This year, I’ve closed over $500,000 in new business that came from ONE lead generation strategy: Referral partners.

Referred prospects are by far the easiest to close. On sales calls, they sound eager to start: “My business attorney said you helped one of his other clients dig out of a huge hole and actually got them cash flow positive for the first time in years. We're struggling with cash. Think you could help us too?”

This guy is 90% sold before you even got on the sales call with him because he came from a referral partner.

How do you get that to happen more?

You need more QUALITY referral partners. 

But here’s the mistake I see a lot of Fractional CFOs make. They have a long list of “partners.” 

But when I ask, “How many of those partners have sent you a referral in the past 12 months?” their answer is “hardly any.”

Those aren’t quality referral partners. They’re business buddies. Of course, I have nothing against business buddies—but I don’t count on them for next month’s revenue growth.

The missing piece is often motivation. Do you have referral partners who are appropriately incentivized to send you a referral when the businesses they’re talking to matches your ideal client profile? 

Most Fractional CFOs haven’t figured incentives out. 
I have some experience (good and bad) in this area, and in this newsletter I’ll share what I’ve learned. 

Here’s how to incentivize your referral partners to send you MORE, BETTER, and BIGGER referrals.

Incentivize Partners with Referral Fees

I once heard it said that everyone’s favorite radio station is WII FM:

What’s In It For Me?

(Yeah, that was cheezy, but I'm not apologzing.)

Do you spend your days thinking about how you can send more business to your network? 

No? 

Well, sad to say, your referral partners don’t spend their days thinking about sending you leads either. 

...but what if they did?

What if you made it worth their while to think about sending qualified leads your way more often?

The most straightforward way to make a referral worth their while is with a handsome referral fee. 

Your referral partners are running businesses too. They need to see an ROI on how they invest their time, including the time they spend convincing THEIR hard-earned clients that a conversation with YOU is a good idea.

It is literally easier for your referral partners to do absolutely nothing than to refer a prospect to you. Doing nothing carries no risk for them; their reputation isn’t on the line; they don’t have to craft an introduction email.

The odds may not be ever in your favor, but you can dramatically increase your odds of getting that referral with a simple, tasteful commission program.

How Large Should Your Referral Fee Be?

For my firm, I like to offer up to $10,000 to our referral partners when they refer us a lead that we close. 

Should you offer that much? It depends. You’ll have to consider things like cash flow and profitability based on your firm’s pricing model.

One helpful thinking question to ask yourself is, “Would I be happy if I could give my referral partner $______ in exchange for an average client?” Fill in the blank with the number you’re considering.

I would be absolutely thrilled to pass out $10,000 checks if I knew I would get an client every time. The math easily works for my firm based on our fees and margins.

What amount would work for you? Could you happily pass along $5,000 to your referral partner once the client signed? Then do that!

Whatever amount you settle on, make sure you’re paying enough that your referral partners are properly incentivized, but not so much that it makes you uncomfortable or jeopardizes your cash flow.

What To Do If They Don’t Want (or Can’t Accept) a Referral Fee

Some referral partners flat-out refuse referral fees. I’ve had some referral partners say that they don’t feel right accepting a fee; others are perfectly satisfied knowing you're taking great care of the people they refer.

Other partners can’t accept referral fees because of regulations and industry requirements.

What do you do in these cases? Two ideas:

• Forget about the referral fee and write a very nice thank-you card, and/or
• Make a meaningful donation to the nonprofit of their choice.

These express your gratitude without offending your partner or getting them into legal trouble.

Getting Started with Referral Fees in Your Firm

If you’ve realized you need to do a stronger job of motivating your referral partners, here’s how to get started:

• Pick an amount that you feel comfortable paying as a referral fee. If you’ve never done this before, it’s okay to start small and raise your fee in a few months. No referral partner ever complained about receiving an unexpectedly large check.
• Tell your referral partners that you’re now glad to pay a referral fee. Clearly explain how much you’ll pay, when you’ll pay, and how you’ll send the payment.
• Go get more quality referral partners! This is a strategy that gets better with scale.