How to Launch a Referral Business and Earn a Consistent Monthly Income by Jerry Robinson Since 2006, I have owned and operated a growing number of businesses that I call referral businesses. I literally stumbled into this income stream, but soon found it to be a simple way for practically anyone to get started earning money as a small business owner. In this brief e- booklet, I will introduce you to this simple concept of starting your own potentially lucrative referral business. You will learn: What a referral business is and how you can start one within just a few days. How to set up your referral business for the best results. Where to get 100% free advertising for your referral business. And more So let s get started. To begin, I will share with you a story that will hopefully explain perfectly what a referral business is, and how easily anyone can start one with little or no money. My story begins back in the fall of 2006. At the time, I was helping a small church in Oklahoma make some much needed improvements to more effectively reach their community. These changes included not just crafting a communications strategy to reach out to the local community, but also to maximize square footage in the church for community-related activities. Like many small and struggling churches today, this church was seeking to become more relevant within the community and wanted to deploy its resources in a way that would help its visitors feel more welcome. One of the many improvements I was tasked with overseeing included a complete renovation of a community room. One of the church s board members had said he was interested in giving this community room a fresh and modern look. One idea included ripping up the old carpet in the room and applying a color stain to the
underlying concrete floor. I agreed that the idea of a stained concrete floor could really update the room, and so I began calling around requesting bids from contractors. Several concrete specialists came out to measure the floor and provided their bids to complete the job. But as the bids came in, I was completely shocked at the prices being quoted. They ranged anywhere from $6.50 per square foot on the low end up to $12.00 per square foot on the high end. Because the room was about 1,500 square feet, these bids ranged from over $9,000 all the way up to $18,000! (There was no way that this small church could afford this much just to apply a color stain to a concrete floor.) The church board members soon decided it would be much more economical just to have cheap tile installed, or even to leave the old carpet intact and cover it with cheap rugs. While the church all but ruled out the possibility of a stained concrete floor, I contacted a few friends who I thought might know of a good quality concrete specialist with more reasonable prices. A colleague at a nearby church told me about a small company that they had used to stain their concrete floors for a fraction of the cost I was being quoted. After getting the company s contact information, I immediately called them. A woman answered, Hello. (I could hear a child playing noisily in the background.) I assumed that I had the wrong number. I apologized and redialed. Again, the same woman answered. Hello, she said, this time sounding slightly agitated. Yes, is the right phone number for stained concrete floors? I inquired. The woman, seemingly surprised, immediately changed her tone, Yes, it is. My name is Joan. How may I help you? I explained to her that a mutual friend had given me her phone number and had raved about her excellent work in staining some concrete floors at their church. After some banter, we arranged a time for her to come out later that day to provide a bid. After arriving, she took a few measurements, and then said: I can do this job for $2.50 per square foot. I was both elated and perplexed. Only $2.50 per square foot! I immediately blurted out. The lowest bid that I have received so far was $6.50 per square foot. How can your company provide this same service at such a reduced cost? I asked. It was then that she explained her predicament.
I am a single mother. I worked for my father s concrete company up until the day he died. That was several years ago. Since then, I have been working a clerical job and doing concrete work on the side to earn extra money. Because I don t have a lot of overhead like many of the other companies in town, I can charge much less for my work. Bingo! This was music to my ears. At only $2.50 per square foot, this meant that the entire 1,500 square concrete floor could be stained for less than $4,000! While the price was right, my only concern was the quality. I asked Joan for some pictures of her work. She explained that she did not have any but that I was welcome to visit some of her clients in person to see her concrete work firsthand. I traveled to several churches and homes where Joan had poured and stained concrete floors, and was very pleased with everything that I saw. However, by this time, the church had already decided to have tile floors installed instead of staining the concrete. Despite the church s decision, I knew that I had found a hidden gem in Joan. Here was a single mother with an obvious talent for concrete work. She was motivated to earn more money to provide for her small family and was eager for more work. After a day of reflection, I called Joan to talk business. Hi Joan, as you know, the church has decided against having you work on their floors. However, let s say that I were to find you a similar job. Could you do it for the same price? I asked. Absolutely, she exclaimed. After searching for the lowest bid on concrete color stain, I discovered a hidden gem. It was then that my first referral business was born. So, let me be direct, I stated. If I can find another similar concrete job, you would be willing to complete the job for a flat $2.50 square foot. Is that right? I asked again. I always charge $2.50 per square foot. As I already told you, I don t need anything more than that, she replied. That s great! I said, adding, Do you have insurance to cover against any liability that may arise from your work?
Of course, she said. That was one of the most important lessons I learned from my father. He said to always have insurance on your small business. Very good, I said with a sense of relief. I will just need you to email or fax me a copy for my records. Also, would you be willing to sign a business contract with me agreeing to a flat price of $2.50 per square foot on any work that I can send you? Absolutely, she said, with a growing sense of anticipation and excitement in her voice. Great, Joan. Just give me a couple of hours and I will send over the contract. In the meantime, can you send over that copy of your liability insurance? Sure, she said. I m excited because marketing my business has always been difficult for me. I get a few calls from word of mouth, but it seems I could be getting many more jobs if I just knew how to market myself. Yes, Joan, I said. Marketing businesses like yours is my expertise. But unlike a typical marketing company, you will never pay me directly for my help. Then how will you get paid? she asked rather bluntly. Let me explain. Any concrete work that I send to you will be pre-sold for $4.00 per square foot. That s $2.50 per square foot for you, and $1.50 per square foot for me. This means that you will be spending less time giving bids and more time staining concrete. Think About It Just like in the world of economics, a referral business uses the concept of comparative advantage. You provide the marketing expertise, and in return you get a portion of the profits when the business owner provides his skilled services to customers. I see, she said. That sounds great. Like I said, as long as I make $2.50 per square foot, I am happy. Okay, I will send over a copy of my insurance to you right now and I will wait to receive your contract to review and sign. Thanks Joan. I think this will be beneficial for us both. Me too, she said. Thanks Jerry. And with that simple conversation, I was literally in the stained concrete business in Oklahoma! I had an insured and experienced concrete contractor ready to work. All I needed to do now was to get a copy of Joan s insurance and a signed contract on file, and then start drumming up some business.
Breaking it All Down As you can see, what I did was nothing new. In my search for a contractor for a local church, I stumbled across an ambitious and skilled worker that just needed help in the marketing department. While most people would have been content to get Joan s business card in case they ever needed work in the future, I saw O-P-P-O-R-T-U-N-I-T-Y. There is a simple law that I have found to be true time and time again. If you will help other people get what they want, you will also get what you want. In this case, I was willing to help a single mother get more business. After getting several bids from many companies, I knew that charging as low as $4.00 per square foot, Joan and I would still be one of the cheapest if not the cheapest concrete staining companies in town. Opportunities like this exist everywhere. Just think about how many small business owners that would gladly agree to similar terms with you if you approached them. This referral business method can work with most types of small companies including auto repair, appliance repair, graphic designers, painters, carpet cleaners, window washers, Keep In Mind If you will help other people get what they want, you will also get what you want. lawncare and landscaping, pool maintenance, locksmiths, tutors, web designers, etc. The list is nearly endless. (However, I do advise that you refrain from using this method with certain industries that require hefty licensing, such as HVAC and plumbing.) Over the years, I have expanded my referral businesses to include appliance repair services, graphic designers, photographers, web designers, SEO specialists, and many others. And what I love about referral businesses is that you are never stuck in one town. Instead, the whole world is at your fingertips, thanks to the internet. In fact, once you start your first referral business, you will find that it is extremely duplicatible. Why stop with just one referral business in one town? Why not expand to other towns and other areas? That s what I did with the stained concrete business. The Basics of a Referral Business Starting a referral business can be one of the easiest ways to dip your toe in the water if you are an aspiring entrepreneur. To succeed, you will need some basic negotiation skills along
with a layman s understanding of marketing. You will also need a phone for taking business calls. Before I tell you how I began advertising Joan s work, let me explain a few important basic concepts of running a successful referral business. Protect Yourself with a Business Contract This is not an option, unless you want to create a life full of business headaches. If you are able to negotiate a good agreement to promote a small business owner, make it legal by putting it in writing. While you can always find cheap generic business contracts online, I strongly recommend that you hire an attorney to draft a business contract that is designed to protect you. Let me stress this: Don t sign someone else s contract unless you have had it reviewed by an attorney. Better yet, you should be in charge of this part. (If you are too cheap to hire an attorney to draft a simple contract, you should probably stop reading this booklet right now.) In addition to spelling out the terms and details of your business relationship, this business contract should also indemnify you against any legal action that may be taken against the small business owner. In other words, if someone decides to sue the small business owner you are signing a contract with, you do not want to be dragged into court as well. Tell your attorney to draw up the contract in such a way that prevents a small business owner from involving you in any future legal issues. While this is never fool-proof, there is certainly legal language that you want included in your business contract that will insulate you as much as possible from any potential legal issues. Always Get Proof of Insurance Every good business owner knows that insurance is a necessary evil. My rule on this is simple: If a business owner could possibly be held legally liable by a prospective client, I require him to carry insurance. If he/she doesn t have insurance, and refuses to obtain it, then I will not sign a contract with that business owner. In summary, don t sweat the small stuff but NEVER skimp on the big stuff. Coming Next Week Part 2: How to Promote and Advertise Your Referral Business For Free