Want more, higher quality customers with a lot less effort than it takes to do cold outbound sales or inbound marketing? Use this simple referral sales system to grow your business starting today.
Every week, I talk to startups who want to get more leads and are considering starting or expanding existing outbound sales efforts.
"How can we get more leads? Are we ready for outbound sales yet? How can we improve our cold calls?
Have you ever thought about your existing customers as a great source for new leads? Yes, I'm talking about referrals from happy customers :) It sounds so simple, yet nobody cares to actually do it right.
Referral sales can be your #1 source of new hot leads and turn into a massive growth engine for your B2B startup if you do it right. The funny thing is most startup don't do referral sales. And those that try, do a half-assed job at it.
What does referral sales really mean?
Referral sales means closing your new and current customers on the concept of introducing you to other companies that are likely to need the solution you've built.
Why are referral leads better?
No outbound lead you could ever generate in any other form will ever have the same quality as referral leads. There are two levels of quality:
- Your best customers will most likely know others who run very similar businesses, which means they are highly qualified leads for your company.
- You are being introduced to them via a friend and have the benefit of trust right at the start of the relationship.
Are referral leads still considered outbound leads?
Yes, they are. They were introduced to you, which is the warmest form of outbound sales you could ever do.
However, it's still reaching out to someone who didn't come to you in the first place. If you're thinking of doing outbound sales, you might as well start at the warmest point possible.
Why are so many salespeople doing referral sales wrong?
Because they’re afraid. It’s scary to ask for more once you close a deal. Salespeople worry that they might jeopardize a deal, or that it’ll turn a positive conversation awkward.
Go where others are afraid to go and you'll find massive opportunity. Don’t let fear get in the way of winning.
When is the best time to ask for a referral?
Right after somebody made a purchase.
I know that people like to wait until customers have been around for months. That's fine, but it's also a waste of time.
Once someone decides to buy, they are likely to be convinced enough to tell others about it. You should take advantage of this moment to grow your business faster.
The way most salespeople try referrals
They ask for a referral, the client says, “Yeah, let me think about it and get back to you later.” The salesperson replies, “Okay, thanks!” rather than pushing a bit further.
The right way to do referral sales
- Ask for a referral.
- Anticipate the no (or “I’ll think about it.”). Ask one more time right, then and there.
- Make sure to give them an email template and make it easy and frictionless to actually make the introduction.
- After you've closed a referral, make sure that your new customer thanks the person who introduced you, so you're closing the feedback loop in a positive way (inspiring more referrals from the original referrer).
Referral sales script
You: “Are you happy that you chose our product?”
You: “Great. Who else do you know who could benefit from a solution like ours?”
Customer: “Hmm ... I’m going to think about this later and get back to you.”
You: “I appreciate that, and I’m sure that over the months and years as you benefit more and more, we’re going to get lots of referrals from you, which is going to be awesome. Today, let’s take a minute right now and think about just one friend who is in a similar position and would really benefit from this.”
Some will tell you “no” in a slightly more annoyed way. That's ok. Just tell them “Okay, I respect that, I will follow up in an email, I really appreciate that you are offering your help.” And just leave it at that.
Some will give you one or more names just because you pushed one more time (my experience has been that 40% of people will give you referrals after the second ask).
Write those names down and tell them: “Great, thank you. I want to make it as easy as possible for you to make that introduction. So you’ll get an intro email from me. Just copy and paste it, and send it to Bob and Steve. Feel free to make edits or write something yourself, if you like. Let's make this happen today!”
Referral intro email template
Hey [first name],
I wanted to connect you with Steli, their company does XYZ. I think this can be really interesting for you, and a contact would be mutually beneficial.
I’ll let you guys take it from here,
After you close a referral
When you sign somebody up who was referred to you, ask them: “Who is actually responsible for you getting all these benefits from becoming a customer of our product?”
Many times, you will get a response like: “Uhm … who? You mean ... you?” And then you say: “No, the person who introduced us in the first place …”
“Oh, yeah, Bob!” “Do you mind doing me a favor and sending Bob a quick thank you email that he made a connection between us, so he knows that you appreciate it?”
The moment they send Bob the thank you email, you're closing the feedback loop, which will likely inspire Bob to make more referrals. The first thing Bob thinks when he gets that email is: “Hmm, who else do I know that I could introduce this to?”
Everybody wants to make successful connections and help others discover something they are grateful for. If you treat referral sales as a separate product that gets the same, if not more, attention from your sales team, you'll see an ever growing amount of new hot outbound leads.
Make referrals part of every deal
Once you've seen success with referral sales, you should make it part of the experience of buying your product and service upfront.
After you had the initial meetings and everything looks like the prospect is going to buy, try saying this:
You: “It seems like we're a great fit. I'm excited. Before we go any further exploring a potential deal, I want to bring up that we're fully focused on building world class technology and on servicing and supporting our customers to massive success. What that means is that we're not investing in marketing and sales as heavily because our happy customers are referring us to others who could benefit from our product. Does that sound like a fair arrangement to you?”
Prospect: “Yes, that sounds fair.”
(I've never heard someone say "No, I want you to spend less time on product and service and do more marketing and sales so I don't have to refer you to anyone.")
Referral sales: The warm outbound lead generation growth engine
I've taught this system to hundreds of SaaS startup founders and many have implemented it to great success. But I have to warn you—it takes conviction to keep asking for referrals even if people say no at first.
It takes patience to ask again after someone fully rejects it. Just like anything in sales, you need the emotional stability to go on as you face failure in the early days.
If you can do that, you'll start a growth engine for your company that's going to support scaling sales for many years to come!
Update: What about referral incentives?
Someone on HackerNews asked the great question "What about referral incentives?"
I've found that in B2B, you don't want to "pay" for referrals and that people are more likely to make them when they feel like they are providing value to their network without any selfish incentives.
Once in a while, someone will ask for it and it's up to you to decide if you want to give people a discount or something else for helping you close new business. I personally think that's reasonable when asked but wouldn't offer it upfront.