced heart attacks. He wondered if his fate was to be he same as theirs.

Like a lot of people in real estate, Brian thought he had freedom. And, in a way, he did. Among many other benefits, he didn't have to punch a clock or sit in a cubicle. But what really bothered him was that he was always working. And if he stopped working his income would stop too. It didn't take long for the reality to sink in; he was a slave to his clients. He calls the life of a real estate professional a treadmill, repeatedly doing the same things with no end in sight. Brian says the pattern he has observed, over-and-over, is that the treadmill eventually wears out even the most ambitious of people.

Not wanting to destroy his health, from the stress of the treadmill, Brian's mind was open to alternatives. Several years back Brian started working with my company because we have a phenomenal product. Better yet, we pay our people on a recurring revenue model. That is to say, the income is completely passive when you do it right. So, Brian went to work. By his second year he was making some very significant income. Indeed, he was making enough money to walk away from the family business. To date Brian has made many millions of dollars. But the best part is, unlike real estate, the money keeps rolling in, whether he works or not.

Stress is no longer a part of his life and his health has been preserved. Brian also happens to be a single father and he just loves that he's now able to attend all of his son's functions. So, if you know of any sharp and fun real estate professionals, who might be ready to get off the treadmill, and get on with a life, please have them contact me. I can show them how to earn more and work less. My number is (949)630-2797.

Would like to work strictly off referral? I think most salespeople would. The good news is it can happen. But it takes a while. In fact, some people are so committed to working only referrals that their income suffers tremendously. Here's a startling fact, research has suggested that asking for referrals just doesn't work. It's one of the ironies of life, we get the most referrals when we don't ask for them. So what can you do?

Well, let me tell you a story about a man named Bill Good. Good was managing his sales crew when, one July, he decided to take an audit of their performance. He found that 30-40% of all the company's business was coming from referrals. Naturally, he figured the obvious goal must be to get more referrals! So he came up with, “Ten Referral Questions,” to teach his salespeople to get more referrals, and hopefully save money on his direct mail expenses. The result? Sales began to fall in August and continued to plummet into September. It was then that he became probably the first sales manager in history to tell his guys, “Quit asking for referrals.”

What had happened? Well, in the couple months that Good had his team asking for referrals they had generated 503 referrals in total. He searched and discovered that those 503 referrals turned into a grand total of three sales. That's a closing ratio of 0.5%. Meanwhile, they were closing about one out of eight direct mail leads or about 12.5%. In essence, a referred named was no more likely to close than a cold name. Asking for referrals was killing his business!

One of the keys to understanding this situation is to understand the nature of those referrals. The 30-40% of his business that was from referral came from unsolicited referrals. He discovered that when people use, “Who do you know?” type questions the names they get are no better than a cold name. In other words, a solicited referral is about as valuable as any random name.

Good says that your clients want to help but just don’t know anybody at the moment who needs your service. And the clients don't want to turn a salesperson loose on friends or associates who do not need your service.

So, what's the solution? Maybe we could promote referrals not solicit them. Good references research released by Julie Littlechild, the president of Advisor Impact. Ms. Littlechild's team asked clients about the last time they had given a referral and only 2% said it was because the salesperson asked for it.

When asked why they refer 58% referred for reciprocity, 38% to help a friend, and 4% for another reason. This means that the client likes referring people to you as a thank you but don't do it when you ask (you put them on the spot). Now, have we gotten any closer to a solution?

Good used to say, in his books, that we should promote referrals. But he has changed that, a little, in recent times to; induce referrals. What does that mean? Bill says to, “Continually educate clients to recognize referral opportunities and gently and persistently remind them their referrals are valued and accepted.”

What both Good and Littlechild are saying is the best way to get referrals is to tell benefit-laden stories about your service that will ring a bell when the time is right. In order to do this, of course, you will need to know what you're looking for. If you haven't already, please take the time to clarify who your target market is. It will make this process (and sales in general) a hell of a lot easier.

So let me give you an example. Let's say you recently helped a growing family find a bigger home. Tell the story of that experience, to your clients, and ask that if they ever know of any families that are growing to please let you know. Of course, you can't just tell them once, repetition is important. It is suggested that you try to tell a referral-seeking story every time you interact with the client. The story, and the benefits it contains, can vary widely. But the idea is that the story will stick, a lot better, with your clients than to simply say, “If you know anyone who needs a realtor, let me know.” Or the dreaded, "I appreciate your referrals." Yikes!