slippery slope ahead

The Hidden Danger of Relying on Repeat and Referral Business

Referral leads are the easiest to close because they come preloaded with trust from the referrer. We all love referral business and want more.

However, there are a few hidden dangers when it comes to relying solely on referrals to carry your business long-term.

Not knowing, or not being aware of these dangers, can impact your business further down the line – which is why it’s important to get familiar with the red flags that might appear when working with only repeat and referral business.

Relying SOLELY on repeat and referral business should be avoided*

*If you have a proven and repeatable referral engine, high five, you can stop reading… but it's probably a good idea to keep with us on this.

Things might be going well for your company, you have a lot of clients, so they keep returning to you for more business, and they’re even referring you to other people.

What could possibly be wrong with a setup like this?

Quite a lot, actually.

When you have a steady supply of clients sending projects to your business, and you have a pretty good revenue coming in, it’s easy to get comfortable. It’s easy for your sales team to get comfortable.

If all your clients come from repeat business and referrals, then you might need to take a step back and think about the realities of putting all of your revenue-generating eggs in one basket.

It’s a recipe for disaster.

You may think that your business is going well, but a lot of sneaky disruption can cause a well-oiled plan of action to turn into a slippery slope of chaos.

The danger of relying fully on referrals and repeat business is a lot more complicated than a simple math problem.

You need to consider who your current clients are, what their businesses will look like in two, five, ten years’ time.

  • Are any of your contacts close to retirement?
  • If they’re young go-getters, are they thinking about moving to another firm soon?
  • If your contacts change jobs, will they take you with them?
  • Are any of your faithful repeat clients looking to sell, merge, or be angling to be acquired?
  • How are they doing financially? Any red flags?

Any of these changes above can wreak havoc on your business. In an instant, your long list of contacts is cut and poof! You’ve lost your referrals.

One of the most common problems for referral business in the construction industry is company owners retiring and key contacts retiring.

What are the chances your biggest client is going to retire?

Ok, I’m not being an ageist here, I’m being pragmatic. If you don’t diversify your client contacts, it’s going to become a problem in the future, especially if a large majority of your customers are in their 50s or 60s.

Sure, this might be fine for a few years, but what happens when they decide to retire? The average retirement age in the US is 66 for both men and women. If your customers are already in their 60s, you’re going to be in trouble sooner rather than later.

If you’re wondering why retirement should be a concern, think about it this way.

Mergers, acquisitions, and succession plans that come from the owner retiring can disrupt your flow of repeat business. Overnight you can be made redundant, obsolete, and be replaced.

Even if the owner doesn’t change, but your internal contact retires, and you don’t already have a relationship with his or her replacement, your days are numbered.

Retirement is a real threat to your contact list. 

We all know the construction industry has an aging workforce, and the number of employees within the industry aged over 60 is increasing. With the retirement age at 66, it’s not uncommon to see many people in our industry thinking about retiring.

Obviously, you can’t keep someone from retiring, but you can be aware of the number of relationships in this disruption zone. And make a conscious effort to build stronger relationships within the client’s firm and be on the lookout for new opportunities.

A byproduct of companies getting comfortable with repeat and referral is their brand suffers. Since no one is going out for new business, they don’t care what they look and sound like. Time is not spent on maintaining the brand; the focus is placed on delivering the work. The brand facade decays, the website gets outdated; the sales materials grow stale.

BAM! Disruption.

Now what? You haven’t had to keep up your brand image and everything that goes with that, because your repeat/referral base has always been a “sure thing.”

You look up from the haze of WTH just happened, and you realize:

  • The market has changed
  • Everyone else has been marketing and building authority online
  • There are a ton of new firms that look slick and polished
  • And your firm is invisible

You are not ready for the proverbial dating scene.

We all know having too many eggs in one basket is a bad thing. But losing valuable contacts to retirement can sneak up on you, in bulk.

But, you do great work… so does everyone else.

You have great people… so does everyone else.

What other firms have that you don’t is clarity, consistency, and they look the part. They continued to build their brand and it’s reputation. You got comfy with repeat and referral and let decay set in.

So, referral business is bad?

HELL NO. Repeat business and referrals are freaking fantastic. Love them, want more.

BUT there are risks:

  • Getting comfortable
  • Relying on your contact base of steady repeat and referrals to be there forever
  • Not continually improving your brand and its assets
  • Not planning for and anticipating retirement disruption in your flow of work
  • Going dark on social media and letting your digital footprint decay
  • Not keeping up with technology changes

What should you do to avoid disruption?

Do an inventory of how you get leads and new business. Be honest with yourself, have you become comfortable? Evaluate what you would do if a few of your loyal customers sold their business or shut it down when they retired. This is an essential mental exercise. Are you hustling the way you should? Marketing effectively?

In the wake of COVID-19, mass layoffs, and business shutdowns, are any of your customers on the edge of financial ruin? Are they close to giving up and walking away? You might be surprised at the fatigue of business owners right now.

Objectively, look at your business from the outside. Is it time to do some repairs and make a plan to revitalize and refresh your brand?

Understand that you need to teach new referral partners what you are looking for in a referral lead. They won’t know magically by osmosis.

Do you want to thrive, or just exist?

It’s vital to be aware of what’s going on with your current clients and keep injecting new blood into your sales pipeline so that you’re not waiting for your next referral.

A healthy business cultivated multiple business development paths – does yours?

Get in contact today, and let’s work on building a healthy brand foundation for your business that attracts fresh new leads to supplement your repeat and referral work.


You may also be interested in: 

Tracy O’Shaughnessy Founder / Lead Brand Strategist of Branding & Beyond

Tracy and her team help firms in and around the B2B building trades look and sound credible online and off.

She has been in the industry since the early '90s and is tired of seeing fantastic firms struggle, blend in, and get bypassed by prospects who judge them solely on the outdated information found online.

Branding & Beyond's mission is to solve real business problems and build the brand foundation clients need to get noticed and hired.

You can find Tracy on Linkedin and here on this blog.