Giving Referrals: Fire and Forget?

We all appreciate getting referrals. There is a feeling of gratification in knowing that someone thinks enough of your work to send a friend or associate your way. Referrals are usually the life’s blood of most small businesses. When I interview prospective owner clients, one of my standard questions is “How do you get new business?” The answer is almost always “By word of mouth.”

NetworkingSome people hand out referrals like candy. They are the super-networkers, the folks that attend tons of business events. Mixers, luncheons, and seminars attract them like moths to a light. They swap business cards like baseball cards; it sometimes seems that their ambition is to collect the whole set – one of every business in town. They can provide a source for almost any product or service.

This leads to an issue. If you ask someone for a referral, is he or she responding in an attempt to fill your need with the best recommendation possible, or is the motive to curry favor with the business who is on the receiving end of the recommendation?

If it’s the former, you can move forward with some level of confidence that the prospective vendor has been at least minimally vetted. Of course, the assumption that the referrer is trying to help you isn’t a guaranty that the transaction will be successful. Everyone has problems from time to time. But it should be an implied promise that the reason behind the referral is based on experience, or at least on hearing about another’s experience.

If the response is based solely on a chance meeting, and is only intended to curry favor with the business receiving the recommendation, then it is a “fire and forget” referral. The person making the recommendation is not concerned that it will circle back negatively. He is  just throwing bread on the water, hoping something will eventually rise up to benefit him.

The difference is critical. Embarking on a business transaction under the belief that the other party has been pre-qualified in some way, when the reality is that it is merely “caveat emptor,” is foolhardy.

There’s a simple solution, but it’s one that is too seldom used. Ask the person making the referral “Why?” It isn’t hard or insulting. “Gee, thanks. Why do you recommend him?” is a logical and inoffensive follow-on to the original request. It’s not problematic if the answer implies a casual or social relationship; it just lets you proceed with the appropriate caution.

As a trusted advisor to hundreds of business owners, I assiduously avoid making referrals that can reflect on me unfavorably. I feel that I’m being asked to refer people based on my knowledge of what makes a good vendor. Even for the most casual referrals I’ll ask a few exploratory questions. “What is most important to you?” (e.g. price, high quality or responsiveness). “Who have you used before? What type of issues have you had?”

Sometimes the answers tell me that the person making the request isn’t a good prospective customer. Let’s say they are asking for a new IT provider. A follow on question reveals that their current provider was satisfactory until he raised his on-site rate to $100 an hour. If all the IT providers I know charge between $140 and $170 an hour, I won’t make any referral. Neither the prospective customer nor the prospective vendor would be happy with the result.

If you make a referral, you should be willing to put your name on it. I always email both parties with each other’s information. If I’ve gone through the trouble to qualify a good referral, I want everyone to remember where it came from.

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