5 reasons why relying on referrals is risky for financial services businesses

 

Relying on referrals is very risky yet so many financial services businesses get the majority of their clients through referrals. And because most businesses, in the industry, get clients that way other business owners think it is normal and don’t think about the risk of relying on referrals. If you’ve fallen for the myth that getting clients via referral is the best way to sign new clients then I’m here to show you why it is a dangerous myth to believe. Keep on reading to find out the 5 reasons why relying on referrals is risky for financial services businesses.

 

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Before diving into the reasons why relying on referrals is risky I just want to make one thing clear – getting referrals is great!

 

If you are consistently getting referrals because your past and current clients are extremely happy with your work and are raving about you to friends and family (and who knows maybe even online) then you should be very proud.

 

Getting referrals shows that your clients are happy and confident about the service you deliver and that they feel comfortable recommending you to others. So it isn’t that I’m against referrals. I’m against relying on referrals because when you rely on referrals you put yourself in a vulnerable position. Instead, you should actively market your business and then have referrals as the cherry on top.

 

5 REASONS WHY RELYING ON REFERRALS IS RISKY FOR FINANCIAL SERVICES BUSINESSES

1. Limited client base

If you are relying on getting referrals from either a (past) client or another business then you are drastically limiting your client base. For example, if you are a bookkeeper that gets referrals from an accountant then your client base will be limited by their client base. And if you are expecting your referrals to come from (past) clients then you are limiting your future clients to be people they know or have contact for.

 

For financial coaches, planners, and advisers it is even more dangerous to be limiting your client base. Financial coaching is still fairly new so a lot of the people who sign up to work with a coach probably don’t even know someone else who has worked with a financial coach. And if you are a financial planner or adviser why would you want to miss out on all of the new money clients? The world is changing and there are a whole set of people who will be seeking financial advice but they don’t have anyone in their family or friendship group that has sought financial advice.

 

2. Unpredictable and often Inconsistent flow of leads

When you rely on referrals you have no power over when new leads will come your way. This level of unpredictability makes you fairly powerless, especially in relation to forecasting and thinking about the future of your business. If you aren’t at full capacity you have the ability to take on new clients, but rather than doing something you are just hoping that someone comes your way.

 

And then what happens when you have an influx, you get too many leads at the same time and are unable to take on that many new clients at the same time. You might end up signing everyone and then overworking to deliver or you’ll turn people away. And if the person who referred you in the first place finds out you turned someone away they’ll likely not refer you again. And if you take on the work you can end up not delivering your usual high-quality service or run yourself (or your team) into the ground whilst trying to deliver that service.

 

3. You don’t develop a strong online presence

The world has changed and whereas previously when someone asked for a recommendation they might have also given that person a number or email address so they could get in touch the reality is now they’ll probably just give a name and then expect the person to be able to type your name, or your business name, into Google and find you.

 

The problem is too many business owners who rely on referrals forget this part. They think referrals and word-of-mouth are doing all the work and don’t make the effort to ensure that what someone finds online during a search will result in them following up on the referral.

 

Remember just because you’ve been recommended doesn’t mean that lead will definitely get in touch. Nowadays it is easy to ask a few people, get a few recommendations and then do your own research before reaching out. That means you need to ensure that during the research stage, your online presence is strong enough for someone to think the recommendation was valid and that they should get in touch.

 

 

WANT TO HAVE A PERSONALISED MARKETING STRATEGY CREATED FOR YOUR BUSINESS SO YOU HAVE AN ONLINE PRESENCE YOU ARE PROUD OF?  I’m a Chartered Marketer that specialises in helping financial services businesses. Having a strong online presence is key in business today and I can help you to achieve that. Forget cookie-cutter marketing strategies, when you work with me I’ll create a personalised strategy marketing that will allow your business to stand out, sign more clients, and ultimately grow.  You can get a strategy created in just one day by clicking here. Or you can get your strategy created and then have 6-months of ongoing training, support and accountability by clicking here. Not sure what is best for your business? To discuss your business and your specific needs send a message here or  book a call here.

 

4. Lack of control over lead quality

Another big risk with relying on referrals is that you have no control over the quality of the leads that come your way. Whereas when you are proactively marketing your business you can make it clear who you do and don’t work with, when you rely on referrals you are reliant on the people referring you only referring the type of client you’d want.

 

If the majority of your referrals are coming from strategic partnerships with other businesses then you can make it clear who you want to work with and hope they’ll only refer the right leads your way. However, if you are relying on referrals from (past) clients then you really could end up with a wide range of leads. This is especially true if you haven’t obviously niched your business, or if you have pivoted at any point in the past.

 

 

5. Lack of scalability

Referral marketing works up until a point, but if you’ve got business growth goals that involve scaling then relying on referrals just isn’t going to be enough.

 

If scaling your business means taking on more employees then you’ll want to be fairly confident that you’ll be able to generate a constant stream of work. Now if you are an accountant or bookkeeper who works with clients ongoing then you’ll have a bit more predictability. But if you are a financial coach who works with people for fairly short periods of time you’ll need to be consistently signing new clients

 

 

That’s it! You now know 5 reasons why relying on referrals is risky for financial services businesses.

 

As you can hopefully see relying on referrals is risky. So what is the alternative? Proactively market your business!

 

Take control and actively market your business. This will allow you to target a specific ideal client, you’ll have more control over the quality of the leads and, to a degree, the flow of your leads. This will enable you to be more confident with any of your growth or scaling plans, and enable you to get more satisfaction out of the work you do.

 

If you are ready to start proactively marketing your business, and let referrals be the cherry on top, and would like to get some expert advice on what marketing would be best for your business then I’m here to help.

 

I specialise in supporting financial services businesses. Whether you are looking for a one-off strategy day to get a personalised marketing strategy or you want ongoing marketing mentoring  I can help.

 

Check out the full range of my services here. 

 

To discuss your precise needs you can book a call here or send me a message here.

 

WANT TO GROW A THRIVING FINANCIAL SERVICES BUSINESS?  As the owner of a financial services business, there is a lot you need to consider and juggle in order to build a thriving business. I have no doubt that from a financial perspective you are confident about running a profitable business, but business is more than just the financials. You need to be offering the right services, at the right price and have the right marketing and sales process. I’m a Chartered Marketer that specialises in supporting financial services businesses to market and build businesses they love, that support long-term financial wealth, and that change the lives of their clients and the world as a whole. If you are looking for one-to-one personalised strategy, training and accountability then my 1:1 business and marketing mentoring  programme is for you. To find out more about my 1:1 business and marketing mentoring programme click here And to discuss your precise needs book a free, no-obligation, introduction call to discuss your business here.