By Kevin Dennis, WeddingIQ
As savvy business owners, you know that measuring ROI is critical to determining whether the investments you make in your business are paying off and if they are worthwhile endeavors. Unlike other models, a referral business is built on relationships, so your major investment isn’t always money. So, how can you effectively and accurately measure the ROI of a referral business?
Instead of cash, a referral business requires an investment of time and trust as you build valued relationships that may lead to referrals. Sure, you might spend some money when you get coffee, or when you surprise and delight your colleagues to stay top of mind, but that outlay is generally minimal, and is definitely not your only cost. You want to know that your ROI justifies all of your expenditures.
The most important step to measuring your ROI is to track where your leads are coming from, so you know which of your relationships are flourishing and which may need more attention. A CRM, or customer relationship management tool is vital to this measurement process. Your CRM tracks where each of your leads originates, along with factors like how long it takes you to convert each lead to a sale, and how many are converted successfully.
You can use the results generated by your CRM to either improve relationships, or to nourish them by demonstrating your gratitude. When you find that a specific company is the source of qualified referrals that frequently convert to sales, consider rewarding that company and encouraging future referrals by recognizing them with small gifts, social media mentions and return referrals.
At Fantasy Sound, we keep track of our leads every month, and we give each month’s winner a little surprise. These have included a coffee delivery, smoothies or other edible treats – small tokens that express our thanks. We also return the favor by sending qualified referrals to great companies whenever we have a chance.
Building a referral business takes time. You expect to meet some great colleagues, share some referrals, and build a successful model overnight – and it can be really discouraging when that doesn’t happen exactly as you imagined. By tracking your ROI using a CRM, following up on the data it yields so you know which relationships are golden and which need more love, and showing your partners how much you value their referrals, you’ll not only build a healthy referral-based business, but you’ll have the data you need to prove to yourself that your efforts are worthwhile.