In coaching thousands of small business owners around the world, I’ve learned that most are missing out on a very big secret. This secret is how I built my high-end cleaning company from the trunk of my car into a company that produces $3.5 million in sales. It is also how small businesses worldwide are having record sales and profits.

Here’s the secret: Instead of spending so much time following up with individual prospects or trying to attract strangers in the constantly changing online world, invest your time building relationships with powerful referral sources.

What I mean by a referral source is a company or professional that has a relationship with a large group of your perfect niche clients.

One example is John Torres. He grew his cleaning business from zero to $600,000 and then began doing restoration. Using the same process, he grew his restoration and construction services to over $11 million in sales, and he is still growing.

I grew my cleaning company — for Oriental rugs, stone floors, and fine carpets for Houston’s most prominent citizens including world leaders, celebrities, and athletes — by building relationships via referrals from flooring retailers, interior designers, and real estate agents. They refer their clients to us exclusively. That business brings in almost $1 million per year just in referrals.

My definition of referral marketing is this: The process of building a network of sources that will refer multiple clients to your business.”

There are many reasons referral marketing is superior to other marketing methods, but these are the top ten reasons referral marketing is so effective:

  • Your network is unlimited. As you begin to build relationships with powerful referral sources and get your clients to refer you, the network continues to grow with no end in sight. The more you build and nurture those relationships, the more your business grows.
  • Higher-quality clients. High-end clients will seek out a referral rather than responding to an ad with the best price. Being “referral based” helps you attract a higher-quality client. Referred clients usually don’t even ask about price; they are more concerned about quality.
  • Prequalified clients. By educating your referral sources, your prospective clients will be prequalified; therefore, they will already know more about you (and that you charge more than the commodity- or service-level company).
  • People trust referrals. Wouldn’t you agree that referrals already have a level of trust in you? Sure they do. They trust you because the person they trust knows you.
  • Reduced competition. With referral marketing, you are no longer fighting for the best ad placement or having your ads copied. Relationships are hard to duplicate.
  • Low cost. With the right referral marketing system, you won’t spend money on expensive advertising. The cost is very low for referral marketing. Even with a referral reward program (which I highly recommend), the cost is still extremely low compared to most advertising.
  • High returns. The returns can be huge. In many small businesses, a four-to-one return on investment on advertising dollars would be outstanding. In other words, if you invested $1,000 in advertising, you would get an average of $4,000 in return. Most small business owners would be thrilled with that return. With referral marketing, if you paid a 10 percent referral reward, and everyone cashed in on it, you would have a 10-to-one return. In my reward program, I get a 20-to-1 return, and there will be more on referral reward programs in a future article.
  • Returns guaranteed. With a referral reward, you don’t pay until after the product or service is paid for. With paid advertising, you put your money on the line and hope for a return. Please don’t misunderstand: There is nothing wrong with advertising — if it works. More on that later as well.
  • Small-time investment. The biggest objection I get to referral marketing is “time.” See the point below, which overcomes that challenge.
  • Exponential multiplication! What I discovered about referral marketing is that, once you win the confidence of a referral source, they will continue the habit of referring you unless you give them a reason not to.

This is how I built my first company from the trunk of my car to a multimillion-dollar enterprise. I still use referral marketing today. This is how I built a well-known and trusted training business and the reason you are reading this article right now. And it’s the same method I have taught countless small business owners around the world. They are having record sales and profits because of it.

It will work for you, too, if you understand and apply it. You can clearly see why this strategy is the “secret” to record sales and profits. Yet, many small business owners still struggle to get out there and see referral sources. If that’s you, hire someone! You cannot afford to continue to leave those dollars on the table.

Howard Partridge started his cleaning business from the trunk of his car over 31 years ago and built it to more than $3 million a year. He teaches cleaning and restoration companies to have phenomenal success. Partridge is the exclusive small business coach for Ziglar Inc., the John Maxwell Coaching Team founder, and a bestselling author.