Referral Partners Are Not All Created Equal
Posted on October 24th, 2023 to Uncategorized
Are referral partners your golden ticket to growth and passive income?
Many business owners invest significant time and energy in crafting referral agreements, hoping that the promise of a 10% referral fee will entice their partners into sending a flood of qualified referrals their way.
The problem? It’s not usually that easy.
In my years of working with clients, I’ve seen a pattern emerge that sheds light on what separates successful referral partnerships from those that fall short.
In this post, I’ll share some best practices, dissenting opinions, and other insights from my discussion with Erin Bradford about referral partnerships.
Erin is a Brand Messaging and Business Strategist who helps experienced business owners attract the right clients and grow their businesses by clearing out the noise in their message and marketing. (She also happens to be the strategist who supported me with my latest rebrand — check her out here.)
We got together to compare notes about the experiences the founders and business owners we work with have with their referral partners. (Confidentiality protected, of course.)
Prefer to watch us in action? Click play below!
First, we’ll explore what happens when you don’t choose wisely.
Referral Partnerships Gone Wrong
One common pitfall many businesses fall into is thinking that a well-drafted contract with a promised 10% referral fee is all they need for a flood of referrals. However, this approach often results in disappointment on several fronts:
One-way streets: Clients often find themselves in situations where they’re diligently sending referrals to their partners, but they don’t receive much in return. This lack of reciprocity feels far from equitable.
Unqualified leads: Even when leads do come in, they tend to be unqualified. This means longer sales cycles, especially when trying to sell higher-value offers.
Missed opportunities: Relying solely on a 10% fee can leave you with nothing when there are alternative ways to benefit. More on that shortly.
Messaging misalignment: Erin has observed that many referrals don’t convert because of messaging, copy, or marketing issues on either partner’s side. One partner might successfully drive their contact (a potential lead) to their site, but consistent marketing across channels can lead to missed opportunities.
Ineffective articulation of value: Referrers often struggle to convey their partner’s work and value proposition effectively. Ideally, they should be as skilled as, if not better than, you at sharing your information.
These are the common stumbling blocks Erin and I encounter when discussing referral partnerships with our clients.
Alternatively, we can see patterns emerging when we look at referral partners who intentionally and strategically enter into referral partnerships – and find success.
In the next section, we’ll look at how to qualify referral partners and how choosing the right ones will yield the best results.
Choosing the Right Referral Partners
If you’re a solopreneur or founder with a lean team, time is your biggest commodity.
That’s why it’s so important to focus on the quality of your partnerships.
In this section, we’ll explore how to qualify your partners so you can build a mutually beneficial relationship.
Best Practice #1: Work With Your ICA in a Complementary Capacity
Firstly, the partners you choose should work with your ideal clients and offer services that complement yours.
It doesn’t make sense to work with partners who provide the same service as yours or a service that isn’t a potential need of your partner’s audience.
Let me illustrate this with an example from my own business: Fractional CFOs.
They have a bird’s-eye view of a company’s financial health and help founders set financial plans.
Yet, if a founder can’t execute a sales strategy to meet their goals, the founder and the Fractional CFO could be out of a job.
Therefore, it’s in their best interest to make introductions to partners like me because the referral fee is just a small part of their motivation. It’s a mutually beneficial relationship.
Another prime example is the synergy between Realtors and Mortgage Brokers.
Smart real estate agents focus on building strong relationships with mortgage brokers because getting pre-approved for a mortgage is the first step in buying a home.
They can send many referrals to real estate agents, and mortgage brokers are motivated to match their customers with excellent real estate agents because they earn their income by originating mortgages. It’s a win-win partnership.
Best Practice #2: Quantity over Quality
When choosing a referral partner, going all-in on quantity is tempting.
Who wouldn’t want a ton of referrals flooding in?
But here’s the deal: You may get loads of referrals, but if they’re not the right fit for your business, you’ll find yourself dealing with prospects who aren’t a good match, and those longer sales cycles can be a real energy drain.
Instead, it’s wiser to find a balance. Look for partners who get your target audience, have services that complement yours, and genuinely want to see you succeed.
These partners may send fewer referrals your way, but these referrals are gold.
They’re more likely to convert, and they’re the ones that can drive real, sustainable growth for your business.
So, while it’s tempting to chase numbers, remember that quality referrals often trump quantity when building solid and lasting partnerships.
Best Practice #3: Beyond the 10% Fee – Build Stronger Relationships
As I mentioned above, Erin and I see clients make another mistake — they think of a partner only in terms of exchanging the industry standard 10% fee.
While there’s no problem with sharing a kickback when someone sends a referral, relying solely on contractual agreements doesn’t usually motivate partners to refer you proactively.
What truly drives success are partnerships that go beyond monetary transactions.
Thought leadership collaborations play a pivotal role in this and can be accomplished by borrowing each other’s audiences.
Here are a few proven ideas:
- Consider sharing the stage at a conference or event.
- Volunteer to guest blog on each other’s websites.
- Invite your partner to teach a session, provide a bonus for a course or program or be a guest expert inside a community. (Or, spontaneously record a Zoom catch-up session to share, as Erin and I did!)
These activities provide valuable content for both partners to share with their audiences.
Moreover, they introduce you powerfully to your partner’s contacts, reaching a wider audience than you could through individual introductions.
Your Referral Partner: A Strategic Choice
In conclusion, building successful referral partnerships goes beyond contracts and referral fees.
It’s about finding partners who align with your ideal clients, offer complementary services, and have a vested interest in your success.
By creating relationships built on mutual trust and value, engaging in thought leadership collaborations, and ensuring partners can articulate your value, you’ll unlock the true potential of referral partnerships in your business.
Building partnerships – including fruitful referral partners – is one way I help my founders, consultants and subject-matter experts.
Click here to learn how to work with me to attract even more exciting clients, pitch bigger deals, and close even more business.