The Risky Business of Relying on Referrals


I was pleased to be included in the latest HubSpot survey report, The Agency Pricing & Financials Report.

New business is covered (with interesting results) but the bulk covers pricing, rates, and hiring, some great info for agency principals.

And specifically in regards to new business, Jami Oetting, a section editor for HubSpot’s Blog, was kind enough to ask for my take on the following question:

What sources best generate new leads to your agency?

I’ve posted the agency responses below via a graph from the report:

The Risky Business of Relying on Referrals

 

That’s a whole ‘lotta referral reliance. My take, as found in the report below:

It’s no surprise that agencies ranked referrals so highly as a lead generator. You do great work and referrals (can) follow.

It’s a lot easier than an ongoing new business program, right?

New business is hard — hard to maintain, hire for, and keep up consistently. And, let’s be honest, agencies typically aren’t very adept at it.

So referrals become the default new business option, which is not a bad thing.

If your agency doesn’t have a process in place to drive referrals, you need to implement that — yesterday.

Having said that, you simply cannot rely on referrals alone to build and grow your agency.

I know there are agencies that will contradict me on this saying, “It’s working for us.”

I say that’s fantastic, and you’re doing that part of it right — but you rely on them at your peril.

There are several reasons why:

1) Referrals aren’t necessarily the right type of client.

For several reasons this could be true (wrong fit, too small, no budget), and you could find your team spending time on the wrong types of work.

2) Referrals are not a consistent and scalable source of new business.

Just as your agency experiences certain lulls given the nature of your clients’ businesses, referrals function in the same way.

3) If you’re a small- to mid-sized agency, larger agencies are going after what they didn’t use to.

It’s a trend that’s gained momentum, which means those referrals you’re relying on have a better chance of slowing, or drying up altogether.

4) Agencies continue to get more aggressive when it comes to new business.

In our own recent survey reports, 86% of respondents say they’re getting more aggressive in their outbound and inbound activity. (In 2011, it was 77%.)

If you’ve gone through this report, you may raise an eyebrow right about now, pointing out that 66% of agencies surveyed said they don’t employ a full-time new business person.

Doesn’t seem too aggressive does it?

The fact is, it’s easier than ever to pursue new business, whether it’s technology, tools, or outsourcing the function, to name a few.

Just because there’s not a fulltime new business person doesn’t mean the agency isn’t pursuing new business.

It’s all about balance and scale.

Clients have to come first, of course. But you need a blend of referrals, outbound, and inbound that you can manage.

There’s a reason insurance exists — if you’re crushing it on the referral front, look at the outbound/inbound component as your insurance policy; it’s not the easiest part, but it’s absolutely necessary to your success.

 

Author: Lee McKnight Jr

I’m the VP of Sales at RSW/US. We specialize in working with services firms to help drive and close new business-if you need help with that, email me at lee@rswus.com. What I actually do: drive sales efforts to bring ad agencies and services firms on board with RSW, create content around successful new business tactics and help drive RSW/US marketing objectives, including social media channels, blog content, webinars, video and speaking engagements. Dig it.