Make This Your Best Referral Season Ever

Every year, I write one particular article that stands out above the rest. This year, this is that article. I’m going to walk you through a simple three-step system for generating referrals. Then I’m going to ask you to put it to work towards the planning-season challenge I outlined in the last two weeks.

Most of us would say that referrals are our single most important source of new clients. But most of us are doing very little to ask for them. Regular, ongoing communications, like the TaxCoach Wire Service, are a great start. Fun, engaging client events are another great tool. But very few of us are comfortable sitting down with clients and other centers of influence, one-on-one, and just asking for them.

Every time you speak with a client is a potential opportunity to ask for referrals. But how exactly do you go about doing it? Let’s say you’re going to meet with a client next week.  What do you say and when do you say it for maximum effect? Don’t just “wing it.” Follow these three steps and watch your success soar:

1. Give them a reason to refer you.

This is the most important step. It has to do with a little secret surrounding the basic psychology of referrals. And it’s not just hype to say that this may be the most important thing I’ve ever written here for TaxCoach.

Why do people make referrals in the first place? It’s not out of yourinterest. The dirty little secret is that people make referrals to make themselves look good.

That’s so important that I’m going to repeat myself. People make referrals to make themselves look good.

Now, when it comes to financial services, people can refer “down,” to others with less income or wealth. They can refer “sideways” to others with equal income or wealth. Or (and these are usually our favorites), they can refer “up,” to others even higher on the financial food chain. Check out the hidden motivation in each scenario:

  • Referring down: “Go talk with my tax pro, and you’ll see why I’m more successful than you, but I’m happy to ‘mentor’ you and generously share my own success.”
  • Referring sideways: “Go talk with my tax pro, and you’ll see that while our income or net worth may be equal, I really have a ‘slight edge’ over you.”
  • Referring up: “Go talk with my tax pro, and you’ll see that while my income or net worth may not be as high as yours, in this way I’m actually just as smart as you, and I found something pretty valuable that you didn’t already know.”

Now, you may think I’m being pretty cynical here. You may even be right! But I think you’ll agree that you’re more likely to succeed in generating referrals if you give your client a reason to refer you that makes them look good.

And how do you do that, you ask? It’s actually probably easier than you think, simply because of the nature of our business. Just do this: sit down before you ask, and quantify your value for them. Let’s say you’re meeting with a client who owns a small home-services company – an HVAC contractor, a foundation guy, or an electrical services company. Two years ago, you set up an S-corp and saved him $8,000 per year in employment tax.

Whether you realize it or not, you’ve already given him at least $24,000. You’ve created wealth for him, out of thin air, to the tune of 24 grand. Tell the client exactly how much you’ve been worth to him, and give him 24,000 reasons to refer you.

2. Define who you want to be referred to.

The next step is to let your client know who you’re looking for. This is important for two reasons:

  • You probably don’t want to be referred to just anyone. Not all clients are created equal! You probably have a target market of prospective “A” clients to build your dream business. So let your client know exactly who you’re looking for – and even which clients you’ll refuse to do business with, if you have a well-defined list there, too.
  • Asking someone to refer you to “just anyone” is like asking them to open their mental rolodex and find someone to match to you. Your best clients know hundreds of people themselves – and when asked to pick a referral out of such a big list, it’s easy for their brain to seize up. When you narrow your request down to a particular slice of that rolodex, you make it much easier for your client to make a meaningful match!

3. Ask your client to do someone else a favor.

When you ask someone for a referral, you’re asking them to do a pretty big favor for you. You’re asking them to put their faith in you in a way that helps you build your business. You, you, you. Maybeyou love the sound of that word. But what about your client?

Many of us quite simply aren’t comfortable asking our clients to do us big, uncompensated favors like that. And there’s no shame in that! We can’t all have Donald Trump-sized egos and Donald Trump-sized confidence (and the world is probably a better place for it).

How do you get around that roadblock? Easy. Don’t ask your client to do you a favor. Ask him to do the referral a favor. Put him in a position where he can feel like a hero, whether he’s referring you down, sideways, or up. You do it by asking him to take the reason you just gave him to refer you in Step One, and pass it along to whatever target market you’ve specified in Step Two.

Let’s put it all together. I’ve just shown my client, a real estate agent, how to use a medical expense reimbursement plan to write off his daughter’s braces as a business expense. How can I use these three steps to craft a referral request?

“Mr. Agent, this MERP we just set up should save you a good $2,000 per year. Do you think you can spend that money better than Uncle Same?” (Wait for acknowledgement.) “Now, who else in your agency does a pretty good business and also has kids at the orthodontist?”

What have I done? 1) I’ve quantified my value, and given him a reason to refer. (Two thousand reasons, actually.) 2) I’ve targeted a specific type of referral target that should be easy for my client to identify. (I’m not looking for the newest agent, who isn’t making any money yet, or the semi-retired agent who keeps her license to have someplace to go every day. And every agent knows who the top producers in the office are.) And 3) I’ve asked him to take that $2,000 benefit and pass it on to those top producers – to do them a favor, not me.

There’s the system. Three easy pieces!

Now I want you to schedule a handful of lunches with good clients between now and October 1. Sit down with their files before you meet, and quantify exactly how much you’ve been worth to them. Then, at some point during those lunches, walk through the process to ask for referrals.

Don’t worry if it’s difficult at first. It’ll get easier as you go, and it will produce results. And your best clients won’t mind if you stumble a little anyway. (Hey, they want to be big shots and show off their awesome tax pro!)

I told you two weeks ago that I would be conducting my own fall tax-planning campaign. I’m looking to sell tax-planning engagements and find monetized installment sale candidates. Earlier today, I had lunch with a center of influence from the investment industry, who promised to put me in front of two financial advisors, including one who’s currently looking to sell his own practice. I’ll keep you posted as I work my way through my own conversations this month!