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Damien Churton on 25 May 2019

DamienChurton ProfileBy Damien Churton - Senior Business Strategist 


Referral Month. Part 1.

Want more referrals? You get what you ask for!


The constant refrain in small business is that we all want more leads, we all want more business and we all want to know where to find them.

At Business Benchmark Group, the next month is “Referral Month”. As part of Referral Month, our entire community is focused on generating referrals. We will be tracking how many leads our total community can generate, and sharing these scoreboards with you (see the bottom of this email!)

Each week for the next six weeks, we will be producing a series of articles that will progressive build each week. We will be giving you a step-by-step guide on how create an an effective referral strategy that will drive new leads to your business.  


Today: Your Ideal Target Market – You Get What You Ask For

Next Week: How To Build Your Network

8th June: Asking for Referrals Is An Ongoing Process

15th June: Dealing With Your Head Trash

22nd June: Kickbacks, Gratitude and Surprise

29th June: Putting It Into Action And Mastering The Process


So let’s start from the top.

The very first thing you need to do is to identify exactly who your ideal target market is. The simple fact is that most small businesses have no clear target market.

It’s a classic evolutionary step in a business as it grows to shift from a wide and diverse client base (something that is impossible to scale) into something that that is highly targeted, with a focused niche that can scale.

Every small business starts its journey having to take whatever work it can in order to survive, if someone asks if we can do it, we usually say yes because we need the money.

This is a situation that continues to occur in a business until you are turning over between $750,000 to $1 million.

The only problem is that this process continues on for years and years and as a result very strong habits are formed that need to be broken. As the business grows it becomes increasingly difficult to service a diverse client base with diverse products.

For example, a plumber might have clients ranging from individual home owners to property companies, to builders, to developers and do work as widely different as construction, maintenance and drainage.

As a result, it becomes increasingly difficult to service everyone, as each client and product offering have a different set of demands.

It’s always interesting when we start working with clients. I often hear the diverse range of things they offer and the even more diverse range of people that they do it for. This gives the impression that they a multinational company with the resources of 1000's of people.

Quite simply, this does not work when you want to scale your business.

The solution is highly counter intuitive. You need to work towards a niche that is so tight and narrow that you need to feel positively uncomfortable. So uncomfortable, in fact, that you actually think there will be no chance that you will find enough clients in this tight niche to run your business as you move forward

The most mature businesses in the world have a very clear idea of what they do and who they do it for.

Think about Apple: They have 5 core products: iPads, iPhones, Laptops, Desktops and Watches. All are designed for the premium end of the market; people who appreciate amazing design, great usability and the kudos that comes with having a premium brand in your hand.

Every car has a very clear product offering and a target market for each car. Think about what springs to mind when you think of a Kia and who might be driving a one.

Then think about the different images that come into your head when I mention a Rolls Royce, who drives them. Now compare this to a Ferrari. Each one is designed for a different person.


The point here is that thousands of hours have gone into working out what products these companies offer and who they are offered to, and there is very good reason and logic as to why this time is invested.

If you do not know who your ideal client is and what product you are offering to them, you will not be able to successfully grow a business.  It really is as simple as that.

That’s why identifying your Ideal Target Market is the vital first step in the process when asking for referrals. The success of your referral strategy depends on this clarity.

This is a constant work in progress. Once you have created you ITM and the product you sell to them, you will get clearer and more narrowly-defined over time.


The next very obvious question is “how on earth am I going to do this?”

Begin by writing down your answers to the following questions:

Once you have written down your list of your top 50 clients, begin calling them. Ask them why they chose to work with you and what they think you’re best at. What would they say to a friend when they are recommending you?


What sort of businesses do I prefer working with?

Yes, you do have a choice! Let’s be smart here and choose easy ones!

As business owners we all have a choice as to who we work with. At Business Benchmark Group, we call our best client “A graders”. These are the type of people who pay their bills, show up on time to meetings, appreciate what we do and say thank you when we do a good job.

We all have the opposite type of client, also. The ones who takes up all of our time, when nothing we do is ever quite good enough and when it comes to paying... well they don’t or they only do when it is overdue by 60 days - and then only after 3 or 4 phone calls.

Why do we accept these sort of “D-Grade” clients?

Some of it is due to the fact that no one has ever said that it is perfectly OK to ditch these clients and get replace them with A graders.

The other part is that this is always a by-product of our early years in business when we were in the habit of simply saying yes because we needed the business. Now is the time for us to set up a new standard and work out who our A grade client are and why we grade them so.

This is all part of the exercise of determining our ideal target market. It will be very personal to you as each individual has their own criteria for working out what makes an A grader for them.


Which of my product set produces the highest gross profit for me?

We are building a business here, and part of building a business is to make sure that we are making profit and, in particular, having a constant focus on our gross profit.

It’s absolutely essential that when we are determining our ideal target market that we have some financial criteria here as part of our selection methodology. As a general rule there will always be the potential for us to 'like' some of our product offering more than others and get emotionally attached to them.

In order to remove the emotion here, make a list of the top 5 products you offer and work out how much gross profit you are making on each.

You do this by taking the revenue you charge and then working out how much it costs you to deliver the service.

For example, if you’re a plumber and you are connecting a house to the sewer network, you would add in the cost of the pipes, the cost of hiring the excavator and the cost of the wages for doing the job and then subtract this from the revenue you make.

In order to then compare products you would need to work this out as a % GP.


What sort of work do we really enjoy doing?

Again, it’s important to realise that we all have a choice when it comes to the work we do, and who we do it for.

We can choose to work with 'A graders', or not. We can choose profitable work, or not. We can choose work where we have already built an excellent reputation for, or not.  And we can choose work that we enjoy, or not.

I know what I choose! As a result I do work that I love every day, with excellent clients, where I have a brilliant reputation, and I get well paid, too.

Now that’s an excellent choice, that I want for you too.What is the sort of work that gets you out of bed every day of the week because you really love it?

Go back to your list of your top 50 clients and pay attention to the type of work that you really enjoy.

What were the weeks when time flew? When your work did not feel like work?

What are the jobs that you really enjoy - when it feels like it’s almost a crime to get paid for doing the work?

The other side of the coin is to think about the jobs when time stood still, when every minute was a pain and procrastination was the name of the game. There are clues everywhere and as long as you’re true to yourself and are discerning, you will find the answers.

In every industry, there are many different niches we can choose to work in.  Let’s take plumbing as an example. A plumber could specialise in anything from fixing taps, to installing all the plumbing for a new house, to drains under a house.

In our experience working with many different trade businesses, we have always found that each business owner has a preference for a certain type of work.

Some plumbers enjoy the consistency of constantly working with builders and gaining reputation by getting better and better at the same thing.

Others find this way too monotonous and would prefer to have the variety of maintenance plumbing where you are solving problems on a daily basis and are using the entire breath of your plumbing knowledge to solve these problems.

How about Accountants? Accountants can work with any business, and most do until they learn that business becomes more profitable when you specialise and you start building profitable niches.


Working out how many new clients you want:

By now you should be getting a very good idea of the sort of client that you really want to be working with. It must be a combination of the type of work that you love doing, that you have built a reputation for being really great at, that is profitable and there is a substantial market for.

Now it’s time to do a little bit of maths to double check that the market that we are aiming for is actually going to help us get where we want to go.

Take an example of one of these clients and add up what they typically spend with you during a year. This would become their annual spend.



Average $ sale x number of transactions per year = Average annual spend


We work with an Electrician who has made a reputation for being excellent at 'quick, clean in an out jobs'. 

What this means for him is that he likes to be working in environments which are new builds, were there is a requirement for the job to be done quickly and to an incredibly high standard. This makes him perfectly suited to high end shopfitting and other commercial jobs. This is also a perfect fit for his personality, and this is the type of work that his team loves.

We worked out that this sort of work is worth about $40k per job (dependant on the size of job) and that an 'A grade' client is worth at least $200k per annum to his business.

Also, due to the nature of the work, there is a good margin to be earned because the people he works for cannot afford to make any mistakes. The cost of call backs are extremely high in terms of lost trading once the business is open.


Now that you know the value of each of your A grade clients, you can now work out how many that you would like to have in order to hit your growth targets.

If you are a B2B business, the good news is that you will not need huge numbers to make a massive difference to your business.

This is why referral marketing is the perfect strategy for you, because the number of new clients you need to generate are extremely small.

A word of caution: AIM BIG!


Over the course of my journey of working with thousands of small business owners around the world, I have found that there is one common theme: they all aim too small or, in many cases, have no real goals at all!

You will only achieve what you aim for, so if you are aiming for something big you might just get there.

The worst case scenario is that you will get to a smaller percentage of something that is bigger, which is most likely going to bigger than what you were thinking in the first place.

A rule of thumb: Double whatever you first thought, and start from there!

Now you will find that there might be many naysayers in your life who start telling you to be realistic and not aim so high.

I say, screw them!

The only way to get bigger is to think bigger and go for it. The only thing that you may need to adjust is your timeline.

This is a tried and trusted technique that has been used for decades and is well written about in the world of personal development.


For instance, with the electrician I have been talking about:

We worked out that in order for him to double the size of his business we needed $1m of new business. This was something that he had never done before, and in fact he had been stuck on $800k of revenue for a couple of years.

Clearly he needed $1.2m of new business and at the time he had never won that amount of business in his entire life, let alone in a single yea.

We went through the process and worked out exactly what he was looking for in terms of an 'A grade' client.

Then we did the maths. It worked out that he needed 6 new clients at $200k per year. Only 6 clients! This doesn’t sound too hard, only 1 new client every 2 months.

We then worked out that we would approach 24 of his current A Grade clients in order to convert 6 of them.

Within 18 months, he was tracking for an annual revenue of $1.8m, and were able to use referral and relationship marketing alone as our lead generation methodology.


Time for you to do the calculations

·         How many clients would you really like?

·         What is your stretch target going to be?

·         How many leads do you need to achieve this target?



What does a description of an A grade client look like?

Creating the description of your 'A grade' client is a constant work in progress.

You will be working on this for the rest of your working life, striving to make it clearer and clearer.

The rule of thumb is very simple, it either creates a picture in someone’s mind of what you’re looking for, or it does not. It is vital that you go through a process to make certain that what you are say is clear and precise. You will need people around you to offer you honest feedback (preferably a professional coach).

Be specific:

Let’s go back to our description of the clients that we love working with and go into the detail of them and answer these questions:

a)       How long have they been in business for?

b)      How would you describe the owners as people?

c)       How would you describe the owners as business people?

d)      What are their employees like?

e)      What are the standards like in the business?

f)        What is their reputation like in the market?

g)       What industry are they in?

h)      How many employees do they have?

i)        How many jobs do they do a year?

j)        What geographic areas do they work in?


At the Business Benchmark group we work with:

Small business owners who run businesses with 10-50 employees, with a turnover between $1m-10m. They have been in business for 5 years or more, are trade-based businesses (plumbers/builders/plasterers) or industries associated with them. 

They are family businesses, with the owners in their mid-30's to mid-40's.

Now hopefully this paints a clear picture of what we are looking for.

The idea here is to go tight, so niche in fact that it feels uncomfortable. When you hear yourself saying that you will have to say no to people that you doubt that there will be enough clients for you to work with - that's when you're being specific enough.

 The key features of the description are:

1) Number of employees

2) Geography in which they work

3) They type of work that they do

 It also needs to be something that you can describe in no more than one paragraph.

Once you have created the description of your ideal target market, its time to go and test it out to see how it works.

The process is very simple, ask some people if they know anyone who fits your description (preferably people in your industry or target market, or at least people who are likely to know what you are talking about!). If names spring to mind when you describe what you are looking for. If not its time to go back to your description and work on it some more.


A couple of words of warning...

This is a process that takes time and plenty of testing and measuring.

Most of our clients take 6-12 months of testing and measuring to create a highly effective description of their target market, and this is with the help of a professional coach.

Part of the reason it’s so challenging is because you must break with habits that have formed over many years.

The bad habit of working for everyone will take some time to break. The more specific you get the better the client you will end up working with and it really is your choice.



Let me give you another example of a client we worked with.

He went through this process. He ran a break fix IT business.

Over the course of the process we worked out that he had made his reputation in the larger world of IT working with corporates.

The business he bought was dealing with tiny one-man band businesses, and a very wide range of businesses up to some medium size enterprises.

Most of these businesses were challenging to work with, the margin was low as was the average $ sale. To add to this, many of them were not the best at paying on time. We had effectively worked out who his ‘D Grade’ clients were.

We then worked out that who he really wanted to work with were companies with 200-500 employees that did not yet have their own internal dedicated IT department.

They were mostly manufacturing/retail businesses with complex processes which could be made more efficient with improved IT solutions. Their turnover would be in the $20-50m range.

Once we started asking for this type of business our average $ spend per annum moved from the $1000's to the $10,000+, and revenue grew by over 50%.

Additionally we were able to let go of many of our 'D grade' clients. This, in turn, freed up our operational capacity and improved our profitability. We could have less clients, yet increase turnover with the same staff.

The final win was that everybody in the business enjoyed work more as they had better clients to work with.

Hopefully this story gives you a great picture of the power of doing this work, and the benefits it can give your business.



How do I know when I am winning? The importance of saying no

When you look at the world of big business it’s very clear what they do and what they do not do.

Bunnings, for instance, is a DIY and building supplies store. They do everything for the home and garden, so you can build what you like.

They could choose to offer many other products. They have big stores, and a huge number of customers travelling to their stores. They could sell pet food and goods for pets, they could stretch to camping and outdoor activity gear, but they don’t.

Why do i mention this? Because Bunnings is very clear as to what they do and who they do it for.

They are very clear as to what they need to say no to. You need to learn how to do the same.

You will know when you are winning when you feel confident enough to say no to 'D grade clients',

When you meet a prospective new client, you know what you’re looking for and if the client is not ideal, you’re able to communicate that point that in a very polite and elegant way.

This is a very important transition as the small business owner says yes to everyone, because they have to they have no choice.

You need to say yes to everything because you need the money, it really is that simple.

The problem is that this habit that has got you here will not help you get to the next level. In fact this very habit will prevent you from getting to the next level. Hence the importance of getting very clear on your target market.

So now we have a clear idea of who we are looking for, how many of them we need and what we do for them, it’s time to go out and find them. I look forward to continuing this series over the weeks of Referral Month.

If you follow our advice each week for the next 6 weeks, you will be well on your way to creating an extremely effective referral strategy that will drive your business growth.

Yes it will take time, commitment and persistence. It will require us to challenge ourselves and break old habits. But with our process, it can become the most effective and efficient lead generation strategy in your business.

See you for next week's installment! 

Damien Churton

Senior Strategist - Business Benchmark Group


Could you use some guidance to run a more successful business? We offer free workshops so you can "test drive" our coaching with no obligation whatsoever. 

Call 03 9001 0878 today or drop us an email. 


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