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   ARTICLE   |   From Scotsman Guide Residential Edition   |   December 2006

It’s a People Business

Brokers who build a referral-based network can reap many rewards

Referrals can be one of the best sources of generating business. This is primarily because most people prefer to do business with someone they know and trust or with someone who is referred by someone they know and trust. A relationship-based referral network is an asset that takes time to develop but that will pay many dividends.

There are many benefits of building a referral-based business. It is important that mortgage brokers understand these benefits and understand what it takes to develop referral business.

Referral-business benefits

Some of the benefits of referral-based business include:

Time savings: Some types of marketing are time-intensive. For instance, telemarketing takes a lot of time and typically has a low closing ratio. Other channels such as Internet advertising can generate leads without requiring much time on the front end. But they often require more time on the back end than quality referrals.

Marketing channels such as the Internet, radio and print media frequently generate leads from folks who are shopping around and who have no reason to trust you more than one of your competitors. For this reason, you’ll close fewer transactions than you would if you were working with quality referrals.

Money savings: Marketing on the radio, TV, print media and the Internet require an investment of money. Referral business from happy clients and your referral network, however, are free.

Increased revenues: Imagine doubling or tripling your income working the same amount of time you work now. This is possible when you develop a strong referral network. Rather than spending your time marketing or talking with prospective clients who are shopping and who may end up working with someone else, you can focus your time working with quality referrals who trust you.

More-stable revenues: A strong referral base will continue to generate revenues even in a market down cycle. Although revenues may drop off, they typically will not drop off as much as for brokers who rely primarily on mass marketing to generate their business.

What it takes

First and foremost, you must be worthy of receiving referrals. You must take care of your clients. Honest, clear and prompt communication is the foundation for good business generally and is vitally important to developing business in the long term.

Some other aspects to developing referral business include:

A clear mission and target markets: It’s difficult for people to refer business to you if you’re not clear about the sort of business you seek. If you specialize in stated-income loans for small-business-owners, it’s far easier for someone to give you a qualified, warm referral.

To get referrals, you must be specific. Even if your company handles a wide variety of business, you will benefit if you select strategic target markets and focus on developing clear marketing campaigns for each of those markets.

You’ll often get more referrals by being specific rather than general. If you ask for referrals to “anybody” or “anyone,” you actually will get referrals to “nobody” and “no one.”

A strong business plan and financial position: Strong financials and cash flow are essential to generating referrals. If you’ve planned poorly and are in a tight cash-flow situation, you’re far more likely to put your short-term interests ahead of your clients’ (and your own) long-term interests. Referral business is long-term business by nature, and it takes time to build. Plan accordingly.

We all need to pay the bills, but poor business planning and cash-flow management can put you in a position that forces you to focus on making that “quick buck.” That can severely compromise your ability to focus on developing long-term relationships that generate ongoing referral business.

A system for tracking referrals and communicating with clients: In business, we tend to value what we can track and quantify. Tracking results helps you understand what is working best in your marketing and allows you to put more resources into channels that generate results.

If you are developing a referral-based business, you must first develop a simple effective system for tracking referrals and the business they generate. One good referral can lead to many other referrals.

A team to support the system: As your business grows, you’ll need more team members to support you in servicing your clients. These can be employees you hire in-house or professionals to whom you outsource. In most cases, a significant increase in volume can be handled by adding just a few people to your team.

A good product: You can be the best relationship person in the world. But if your product doesn’t meet your clients’ needs, your business will suffer. Stay abreast of new products. If they are valuable, add them to your portfolio.

Remember to always thank your referral sources for the business. Your relationships are a vital part of building and growing a referral-based business.


 


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