Category: Planning

Sample-Independent-Contract-Agreement

Define Your Goals: Personal and Family Considerations (Step One)
Consider Your Options: An Inventory of Possibilities (Step Two)
Identify Your Market: Right Buyer, Right Price (Step Three)
Assess Your Resources: Examining Production Requirements (Step Four)
Review Your Finances: Making the Money Work (Step Five)
Analyze your Profitability: Managing your Growth (Step Six)
Launch Your Business: Time for Action (Step Seven)
Build Your Network: Reaching Out for Support and Advice (Step Eight) 

The ability to give quality referrals has significant advantages. Not knowing whom to refer to an important contact can seriously undermine your credibility. The same applies to businesses and bloggers alike.

Creating a network, of referable businesses, creates the most value to you and your customers – even more than just giving random referrals. In a referral network businesses refer each other as long as there are no better options. It has the obvious benefit of keeping customers inside a circle, which you’re a part of. But that’s not the only benefit.

Why create a referral network?

The most obvious reason for giving referrals is the value it provides to your customers. If you can’t help a customer with a problem they have by selling the solution, at least you’re able to give a quality referral.

Another simple reason to give referrals is the status it creates for you. People expect you to know your industry and other services in your industry. If you don’t know where they can get something that they expected you to provide, you don’t appear professional. But if you know exactly where they can get what they need, you look like a true expert.

Creating a referral network has one especially enticing end result: the best leads you’ll ever get. You’ll end up getting referred customers. And referred customers are even easier to sell to than repeat customers (yeah, I was a bit surprised as well, but apparently if someone you trust recommends a company, you’re more likely to buy from them than if you’ve bought from them before). You’ll get “reciprocal” referrals even if you don’t create a referral network, but the network will increase that number significantly.

If you’re a blogger, than you’re probably interested in getting links to your blog. Well, creating a referral network might be the best way to do that. And I wouldn’t worry about the claimed SEO disadvantages, as long as you follow the “rules” (the three requirements for referrals).

There are more benefits to giving referrals than these three. But this post is about the referral network you’ll build around you.

The 3 requirements for referrals

Every referral you ever give needs to meet these three requirements. If any of these doesn’t apply, don’t give the recommendation.

1. Relevance. Every referral you’ll ever give needs to be relevant for the customer, in that situation.
2.  Quality. If you refer something that doesn’t live up to high expectations, your credibility is gone.
3.  Authenticity. Don’t give referrals just for the sake of doing it. And don’t overvalue the businesses in your referral network; if there’s a better option for your customer, refer that business.

The 3 circles of a referral network

When you create your referral network, you can divide everyone in it in three circles. The first circle is the most important and has the greatest potential rewards. But it’s also something you’re likely to already have. The second circle often adds the most value to you, but businesses in the third circle can also be very valuable to your customers.

So, what are the 3 referral circles?

1. The ones your customers can’t live without

The first circle is the closest to you. You must know these. If you don’t, you’ll be seen as an amateur, and not trustworthy. For example a fabric store needs tailors/seamstresses and upholsterers.

These are businesses/products/services/people your customers will most likely need whenever they buy your products and vice versa. There’s no way to justify not knowing the best options for your customers. And there’s no reason why you couldn’t get them into your referral network.

Even if you already have referred certain businesses and received reciprocal referrals from them, you should talk with them about referrals. You can deepen your relationship and make it even more valuable. More about that later in this post…

2. Others in your industry and closely related to your business

The second circle is much larger than the first one. It consists of businesses/products that are related to you either because they’re in the same industry as you are or you have similar buyer personas. For example a hairdresser needs to know a good nail salon. But a stylist and a cosmetologist would also be highly relevant to their customers.

The second circle is usually the first you need to create from scratch (since you probably already have the first circle started). You might have some ideas about who to network with immediately, and maybe you’ve already sent customers their way. But have you contacted the companies? It’s difficult to have a relationship without personal contact.

3. Unrelated to you, but important to your customers

These are services everybody sometimes needs or wants to see. Referring restaurants, hotels, cafés, museums, galleries, etc. is more about creating a relationship with your customers than anything else.

You may wonder why these businesses would be relevant to have in your referral network. Most of their customers are unlikely to need your services and even less likely to ask for their referrals. It’s true,unless they’re in your network, you’ll never get any referrals from them.

But if you do create a referral network, there are ways they can refer you. Maybe they can offer your discount coupons for their customers. There are other ways, but none of them works every time (and it’s possible that the coupons won’t work for you). How you approach these businesses is more important than in the first two circles because they’re unlikely to understand why they would refer you.

Bonus: Irrelevant but fun or useful referrals

Sometimes you can just help your customers by giving a referral that has nothing to do with your business. For example a customer might say something about annoying allergies, and you could help by recommending a great allergy medicine. Or maybe there’s a wonderful ice cream shop right next to your store that you could recommend to families that come into your store. Or if you’re a blogger the occasional link to a funny video won’t hurt.

There’s probably no reason for including these types of businesses into your referral network, but you can still recommend them to your customers just to make their day a little happier.

Who to network with

The three circles only tell you the types of businesses you should network with, not who exactly should be in your network. There’s a pretty straightforward method of deciding whom to network with.

Answer these questions. Make a list of answers, and always start with the best answer.

1. What kind of services your customers would benefit from the most? Divide the answers into the three circles.
2. Who are the very best providers of those services? Preferably you’ll have more than one option for each service.
3. Who are the best local ones? There’s no reason for you to refer someone on the other side of the planet, unless you still share customers (online businesses).
4. What can you offer for their customers? If you can’t think of anything, find more answers to the previous questions.

Now you know the ideal businesses to have in your network and what you can offer for their customers. Start with the best option, even if it seems unlikely to work out (they’re a huge business and you’re a starting entrepreneur).

As I mentioned in the list, it’s possible to network with online businesses (if you run an offline business). Maybe they have customers from your region and they’ll be happy to be able to recommend you. If you have an online business, I’m sure you can think of some offline businesses to include in your network. But generally offline businesses will find most value in other offline businesses, and online businesses in other online businesses. Just don’t forget to think of every possibility.

How to approach potential members

When you’ve identified a business (or an expert or a blog) you’d like to include into your referral network, first assess who you are to them. In other words, what do they think of you. Do you represent a great opportunity, or do they think you’re trying to take advantage of them?

You need to offer value. There’s no way around it. Unless you’re valuable for them, they have no reason to be in your network. The least you can offer, are your referrals. If you can drive customers to them (and they believe that), you’re valuable and they have no reason not to join your network.

The other problem you’ll face is uncertainty. Generally people aren’t familiar with the idea of a referral network. They might’ve never even heard of it before. And even if they have, there’s a chance it has a different meaning for them. So, before you approach anyone, you need to make it clear for yourself what you envision the network to be like. And then you’ll need to sell that idea to others.

How to use the network

Congratulations for creating a referral network.

“But what am I supposed to do with it?!”

There’s no definitive answer to that, but only because there are so many opportunities. The smallest thing you can do is to refer the other businesses when your customers ask for it. At the other extreme you have joint marketing, where you create marketing campaigns together.

Ultimately you’ll have to come up with your own answers to how to use the network. There’s only one basic principal you’ll always have to follow: whatever you do, it has to be mutually beneficial to everyone involved (including customers).

But to give you some ideas, here are a few things you can do with your referral network.

1. Give discount coupons to other businesses in your network. Your customer will be glad to get a discount for something, which makes you more valuable for them. And the other business will get more leads.
2. Use products from the other businesses. This works best within an industry. A record store would get a CD-player from a hi-fi store. And the hi-fi store would get albums for demo use. Something (a sticker, small advertisements, etc.) would make it clear to your customers where you got the CD-player (or the albums).
3. Shared marketing materials (a form of joint marketing). If your buyer personas are similar you can create brochures together. It makes the brochure more valuable to your customers, and gives you more reach when everyone involved shares it with their customers.

Simon Sinek is the author of Start with Why and the creator of concept he calls “The Golden Circle.” The Ted Talk he gave on the topic is incredibly popular, almost 10 million views as I write this.

The concept of the Golden Circle is simple. It looks like this:

Sinek purports that great organizations seem to create their foundation by first addressing Why they exist, then How they go about their mission, and then finally, What they do.

Let me say first that I really appreciate what Sinek is doing — inspiring leaders to think about the soulful calling of their organizations and to rally others to a bigger cause beyond just selling widgets. And he does a masterful job of calling out that people don’t buy what you do, they buy why you do it, and that it’s critical to attract customers who believe what you believe. Awesome.

However, the truth is that great organizations build their core ideology by first defining and reinforcing Whothey serve and the customer problem or need that they solve in the marketplace. Then they address and reinforce Why they exist, then How they go about their mission, and finally What they do.

So a modified more accurate Golden Circle should really be drawn like this:

How do I know? Two reasons:

1) A business doesn’t exist to promote its beliefs. It exists to produce results for its customers (Who it serves). Understanding who your customer really is and the problem or pain they seek to solve is what differentiates a company in the marketplace and keeps it focused on the highest goal — creating customers.

It’s an easy trap to fall into. You get so caught up in your own beliefs — how you think the world should be versus how it really is — that you lose sight of who your customer is and the pain point that they really want solved. That’s why you exist. To solve a need in the marketplace. If you’re not solving needs, then you’re quickly going to go out of business regardless of how inspiring your vision statement is.

2) Leading with Who is what also allows the business to successfully navigate what in his Ted Talk Sinek calls the “Law of Innovation Diffusion.” This law is a term used to describe how innovations spread in the marketplace through a series of unique stages of customer groups. It tends to be depicted in a bell curve like this:

Here again Who is most important. By focusing on the Who you serve, it allows you to understand which customer segment you’re selling to at any given time and to refine/adapt your solutions to meet those customer needs over time.

Knowing which type of customer to pay attention to, and when, also allows you to anticipate and respond to changes in the marketplace and successfully drive new innovations forward. I explain how to do this in detail in Part III of my book: Organizational Physics – The Science of Growing a Business.)

I think Sinek realizes that great organizations begin with Who too. For example, when he says that Tivo should have led their branding with this, “If you’re a person who values having total control of your life, then you’ll love our product”. He’s really calling out the power of starting with Who. Also, his example of Martin Luther King also supports the notion of leading with Who. “I have a dream that all men are created equal.” Dr. King is also focusing on the Who first. Finally, the ultimate point Sinek is trying to make is that people buy what they believe (Who), not what you believe.

To sum up: The reason that your organization should build its foundation on Who is that every business exist to serve the needs of other individuals and organizations in the marketplace, who. Bring “who you serve and the problem or need that you solve” to the forefront of your organization’s consciousness. By doing so, you focus organizational efforts on the most important thing – meeting customer needs – and by monitoring and adapting to those needs, you cause the organization to adapt and innovate over time. And as Sinek points out so well, you must marry the Who with a powerful Why — a set of internal beliefs that all of your marketing and communications flow from within the organization to outside in the world. Think Who. Then Why, How, and What.

Although most executives can recite the truism that a company must build a distinct competitive advantage in order to grow and be profitable over the long term, many have only the fuzziest idea what that really means. They’re confused by the esoteric language of strategy or they’ve gotten bogged down in the technical details of analytical tools.

We often encounter these executives in our consulting work and in our classrooms. We tell them to draw three circles. Those circles, placed in the proper relationship to one another, provide a good visual representation of what strategy—both internal and external—means. Hundreds of leaders and future leaders have quickly absorbed strategy concepts by using this simple tool and have taken it back to their organizations, where it often becomes part of the decision-making process.

Let’s assume that this exercise is being conducted by an executive team. The team should first think deeply about what customers value and why. For example, they might value speedy service because they want control of their own time or they have other business or family obligations. (Exploring deeper values can open managerial eyes and reveal new opportunities for value creation.) The first circle thus represents the team’s consensus view of everything the most important customers or customer segments want or need. (Other segments can be analyzed later.)

The second circle represents the team’s view of how customers perceive the company’s offerings. The extent to which the two circles overlap indicates how well the company’s offerings are fulfilling customers’ needs. Even in very mature industries customers don’t articulate all their wants or problems in conversations with companies. They weren’t banging on Procter & Gamble’s door demanding invention of the Swiffer, whose category now contributes significantly to the company’s double-digit sales growth in home care products. Rather, the Swiffer emerged from P&G’s careful observation of the challenges of household cleaning. Customers’ unexpressed problems can often become a source of relationship building and growth opportunity.

The third circle represents the team’s view of how customers perceive the offerings of the company’s competitors.

Each area within the circles is strategically important, but A, B, and C are critical to building competitive advantage. The team should ask questions about each. For A: How big and sustainable are our advantages? Are they based on distinctive capabilities? For B: Are we delivering effectively in the area of parity? For C: How can we counter our competitors’ advantages?

The team should form hypotheses about the company’s competitive advantages and test them by asking customers. The process can yield surprising insights, such as how much opportunity for growth exists in the white space (E). Another insight might be what value the company or its competitors create that customers don’t need (D, F, or G). Zeneca Ag Products discovered that one of its most important distributors would be willing to do more business with the firm only if Zeneca eliminated the time-consuming promotional programs that its managers thought were an essential part of their value proposition.

But the biggest surprise is often that area A, envisioned as huge by the company, turns out to be minuscule in the eyes of the customer.