People know the power of referrals. As home buyers, we love referrals. If you are not getting referrals right now in your real estate investing business, it is time to start installing strategies to secure more of these exclusive deals. Other deals out there you must work to win or lose, but referral deals are practically handed to you ready to close.
In our business right now, there is no marketing more effective than a personal endorsement. You can have the greatest testimonials, which absolutely build credibility and increases the likelihood a seller in your market will choose to work with you, but if one of your clients recommends you to a friend who they have known for 20 years… that friend will trust you as much as if they have known YOU for 20 years.
The problem is that if we are not getting enough referrals, or we are not getting referrals consistently, then it becomes incredibly difficult to plan and anticipate the numbers, specifically cashflow, in our real estate investing business. We do not want to be forced to get all our deals from low conversion activities or low response rate marketing.
Referral deals are ideal because they are profitable. However, referrals can be a double-edged sword. Say for example, someone who does not know you very well gives an endorsement of your home buying business. That is a powerful statement. Perhaps it is a colleague, an acquaintance from church or child’s school, or the sibling of one of your motivated sellers. This can be a huge benefit to you and your business.
But what if, since this person does not know you very well, they refer you to a client who is not your perfect fit. Maybe this means that, if you take the deal, you will not be able provide the level of service that is expected. Now both you and the person who referred the deal to you both come out looking bad. This can make people hesitant to give referrals. At the very least, people tend to be cautious when choosing the businesses that they refer to their network.
What can you do to counteract this hesitancy? In our experience, working to position ourselves as educators and advocates in the community has increased the level of trust the community has in us, leading to more frequent and enthusiastic referrals. Once we pivoted to educating homeowners in the local area about their options, previous clients and members of our personal and professional networks felt much more confident referring people to us. Everyone knew we had the best interests of the community at heart, even if that meant passing a deal along to someone else. We established ourselves as a business that prioritizes providing the best possible service and connecting homeowners to other resources if it makes more sense. This meant that people could send us referrals without having to worry about us potentially ripping off their friend, neighbor, or colleague and making them look foolish.
The credibility borne of education and advocacy also drastically increased the scale of our marketing. Before, I was reliant on one-on-one referrals and appointments. Now, leading with my book and other educational material, leaders of local community organizations, such as places of worship or community centers, feel confident about bringing me in to give a presentation. We call these non-competitive synergistic referral partners – organizations that serve our ideal prospect but offer services that do not overlap with ours. We can now create win-win situations in which the event planner can bring in a credible speaker and we get free marketing.
Let’s break that down further. Non-competitive means we are not providing the same service. Synergistic means we focus on the same audience. Referral partners simply means they are willing to endorse us.
How can we find these types of referral partners? Know where your ideal customer spends their time. For example, Seniors are my favorite and best customers. I know that they spend time at churches and Senior centers. Many of them work with probate attorneys, CPAs, and insurance brokers. Armed with this knowledge, I can then reach out to these places and businesses to establish a partnership. They do not see me as a threat to their business because I am offering a service that does not encroach on theirs. Even better, they see me as an educator and a reliable community advocate. It is good business for them to be associated with me, to pass my information out. Soon they are giving me endorsements.
This works because I make sure our partnership is a clear two-way street. People who get a lot of referrals, give out a lot of referrals. It is important to make sure any business you partner with gets value from you as well. Sometimes, this even leads to more influencer or business-to-business (B2B) referrals. This is much more scalable than relying solely on direct mail leads.
Before installing these strategies into my business, a lot of the calls I received from my marketing were people asking to be removed from my lists. Even with these calls, my response rate was low. After establishing myself as the connector, the expert, the authority, I started receiving a much higher volume of calls. This inevitably meant that we could not help everyone directly. You know that you cannot buy every house that comes your way and sometimes people call looking for other services that we do not offer. But, if you can confidently refer the people who call you to another investor, or a CPA or tax planning attorney, these people will still feel that you helped them. Plus, your referral partners will be grateful for the business you are sending their way, usually causing them to send more referrals to you.
There are two key components to building a continuous stream of referrals. First is building trust. Second is leveraging the law of reciprocity – give out referrals first and your referral partners will start sending some to you.