Every entrepreneur would love the day to arrive when they don’t have to market their services any more because buyers come to them through their referral system. The main reason that most people do not have referral networks working for them, or develop referral systems is that they haven't yet learned how. People cannot read your mind, unless you specifically ask them to refer other people to what you offer; then you might not get a referral.

If someone is happy with your product or service and tells you so, then is the time to say thanks, if you happen to hear of anyone else who might benefit from what I have to offer, then please give them my contact details. A variation of this is I'm glad you are excited, you may know someone who would like to pay off their mortgage.

The above is idealistic, people are usually pleased with what they have received, but because we don’t act right away and make a point of asking them, or the opportunity will come and go.  Another way of developing a referral system is with the thank you letter where you thank a person for their business and then end saying that you enclose one or two of your business cards for them to pass on to people you think might need your services.

There are occasions however, when the above methods of developing a referral system do not work, especially in the financial sector. The fact of the matter is that people vary rarely discuss their finances with others, and so wouldn't be sure who might be interested in the services that you have to offer. There are a couple of approaches to creating a referral system that will work more effectively than those already mentioned.

Many successful business people have found that it helps to stay in touch with your clients by asking them if they would like to sign up for your monthly news letter. This should give them helpful financial tips and at the end you could ask if they know anyone else who might appreciate receiving your news letter.

You should network with other businesses and try and get people together referring business to each other. When people are introduced in this way, they are far more likely to make referrals to a client of theirs that needs the services that you have to offer. These things are proven methods of building a referral system, but it won’t happen overnight.

If you are going to build a successful referral system that stands the test of time, then you need to have patience.

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If you’re low on money, you might want to consider using referral marketing to promote your business. How does referral marketing actually work? In fact, you use the general public to help advertise your company.  They would do this through a special referral site that they would share with their friends and family. If someone converts to a sale through this site and/or signs up for the referral program, the original person who referred would receive an incentive. This incentive can be virtually anything, whether it’s cash, discounts, or give away merchandise.

Now, there are two ways you can achieve referral marketing.  The first involves utilizing it as a secondary form of advertising, especially for time-sensitive promotions.  You try to create as much buzz as possible before your promotion ends. The second method involves incorporating referral programs into your unique business model.  If you do this, technically your company becomes an MLM, (which stands for Multi-Level Marketing).

Okay, I can guess what you might be thinking. Isn’t an MLM a pyramid scheme? No, but MLMs can go in a downward spiral if they are not done carefully. This means that they rely only on referrals for their company.  No legitimate sales of products or services are incorporated into their business model.

12 Daily Pro is an example of such an entity. This was an autosurf website that generated millions of dollars.  However, over 95% of these profits came from referrals who invested their own money into the program; very little came from legitimate business transactions.  As a result, older members were getting paid from the new members’ money.As the scheme moved forward, many new members weren’t getting paid because there weren’t enough leads to keep the pyramid strong.

This is the result of pyramid schemes… even those that last several years, (like the Madoff scandal). The Madoff scandal was a ponzi scheme, which is a way more complex than your everyday pyramid scheme.Either way, the concept is the similar.

In order to prevent these problems, always make sure that you’re rewarding referrals from the profits of your company. If this would be hard to do, consider compensating them only on an affiliate basis, meaning they would receive a commission only if their referrals actually buy something.

In conclusion, if you can’t afford an elaborate advertising campaign, consider utilizing referral marketing. Implementation is a snap, and once it’s established, you’ll have tons of people promoting for you with no cost to your business.

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