Every business needs new customers. One of the best ways of getting these customers is through advertising.
However, that is not the only way to reach new customers, as businesses can also use referrals. These are people or businesses that direct potential customers to other businesses, and these businesses then pay a fixed amount or a percentage of the amount the new customers spend. If you find yourself in a unique position where people ask you for recommendations on where they can find certain goods and services or for referrals, you have the stepping stones to build a successful referral business.
Planning the Business Model
There are so many different models you can come up with as you plan your business, but the general idea is to decide whether you will specialise in one or several areas. Specialising in one area is the better option for people who are just starting out as this gives you the chance to learn the business. It also gives you time to learn what different customers need and the businesses you can refer different customers to. Specialising in several areas should be left to people who have been referring people to businesses for some time but would like to expand their portfolio.
When deciding what niches to focus on, start by thinking about your strengths and what areas you are most interested and knowledgeable in. Interest in the niches you choose will ensure the business never gets boring. In addition, you might already understand what people need in the niches you choose to focus on if you already have the same interest in those niches. For example, if you have been in the construction business for some time, you might know what your clients need when you talk to them even if they do not put what they want succinctly.
Services Are More Lucrative Than Products
Your referral business should ideally focus more on services and less on goods. The overwhelming majority of people buy recurring services. For example, people have recurring telephone and internet plans, and if you decide to get into this niche, you can expect monthly payments as your referrals pay their bills. Goods, on the other hand, are usually a one-time purchase which means you will be paid once when they buy the products and then wait for a long time before they purchase that product again.
Once you find a customer who needs a service, they are likely to become a lifetime customer. How many times have you changed your network provider in the last few years? You probably never have and your customers are unlikely to move away from the services you refer them to unless something drastic happens. As for products, people change their preferences all the time, which means you cannot rely on them to become loyal customers to the businesses you refer them to, which lowers your earning potential.
Screen the Business You Refer People To
Screening the business that you refer people to is very important; you want to know as much as you can about them so that you have a better understanding of the businesses you are referring people to. When doing this, it is important to search for them online to see what people are saying about their goods and services. Ideally, the businesses you refer should have:
- High-quality products
- Reliable services
- Good customer care and support
If they check all the above boxes and fulfil any other criteria you might have, you will be confident that you are referring people to businesses they can trust and rely on. A good rule to follow is that if you cannot use a business’s goods or services, they are probably not a good business to refer to others.
Establishing a Market
Your customers will be made up of the businesses you refer people to as well as the people that need these referrals. What this means is that you need to do your outreach and marketing in two ways. First, you need to find businesses you can refer people to. You can reach out to these businesses to ask them if they would like to be included in your service. Ensure that you have a list of benefits handy so they can see why they should consider agreeing to be added to your list.
Second, you need to find customers you can refer to these businesses. One of the best ways to do this is to use online services. There are lots of websites where you can find people who are looking for different products or services. Most of these websites have categories that catalogue and list specific services or products that people need.
Also, ensure that you place your ads on relevant pages. For example, if you are referring baby-sitting services, post them where new parents are likely to see your ads for maximum impact. You can also place ads in local papers, post flyers, or use targeted social media marketing to reach potential customers.
Going Online
The best thing about starting a referral business is that you can establish your business online and never have to deal with businesses directly. A lot of businesses have referral options for those interested in sending them customers. As with physical businesses, you get a cut of whatever your referees spend, depending on the agreement you have with the online businesses.
If you want, you can complement your physical business with online services, which will help you earn extra cash from home. For example, Lebara is a value led, budget friendly, mobile services brand which offers SIM Only plans for customers who are looking for flexibility and do not want to get into longer contracts. Lebara has launched a competitive referral program which offers uncapped opportunity to earn extra cash from the comfort of your own home . It’s a simple sign up process which often takes less than 60 secs to complete, payments are made directly into your UK bank or Paypal account – and you can keep track of earnings directly from the online dashboard. Programmes like these can be a great complement or additional income avenue for your business.
Equipment
To get your business going, you need equipment that will allow you to reach the business you are referring as well as potential customers. At a bare minimum, you need a phone, a computer and a stable internet connection. You might also need a wireless headset, which will allow you to take mobile and VOIP calls on the go. Get a comfortable headset because you might be on call for long periods of time and such a headset will keep your ears from getting sore.
You also need a database software that will help you keep track of all the people in your business list. There are lots of software options that help you manage your customers and clients easily, and these might help you streamline your business procedures in addition to saving you money and time.
If you cannot afford a computer when your business is at its infancy, you can get by with handwritten lists. Just ensure you have a file management system that helps keep everything organised. Once you are able to purchase a computer and all other electronics you need, you can switch to a cloud-based management system and think about getting a good website.
The website can be used to complement your social media marketing campaigns should you have enough people at hand to help you with these campaigns.
Starting a referral business is an avenue you can explore as the entry requirements are very low. You might need to be knowledgeable in the niches you decide to focus on and have the right equipment, but once you do, this can become another lucrative revenue stream for you.
