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Make The Most of Client Referrals

from TaxCoach™ Briefs
Volume 1, Number 6 — July 6, 2006

by Edward A. Lyon, JD

Tax professionals know referrals are the heart of any service business. Why spend time chasing down strangers and telling your story when you can use happy clients to do it for you? And referrals aren't just easier clients to sell, they're better clients to serve. Referrals are less likely to quibble over fees, less likely to leave you for a competitor, and more likely to refer you to their friends and colleagues.

The key to making the most of client referrals is to define the clients you want to work with, and target your referral strategy to generate those clients.

As a tax professional you're probably familiar with 'client segmenting.' Simply put, this involves dividing your current client base into segments. You might have 'A' clients (your best clients, who see your value, pay your fees, and refer you to their friends and colleagues), 'B' clients (who may or may not see your real value, may quibble over fees, and probably don't refer you to their friends and colleagues), and 'C' clients (who grumble when they see you, complain about fees, and don't refer you at all).

In a perfect world, you'd clone your 'A' clients, re-train your 'B' clients to make them 'A' clients, and send your 'C' clients to your competitor down the street. (In fact, once you see how TaxCoach works, you might consider starting to fire some of those 'C' clients.) Your referral program is an important tool for reaching this goal.

Here are some strategies for making the most of referral opportunities:

* Make sure to thank your referral sources. Take care of them so they keep taking care of you. Send thank-you notes and thank-you gifts. Restaurant gift certificates or American Express gift cards are good choices.

* When clients come to you because of referrals, make sure to acknowledge how important referrals are to your business. Let the new client know how much you appreciate the referror and their business, and let the new client know that you'll appreciate their referrals too.

* When clients ask you about your business, tell them how important referrals are to a tax professional. Telling them you accept new clients 'by referral only,' or 'primarily by referral' suggests that your service is in demand.

* My favorite time to ask for referrals is right after delivering a TaxCoach plan. By that point, I've met with the client at least twice, and established some comfort and rapport. I've just spent an hour or so telling the client how he or she can keep more of their hard-earned income. I've filled their head with savings opportunities. And they're not likely to be happier with me than right now.

* I don't just ask 'who else do you know who could use this service?' That's too broad a question, so it takes too much work on your client's part. And it leaves you open to whatever potential referral pops into the client's mind. If you have an 'A' client profile in mind, find a way to tie your referral request to that client profile. If you're targeting real estate agents, for example, and you've shown an agent how she can use a medical expense reimbursement plan to deduct her daughter's braces from her business income, you might ask 'who else in your office has a kid in braces who could use this plan?'

Here's the formula for a proactive tax professional:

Now you're asking for a specific referral who meets your target profile and giving your client a specific benefit that they have just seen work for them that they can offer by referring you.

* Ask the client if you can contact the referral directly. They may say 'no,' or they may want to ask the referral's permission. But you're better off with that permission than you are sitting back passively waiting for referrals to call you.

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