What is a business referral? A business referral is when you or your company is recommended by an outside source. A business referral is powerful in that a person that is not associated with you recommends you, thereby distinguishing you as a qualified expert in the services you provide or the products that you sell. There is an automatic trust factor in a potential client that is referred because business referrals normally come from trusted sources like family, friends, and colleagues.

Take this example - You are speaking to your friend about cars when he tells you that his engine is causing him problems. You tell him that he should visit the auto mechanic that you always go to whenever you have a problem with your own vehicle. That's a business referral! Your friend will also automatically trust the auto machanic because he trusts you and your judgement.

Many sales professionals will claim that business referrals are the best way to get new business. Sales closing ratios may well be a lot higher from business referral prospects than any other prospects, including those found via cold calling. It is because of this that many salespeople actively seek business referrals by asking their friends, family, existing clients, and referral networks to refer clients to them. That is referral marketing! Another popular method of gaining referrals is for two complementary professionals to refer new business to eachother, as would be possible, say, between a mortgage broker and a real estate agent. That would be a mutually beneficial business referral relationship.

Referral marketing can, most of the time, be the cheapest form of marketing as it is usually free! But there is other ways to get referrals that cost money but is still beneficial. Many salespeople actually pay for referrals. That would be a referral fee. It could be a flat rate per referral or it could be based as a percentage of each closed sale. Again, that would be a mutually beneficial relationship as the salesperson get more sales and more income and the referrer gets paid for making the initial introduction in the realtionship.

Business referrals are a great and cost-effective way of getting more business if you don't have a big marketing budget to pay for advertising. And, even still, referrals are always good, should be welcomed, and actively sought.