John W. Howard, Ph.D. - Editor

BUILDING A REFERRAL-BASED BUSINESS-OPINION

Take a good look at your client list. Arrange the names in order of their importance to your success and write down where their relationships with you began.

It's likely to become apparent very quickly that your best clients probably originated with a referral. (If you find few referrals at the top of your list, you may have even more to gain by reading further- you're missing valuable opportunities!)

Now, consider your efforts to acquire new business: Where do you devote your efforts? Where do you spend money? It's widely accepted that referral-based business is the easiest to acquire, is likely to remain loyal and is most likely to notify you of and allow you to fix a problem when one arises.

Over the long term, it is the segment of your business likely to be the most profitable!

These facts are hardly secret. Why, then, do most businesses fail to maximize their referral opportunities? They simply do not have a structured, organized way to gather and capitalize on referrals!

Look at any business magazine. You will see products for sale that are designed to help you acquire new business--- marketing tools, advertising design services, mailing lists and mailing services. Add to the list Internet marketing ideas, contact management software, training in sales techniques and workshops on prospecting methods. Where in all this are the referral management tools?

Joe Stumpf, the real estate world's guru of referrals, has built an empire on the base of teaching people to build referral-based businesses. (You can find him on the web.) He has even trademarked his mantra, "By Referral Only™," and sells products promoting his approach.

His three-day workshops have been credited with thousands of real estate success stories, but you don't have to be in real estate or spend a dime on training to let the power of referrals help build your business. A few basic diligently applied practices can make a big difference.

To increase referrals and your new business, follow these five simple steps:

Take Time To Explain.
Somewhere in the process of introducing our business to someone new, we tell them we base our business on referrals and explain why. The key point, and the reason they will eventually feel they owe us referrals, is this: Other people who do what we do spend more than half their time looking for new business, and the remainder servicing their existing clients. With our approach, we can spend 90 percent of our time giving clients exceptional service as they provide referrals for our new business.

Ask For Referrals.
This simple, no-cost act is the foundation of successfully building a referral business. Why don't we ask? Usually it's because we don't know how or because we are afraid of imposing. They might say no! Asking is simple, and done properly will almost always yield one or more referrals. Reduce the task to a non-threat level by simplifying your request: "Jim, who else do you know that we should be talking with?" As the conversation develops, explain
your approach.

Say, "I'm not asking you to call them and tell them we walk on water. I'd rather just call them myself and be able to say that Jim suggested I call because he thought you'd be interested in what we do."

When you call, say exactly those words. There's no threat to Jim or his relationship, but you'll be talking to someone who's listening. This is the first step to a new business relationship.

Ask Everyone.
One of our best clients came from a referral gained as we were essentially being "thrown out" of another prospect's office! When the prospect made it clear our services were not something of interest to him, our representative asked on the way to the door, "Well, then, who do you know that should be talking to us?" Ask your clients and suppliers, your prospects, your relatives and friends and people you meet at networking events. Ask the people who tell you no. You have much to gain and little to lose.

Ask Repeatedly.
In the six face-to-face meetings leading to a new client relationship, I asked for referrals each time without success. It actually became a standing joke, since we both knew that eventually I would ask. On the seventh meeting, I walked into the office, and he handed me a neatly handwritten list with seven names and contact numbers. He said, "Here are the referrals I owe you!" He had a smile on his face and I did, too!

Give Referrals.
In the preceding story, I presented the prospect with at least one referral for his business at each meeting. By the seventh meeting, it would have been difficult for him to avoid reciprocating. It's not that hard to provide others with referrals, and you owe it to them, as they owe it to you.

And Those Are Five Simple Steps That Can Dramatically Improve Your Business!

OPPORTUNITIES FOR REDUCING HIRE FAILURE -APPLYING ASSESSMENT SELECTION CRITERION

A relatively large medical practice has used the StepOne Survey II™ in its selection process for nearly two years. Recently, the practice shifted its attention to what was perceived as an unacceptable level of early hire failures (27 percent of new hires failing in 180 days or less. )

The company enjoys "preferred employer" status in its market and has continued to have a high number of applicants, even as unemployment has declined.

Historically, the practice has used the results of the assessment to influence the hiring decision.

(Average scale scores are appreciably different between the groups of applicants who were hired and those who were not hired.)

It is also clear they have not applied consistent criteria to the scale scores by eliminating applicants below criteria levels. (Several hired applicants had one or more very low scale scores on the assessment.)

The data was analyzed for the possible effects of applying different criterion levels to the scores. Criterion 1 was calculated as if no applicants had been hired with any scale score of 3 or less. Criterion 2 was calculated as if no applicants had been hired with any scale score of 4 or less. As the graph shows, applying either criterion would result in a dramatic decrease in the rate of early hire failures. Criterion 1 would reduce the rate from 27 percent to 21 percent, while only reducing the percentage of hires working beyond 180 days by 5 percent and the applicant pool by a mere 1 percent.

Criterion 2 would further reduce the failures to 17 percent but would reduce the percentage of hires working beyond 180 days by 27 percent, a level that may be unacceptably high. The statistics provide a job-related basis for adopting Criterion 1 and should be more defensible than the current, less-structured approach.

To further reduce the percentage of early failures and provide the increased productivity effects usually associated with improved job fit, the company may well benefit from adopting a job fit assessment for finalists for these positions.