If you’re a freelancer, consultant, or agency owner, some of your peers are making $50K+ per year making referrals to others. Most of the people who do this don’t proactively tout how much money they make on referrals. But it’s more common than most think.
Monetizing referrals isn’t just a selfish thing you do to make more money. Professionalizing—and monetizing—referrals can actually be better for your clients and the people you refer business to.
If you’re going to do this, it’s important to do it professionally. There are valid arguments against monetizing referrals. But they’re mostly valid arguments against monetizing referrals unprofessionally.
This guide breaks down the benefits of investing more time in making referrals to others, how to think about monetizing those referrals, how to build your referral network, and how to make referrals as a professional matchmaker.
By following the tips in this guide, you can increase the volume of referrals you make to others, become one of the most valuable nodes in your network, unlock a powerful income stream, and end up with a pipeline that’s always full.
If you’re a service provider – whether you’re a freelancer, consultant, or small agency— there are two ways to grow your business: get more (or higher-paying) clients, and service more of their needs.
Keeping your pipeline full of potential clients is one of the most important things service providers think about. There are a lot of well-trodden tactics that people use to generate pipeline – from outbound sales, to social media, to content marketing. But referrals are the single best channel: they have a 4x higher conversion rate than any other channel.
There are some things you can do to get more referrals from your network, like asking at the right time, offering a referral incentive, and giving people materials they can use to share your services with others.
But the truth is, simply asking your network to send your referrals is not a sustainable business practice. Sure, doing so can result in a spike in new inbound referrals, but continuously asking the same people for referrals over time becomes less effective and can be draining and demotivating. Even worse, it can make you look desperate, or like someone asks for help without offering much in return.
Counterintuitively, the best way to get more referrals from your network is to focus on making more referrals to your network. People who get the most business from their network are usually the ones who refer the most business out. Here’s why:
1. Making referrals gives you a new way to engage prospective clients, even if they’re not ready for your services.
Being a connector means you can help prospects no matter where they are in their journey. Imagine if tomorrow, you could go to all the prospects in your CRM who you had a good initial call with and offer to put your network to work to help with any challenges they’re navigating. Many of these prospects would take you up on the offer, and maybe even realize that they need your services as well.
2. When you make referrals to other service providers, they reciprocate and keep you top of mind.
You probably have different service providers you know and trust who you’d be willing to refer clients to. If you can refer clients to them, there’s a good chance they can refer clients to you. It’s much less awkward to start a conversation by asking if they’re open to you sending them referrals than it is to ask them to send you referrals. And if you actually do refer someone to them, you’re always going to be top of mind.
3. Over time, you become people’s first call when they need help.
If you’re making referrals to a broad range of providers, over time, people in your orbit will start to view you as the “first call” they should make when they have a need. People will come to you even if they’re unsure if your services are what they’re looking for, since they know you can connect them to others. Active referrers end up with an abundance of pipeline, most of which they will refer out, but some of which they’ll take on directly.
Peter Kang (Co-founder of Barrel Holdings) shares this sentiment when recommending how to get more leads from complementary consultants:
"Be on the lookout for any opportunities that may land [complementary consultants] their next gig. A sure way to increase lead flow is to continually place these consultants with companies. In the best of cases, it’s like having someone on the inside who is proactively looking to find ways to work with you."
Playing the role of connector and making referrals is rewarding and feels better than asking for referrals – and it can lead to more of the results you ultimately want. But making referrals isn’t just great for keeping your pipeline full. It can also help you service more of your clients’ needs without spreading yourself too thin.
When doing client work, you’ll inevitably run into a situation where a client or prospect who trusts you needs help with a service adjacent to yours. If you’re a web designer, this could be brand identity design or an SEO engagement. If you’re a Fractional CHRO, this could be a comp plan revision or an exec search.
This is a great milestone. You’ve earned the trust of a client (or prospect), and now they’re looking to you to help with adjacent needs. You might wonder: Can I help them with and make more money?
Some people do nothing. They simply tell the client that they can’t help. But that leaves a great opportunity on the table.
Some people subcontract, often underestimating the hidden costs of subcontracting.
Subcontracting means that you’re selling the client on work, and you’re hiring someone to team up with you on a project and paying them for their work. When subcontracting, you take full responsibility for orchestrating the delivery of the adjacent services, and you mark up the services so you can get paid a premium for the orchestration. Subcontracting only makes sense if all of the following are true:
Often people subcontract when one of the above conditions aren’t true, and they end up regretting it. The operational overhead of subcontracting is material, and sometimes standing in the way between the client and the subcontractor creates more confusion and friction than it does value. In these cases, it’s typically better to just refer to the person you trust, and let the client work directly with them.
The third option – referring – is a happy medium where everyone wins.
Clients always need to know who is the one responsible for what work. When referring, you can make it clear that they’re forming a direct relationship with the other service provider (and they are responsible). Ultimately, referring can be more client-centric and create more clarity on everyone’s responsibilities.
“I’ve started referring instead of subcontracting because there’s less downside risk. In subcontracting, I'm responsible for that person's work in both directions - if the client isn't happy with the contractor, I look bad, and if the contractor isn't happy with the client or the gig doesn't continue, then I look bad. Referring is more egalitarian - every person for themself. I create value through the introduction, but don't keep intermediating after that.”
Referring instead of subcontracting also helps you stay focused on the type of work you enjoy and are best at. Getting involved in projects that are outside of your sweet spot slows you down and, counterintuitively, makes it harder to grow long-term.
Even people who’ve previously built agencies with dozens of people are now building much leaner practices by focusing on referrals:
So we’ve established that making referrals can be great for business. This leads to another question: should you monetize them?
It’s hard to get really good at making referrals if you’re only going to do it occasionally. If you’re going to become a referral-making powerhouse, making referrals will need to become a core business activity.
Some people default to referral karma: making referrals to others with the hopes that the favor will be returned someday. There’s merit to this approach, and it’s certainly the path of least resistance. But there’s also merit to monetizing referrals, and you should make a decision about which approach is right for you.
The truth is, doing professional service referrals well is about more than just firing off a quick intro email. You could be catalyzing a valuable relationship where both parties end up investing a lot of time and money working together. Doing this well requires you to act as a matchmaker, where you apply your own expertise to connect clients and service providers who are a good fit to work together. This is valuable work that’s worth getting compensated for.
Referral compensation is more prevalent than most think
Asking people to pay you for referrals you make to them can feel awkward to broach. But despite how it may seem, such arrangements are common—they’re just not talked about much in public. After all, if you refer a client to a connection, and that connection makes $50,000 from that client, it’s reasonable to wonder if they might be open to cutting you in.
In many cases, they will be. 20% of self-employed service providers and 50% of agencies offer some formal compensation for referrals. And anyone getting leads from a marketplace is used to paying for them. Bigger agencies like Hawke Media and BlairesDev have massive referral programs with hundreds of people making referrals that generate over 20% of their revenue.
Being willing to pay for referrals makes sense. Business development is one of the most painful business challenges for service providers, and it's typically the thing they hate doing the most. If they can compensate others to generate warm referrals for them rather than having to spend a bunch of time on sales and marketing, that’s money well-spent.
Monetizing referrals can actually be better for everyone: you, your clients, and the people you refer to. Clients benefit because by making referrals a core part of your business, you’re incentivized to build your network and make really great referrals. Your referral partners benefit because having incentive alignment means you’ll go the extra mile to help the people you refer to close the deal. And you benefit because getting compensated lets you invest energy into into this work sustainably, without having to wonder if and when people will reciprocate the favor.
You should only monetize referrals to other service providers if you’re willing to do it the right way. And you don’t have to do it with every referral or every person in your network. There are two golden rules to follow when monetizing referrals:
There are a few ways to approach referral monetization that ensure you follow these golden rules and remain client-centric.
If you want to start increasing the volume and quality of the referrals you make, you can take some practical steps to position yourself as a matchmaker in your network.
To put yourself in a position to make more referrals, your network needs to start to view your as a connector and matchmaker. Here are a few concrete ways to do this.
Introductory calls with prospects are a core part of doing business development. There's a really simple way to turn every introductory call into a potential referral you can make.
Whenever you're having an introductory call with a potential client, start the call with a line like this: "I offer some services myself, but I also have a great network of other excellent consultants and agencies. Let's focus the call on what your biggest challenges are. Even if we're not a fit to work together, I can probably introduce you to some great folks you should talk to."
This line does a few things:
Embedding this opening line into most of your networking conversations and interactions with potential clients can turn you into one of the more valuable connectors in your network. And even if you don't end up working with the client now, they're going to come back to you in the future when they need something else.
Service providers who embed this into their “script” for introductory calls surface tons of opportunities for referrals to others in their network.
Advising and referring
If you provide strategic services, you can position yourself as an advisor and referrer. This means you provide high-level strategic guidance to help clients understand what they need, and you can help them find the right service providers to help with implementation.
This works best with people who are Fractional CxOs or provide highly consultative services where the value of their time is best spent high-level, not on actual deliverables. In these cases, you have the functional expertise to not only diagnose challenges, but find and vet the right service providers to solve them. Your client probably doesn’t have the expertise to even know what they’re looking for or suss out who is ideal for their needs.
"I have a very client-centric mindset, and when my advisory clients are looking for support, I can usually find a great person in my network that can help. In these cases I run a quick process where my network can easily pitch themselves for the opportunity, I can create a shortlist of great candidates, and my client can pick and choose who they'd like to be introduced to."
Doing strategy deliverables and referring implementation specialists
Similar to advising and referring, if you provide high-level strategic value, you can create strategy deliverables. Examples of strategy deliverables might include:
With any of these types of deliverables, there’s a common follow-up question from clients: “Great! Now who can help us implement this?”
Sometimes that person might be you. But these deliverables essentially inventory new needs that a client has, all of which could be opportunities to bring someone else in to help.
Offering zero-fee recruiting services
The most aggressive way you can position yourself as a referrer is by offering zero-fee recruiting for contractors or service providers. Clients are used to recruiters charging fees for successful full-time placements. But if you’re getting paid by the people you refer to, you can offer a “free” recruiting service to clients.
“Clients primarily ask us for help with regular employment hires, but now clients are often asking for interim, project, contract, and fractional workers. Applying standard recruiting fees to these types of hires makes the client think twice about engaging us. But by monetizing it on the contractor side and running these “searches” for clients for free, we clients now come to us all the time asking for referrals.”
This can work across all types of functions – whether you can help people find contract engineers, HR consultants, coaches, or anything in between.
So now that you know how to put yourself in a good position to make referrals, you’ll need to build out your referral network.
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There are a few things you’ll want to do, both when getting started and on an ongoing basis:
Let’s dive in.
Ideal people to make referrals to are service providers whose services are adjacent to yours in each of four directions: upscale, downscale, upstream, and downstream.
To find providers like these you’re connected to, you’ll need to spend some time scanning your network. Here are a few tips:
Here’s an example of an ideal partner network for a marketing consultant:
If you’ve identified or are networking with service providers who would be good referral partners, you’ll want to “add” them to your referral network.
When adding someone to your referral network, you’ll want to (1) confirm that you can send them referrals, (2) align on referral terms, and (3) collect information on their services that can help you make referrals.
Broaching and negotiating these arrangements is often awkward, but it doesn’t have to be. There are a few guiding principles to keep in mind:
Confirming that you can send them referrals is the easy part. Aligning on referral terms is a bit trickier. Remember our golden rule: “Only ask for referral compensation if you are willing to offer it in return.”
The least awkward thing to ask someone for is a reciprocal agreement: they pay you for referrals you send them, and you pay them for referrals they send you. Even if in practice one partner sends many more referrals than the other, being willing to reciprocate makes these conversations a lot cleaner.
While there are more detailed brass-tacks terms that go into referral agreements, the more important priority is to simply communicate the referral compensation. There are three pieces of information an agreement needs:
Referral incentive amounts
Referral incentives can be fixed (e.g. a flat amount for successful referrals) and/or variable (a percentage of revenue).
Usually this is really simple and based on a single revenue stream (e.g. services revenue). For example, a consultant might offer: “10% of revenue from consulting services.”
Sometimes, there may be other services or income streams that you might want to layer on. For example, some consultants may offer consulting services, sell courses, and have other revenue streams. That same consultant might offer:
Limits per client
When discussing referral agreements, people can get concerned about paying out referral fees in perpetuity for an ongoing client, or paying out a huge amount if they end up upselling a client.
There are two levers that are used to limit the amount that someone pays for a referral:
Here’s a good standard referral agreement we see often:
Step two: Connect with new partners
Once you identify people within your network who might be good referral partners, how do you initiate the conversation and eventually broach a referral agreement?
You should broach the referral agreement once you trust the person enough that you would genuinely be willing to refer a client to them.
For some people who you already know and trust, this might be right away. For other people, you may need to connect with them and learn more about the work that they do before you’d be willing to refer to them.
This almost always starts with a conversation (unless you already know the person well). Here’s an example of a good outreach message you could DM to someone on LinkedIn, in Slack communities that you’re in, or any other networks you participate in.
Once you know that a potential partner is someone you’d be willing to refer clients to, you can broach an agreement with them. You want to keep this casual and easygoing, but still professional. Avoid making it overly formal or transactional.
You can share the referral agreement you use with others and the referral compensation you offer in return. There’s a chance your new partner may have their own referral agreement they already use with partners that they might prefer. You can decide how amenable you want to be to using their own referral compensation. Here’s a draft of what the tone and messaging might look like:
If you’re going to make a lot of referrals, there’s some information you should collect that will help you make more relevant referrals quickly. It helps to have a sense of a service provider’s ideal clientele, the services they provide, and their rates. Having this information in-hand can help you qualify potential clients on their behalf and reduce a lot of the back and forth that often happens when trying to make referrals.
You can always collect more information, but if you add data that you need to collect from your partners, it should arise from a real need. Resist the temptation to collect a lot of other information to collect that doesn’t end up being useful.
It’s tempting to want to create a database or a form where you have everyone’s services neatly tagged and categorized, but it’s often a fool’s errand to try to perfectly codify information about all of the service providers in your network. The service providers you trust have different ways of defining their services, packaging ways clients can engage with them, and articulating their pricing. It can be difficult—and often unnecessary—to try to get everyone to provide information in a consistent, codified format.
Here’s a template questionnaire we recommend using to collect information from your network:
Note that this information is always evolving for service providers. They change their pricing or start offering different services frequently. This is why it’s always good to keep this simple. And collecting this information upfront is just the start. If you’re maintaining a strong referral network, you’ll want to give your partners ways to update this information over time.
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Doing professional service referrals well is about more than just firing off a quick intro. It requires you to act as a matchmaker, where you apply your own expertise to connect clients and service providers who are a good fit to work together.
If you want to increase the volume and quality of the referrals you make, you need to become a good matchmaker. Otherwise, what can start as a well-intentioned desire to connect people can lead to a bunch of cumbersome back and forth.
To make high quality referrals, you’ll need to figure out who in your network is a good fit for the client’s need, get opt in from both the client and the provider, and make the introduction.
Let’s unpack how to do these things well. We’ll start with what comes at the end—introductions—and then work backwards to figure out how to get to that point.
Good introductions do three things:
This can be brief. Here’s a great example:
Sometimes a client is asking for someone and you have the exact person in mind they want to talk to. In those cases, you can just make a quick introduction. But just making a one-off introduction is implicitly a very strong recommendation—you’re saying that this is the one person you recommend they talk to.
Generally speaking, it’s more valuable to curate some options for a client, so they can choose who they want to talk to. Providing options gives the client more agency, and it makes you look more impressive as you’re able to quickly curate vetted options. It also drastically increases the odds that you’ll be able to make a connection to someone the client actually ends up working with. If you only provide one option and it’s not a fit, then you will have failed to address the client’s need
There are generally two ways that people curate:
Let’s break these two ways down.
If you’re spending any time talking to clients or prospects, you’ll uncover challenges or needs that they need to address that you alone cannot help with. Oftentimes, clients or prospects will come to you asking for one thing, but your expertise will help you advise them that what they need is actually a little different.
For example, if you’re a former VP of HR currently providing fractional HR leadership services, a client may express a need for a compensation consultant. If you run a marketing agency, a client may express a need for PR support. If you’re running a product development shop, you may uncover a need for some data engineering work.
In these cases, you’ve surfaced a client's need and have their trust. This is a valuable position to be in. There’s an opportunity to make a great referral.
To translate a client's need into great referrals, your goal should be to generate a shortlist of 3-4 highly qualified candidates. Speed matters here—if your client has a need, you want to address it quickly, because they may continue asking around.
To create a shortlist, you need to tap into your network to find relevant service providers. There are two pools of service providers you may tap into if needed: (1) your existing referral partners and (2) your broader network.
The best way to minimize back-and-forth is to create a simple brief that articulates your (anonymous) client’s need. This helps you avoid having to respond to requests for clarifying information from providers who might be interested in the referral
The anatomy of a brief
Like the name says, briefs can be brief. They just need to have the information you need for you to tap into your network and have people qualify themselves as a good fit. You should have this information before you start tapping into your network and making referrals—even if it’s just in your head.
Here’s a good example:
Let’s break down the valuable information that could be included in a brief:
With this brief in hand, you can broadcast this out to your network to surface people who might be a good fit. In 48 hours, you can turn around a shortlist that looks like this which you can present to your client via email, via a Google Doc, or via a shortlist with Switchboard.
Now let’s talk about how to tap into your existing referral partners and your broader network.
You should have these people provide a quick pitch on why they’re a good fit for the opportunity so you can know if you should share them with the client or not. You can also add qualifying questions that will let you do some qualification on the client’s behalf. When sharing a brief more broadly, it’s common that you may get 10+ people who are interested, and it’ll be your job to filter things out for the client.
Now for the tricky part. You do not have a referral agreement with these people. But given that you have a live referral that’s highly relevant for them, it’s clear that you might make good referral partners.
If someone is a really great fit, you should be willing to put them in front of the client even if you don’t have a referral agreement. You should give them the opportunity to opt out of becoming a referral partner of yours if they are vehemently opposed to paying referral fees—that’s what being client-centric is all about. But this is also an opportune moment to align on referral term, both for this specific referral and for other potential referrals in the future.
Once they provide their quick pitch, you should ask them if they want to become a referral partner. If they don’t, they can tell you. If they do, then you can collect the other information you’ll need from them to more easily make referrals in the future, and get them to agree to your referral agreement. This is a win for everyone.
Preparing your shortlist
If you get 8-10 interested candidates, 3-4 of them may be excellent candidates you want to share with the client. You’ll want to include their basic information (name, website, linkedin), their pitch if they gave one, and most importantly, your commentary. You can provide this via email or even a quick Google Doc. To increase your credibility, make sure you provide some of your own thoughts on each candidate in a way that’s balanced and shares booths pros and cons. This earns a lot of trust and increases your credibility.
This whole process can happen quickly, often in 24 hours. But what if you’re talking to so many potential clients that you need an easier and more passive way to refer?
That’s a people-first referral.
Making referrals based on specific needs leads to more curated and relevant matches. However, as you build your referral network, there are also passive ways to empower your clients and prospects to explore your network and request introductions themselves.
For instance, if someone in your network is looking for good marketing agencies and you don't have detailed context on their needs, you can simply share a list of your preferred agencies and let them request introductions.
Directories are fine; Shortlists are better
While building large referral networks, some may create directories to allow people to search, filter, and browse through numerous service providers. Although this might seem impressive and somewhat useful, it places the burden of curation on the client.
For example, if a client seeks an executive coach and you provide a directory of 50 service providers, with only 4 being executive coaches, it can be overwhelming and inefficient for the client to find the right match.
Shortlists are more effective. These are pre-filtered lists of your referral partners based on common needs. For instance, you could have a shortlist for marketing agencies, another for executive coaches, and so on. These lists are based on the common requests you receive, allowing you to quickly share them and facilitate more targeted referrals.
How to make people-first referrals
When making a people-first referral, use the following process:
This process is easier on you than the need-first approach, but it has a lower probability of a successful referral.
Let’s say you refer a client to a service provider. Whether or not you’re collecting a referral fee, you should check in with both the client and the service provider for status updates and feedback.
There are a few critical reasons:
When collecting feedback, structured data or rating systems are overrated and impersonal. Richer context/feedback from both sides is more valuable.
Emails to the client should be simple and focused on helping them.
Emails to your service providers can be a little more direct.
Monetizing referrals is not just about creating an additional revenue stream; it's about professionalizing a crucial aspect of your service business that benefits everyone involved – you, your clients, and your network of trusted partners.
By implementing the strategies outlined in this guide, you can:
Remember, the key to successful referral monetization lies in maintaining a client-centric approach. Always prioritize finding the best fit for your client's needs, be transparent about referral agreements, and follow up to ensure satisfaction on all sides.
Ultimately, by mastering the art of professional referrals, you're not just growing your own business – you're creating value for your entire professional ecosystem. You're solving problems, fostering connections, and building trust. And in doing so, you're positioning yourself as an indispensable node in your network, ensuring a steady flow of opportunities for years to come.
So, take the first step today. Identify potential referral partners, start conversations about referral agreements, and begin positioning yourself as a connector.
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