Why Agencies Rely on Referrals But Few Treat It as a System

Sei-Wook Kim (00:05.903) On this episode, we're talking about referrals, why most agencies rely on them, but few treat them as a system. We'll share lessons from the book The Referral Code, on asking the right way, building trust, and staying top of mind. Peter Kang (00:20.814) All right, so referrals — a lot of agencies say they rely solely on referrals. This is something we hear over and over again. But one thing that strikes us and we've talked about a lot whenever we hear these things is that they don't treat referrals as a system. It's almost like a hope-based belief that, hey, if we do great work, people are going to tell others and we're going to get referrals. So today we really want to talk about what more intentional referral generation looks like. And just to frame this, it's a bit different than partnerships because we did have an episode earlier about partnerships — episode 12, the lightweight agency partnership program. With partnerships, we talk more about building something scalable, more about aligning incentives, and building a repeatable system where two parties can grow together. That's with your platforms or other agencies. But for this conversation, we're going to talk about referrals from a perspective of good feelings — this network, this desire to want your network to feel good about the experience they had with you and then, in turn, their willingness to present you with more opportunities. Anything to add there before we dive in? Sei-Wook Kim (02:01.073) Yeah, referrals are such a big part of the agency journey. We've benefited quite a bit over the years from getting great referrals into the agency that led to really great opportunities that helped us grow. And we went along this journey where we early on hoped that, because we did good work, of course people would hear about it, and we weren't very intentional about that process. Peter Kang (02:37.077) Yeah, definitely. For the vast majority of our time running an agency, hope-based referrals. But one book that we read together as part of our leadership team really impacted how we think about referrals, and we'll be referencing it throughout this episode. The book is called The Referral Code. It's by Larry Pincey and Phil Glosserman. It's a very short book, but packed with a lot of good tactics around referrals. So maybe let's begin — how can we think about referrals conceptually? How should we define it? Maybe we should start there. Sei-Wook Kim (03:22.395) Yeah, the book talks about this too, but a referral is essentially a transfer of goodwill. It's not someone doing a favor for you. It's people sharing the feeling that they had working with you with other people in their world, in their network. So it's very emotional from that perspective. It's all the feelings that they had, the confidence that they had working with you, the appreciation they felt from the impact that you made, and that personal connection they had with you. And thinking about the example of someone who has worked with you — in general, it's how do you extend that feeling that you have within one person to more people in your network? Peter Kang (04:14.435) Yeah, totally. The word they use in the book a lot is love. I think we equate that to this good feeling that you might have from working with someone. We talked about this pre-recording — when we look back on folks that we've referred to our network, whether it's consultants, coaches, other agencies we've worked with, it's actually all about, hey, we had a great experience working with these people, they did a great job for us, and we're sending that referral to people who we care about. We want them to have that same good experience and find the same success. And that's more important than anything. The worst thing that could happen is if you refer someone with that good feeling but they end up disappointing the person who they were referred to. That is a terrible feeling. So you want to be careful — we try to be careful there, and we're not willy-nilly referring anyone we happen to feel good about. Sei-Wook Kim (05:30.446) Yeah, definitely. So let's talk about what are the wrong ways to go about seeking referrals. We've definitely done many of these along the way. If you want to jump into some of these wrong ways. Peter Kang (05:45.611) Yeah. The first one is just being not specific enough — treating referral seeking as a blunt instrument. You go up to somebody and say, hey, if you know anyone that needs a website or needs marketing help, let me know. That just shows a lack of intentionality in the referral seeking. Part of that is you really have to be more specific about what it is you're actually seeking — who are the people you actually help and how? There's a lot of groundwork to be done on that front. Think about how you're going to ask, and seek to educate first and give more context on who it is that you actually help. Sei-Wook Kim (06:50.637) Yeah, timing is another one. Thinking about the right moment where the person has a feeling of gratitude — where they're reflecting on the project you worked on together and thinking, wow, all this impact, your team was so great. When they're in that moment, that's the best time to ask. So the wrong time is when the client is unhappy, when you wrapped up a project and they gave feedback that wasn't great, and then you ask, hey, do you know anyone who could benefit from our services? Catching them at the right time of appreciation matters. Peter Kang (07:22.731) Yeah, and I'm sure we've felt this too. Think about home services — you get something done to your house, it was a subpar experience, maybe they were terrible with communication or overcharged for something, you're not feeling great about it, and then all of a sudden at the end they're like, hey, can you refer us to some other people? Sei-Wook Kim (07:54.103) Yeah. Or sometimes it's an automated email where it's just like, hey — really? Now you're going to ask me for a referral. Peter Kang (08:05.502) Yeah, and in some cases that kind of pushes people the other way where you're thinking, you know what, I'm going to bad-mouth these folks or leave a bad review. So you have to be really careful. And what you brought up — in The Referral Code they talk about it as never asking for referrals outside a state of appreciation. It's about identifying when that state of appreciation is, and you do that simply by asking, like, hey, when was a time that we did a good job for you? You put the potential referrer into the mindset of feeling good about when they had a good experience with you. All right, so maybe we should jump into how we go about building the referral engine. We talked about avoiding the vague asks. First and foremost, you want to be very specific about defining who you're actually looking to help. This is basically ICP work — industry, company size, job title, the folks who might be ideal referrals. What kind of situations are they in? Because it's one thing to say, hey, send us to CPG brands that need a website, but you can get more specific on the situation: anybody about to launch a new product line, or maybe after some kind of a transaction where they've been acquired or sold, or when a new CMO is in town. So define these things for the types of folks. Maybe you could dive into who should be targeted for referral seeking. Sei-Wook Kim (10:02.806) Yeah, the next step is thinking about who is on your referral list. Examples are former clients — people you've worked with in the past — or existing clients where things are going well and you have a good relationship. People who work with a similar ICP: peer agencies or people who have a similar ICP target but maybe different services, where you could be good referral partners for each other. And then what you might call an affinity network — school alumni groups, local community groups, places of worship, or associations you might be affiliated with. Thinking about people who may have a good feeling about who you are, who know you, and who have some experience to vouch for your reputation. Those are a good baseline of referrers. Peter Kang (11:09.465) Yeah, and within these broad categories you can go super deep, because even within the people who work in a similar ICP, you're talking about people who might do something adjacent to what your firm does and something complementary, or you might do something where the ICPs are the same but it's totally different types of work. For example, there are fractional CFO types, or even legal services or supply chain folks who we've sent referrals to and also received referrals from, because they work with the same B2B or CPG type of clients. It's very important to dig deeper and see what those possibilities are. I'm always surprised — when I go through my LinkedIn connections looking for potential referrers, there's a lot you can mine from looking through that lens. Sei-Wook Kim (12:15.55) Yeah. And the other thing about the network is that you never know who will be the referrer. That person on your list may not be the referrer themselves, but they may know somebody who then knows somebody — it can be a multi-step referral journey. As long as the feeling of appreciation from the first person can pass through to the next person, each person is vouching for you. By the time it gets to the person who needs what you provide, that's where the connection gets made. Peter Kang (12:50.224) Exactly. This is classic network building, right? A lot of times with your first-degree connection, trying to get a referral that leads directly to a deal — it can be shortsighted. There's a degree of patience that's required to do this right. Sometimes the best opportunities come because you've parlayed one relationship into another, into another, that then leads to that big opportunity. That could be years in the making. You can't be transactional about it. You almost have to think, look, you're planting a lot of seeds. Some are going to be something you can harvest at some point. Others might not bear fruit at all. So how do you maximize that and just show up, be authentic, be helpful, and then the good things will happen. That mindset is really key to building up this engine. Sei-Wook Kim (13:46.645) The next aspect is how you ask, and one of the things is using open-ended phrasing. "Who do you know?" versus "if you know someone" — it's "who do you know who could benefit from the work that we did together?" You're making them think about a specific person rather than keeping it open-ended, and then pausing and letting them answer and think about it. Part of that is also framing it in a way that you're not asking them for help — you're asking to help the people they know, the people they care about. How do you help them get the same result and feeling that the referrer had working with you? Peter Kang (14:53.861) Yeah, this is so important because it goes hand in hand with the persistence aspect. In The Referral Code they talk about how once you ask the "who do you know" question, you come back the next week and check in again, and then maybe a couple weeks later check in again. You have to overcome that fear of rejection or seeming needy, and you have to really believe that you're doing this for the benefit of the people they're going to refer you to. At the end of the day, you're not here to beg for business — you're super confident in what you do, and you're asking because you truly believe in what you're doing. Sei-Wook Kim (15:40.148) Yeah, and that's an important thing — you're not demanding the answer right now. If they need time, give them the time, but check back to make sure you follow up and they're thinking about it. The other thing is thinking about the right people. It's not a volume game. It's not, hey, let me blast everyone I've ever worked with. It's really thinking intentionally about who are the five to ten people that can make the most impact. You can have those conversations, and those people can yield more introductions. It's a leverage thing where it multiplies as you have more of these conversations. You don't need to do a huge cold outreach or a blast to get results from this activity. Peter Kang (16:41.894) Right. With the proliferation of automation tools and such, people want to lean toward bulk outreach — it feels like you're doing more — but there's something to be said for crafting what looks like a real message, even a text message, something that actually feels real and one-to-one. Along this topic, another book folks might want to check out is called The Short List by David Ackert. It has some really good lessons on cultivating a short list of folks you want to stay in touch with — anywhere between 10 to 30 people that you want to continue building relationships with and stay top of mind on. Sei-Wook Kim (17:38.002) Yeah. The next layer is thinking about how you manage the referrals. Let's say somebody refers you to somebody — keep your referrer posted on how it went, even if it doesn't materialize in a deal. Just keeping them in the loop. And if something does go through, obviously showing your appreciation — sending them a gift, a note, taking them out for dinner, whatever is appropriate for that person. Just showing them that you're not taking them for granted and treating it as purely transactional. Peter Kang (18:16.694) Right. And we said don't blast them if you can avoid it, but there is a degree of marketing you can do to stay top of mind. For all the people who end up becoming part of your short list or your top referrers that you're trying to stay on top of — add them to your newsletter, connect with them on social media so they continue to be reminded of the type of work you're doing. People need reminders. I can't recall how many times someone who sent me a referral, a year later, needs to be reminded what we do again. It's always worth it because they're busy and they might've changed focus too. So you've got to stay current on that. Sei-Wook Kim (19:10.374) Yeah. And the top lesson from The Referral Code — rule number one is you have to ask. You can't just assume that people will send you opportunities just because they have a good relationship with you. And rule number two is keep asking. Just the consistency over time will compound into meaningful impact. Peter Kang (19:35.832) Yeah, they had a really fascinating stat — only 5% of people are natural referrers, just naturally inclined to refer others. That leaves 95% of us who need the reminding to take that action. So it makes a lot of sense. Okay, so we did talk about approaching people in their state of appreciation and getting these more organic referrals. We did say don't lead too aggressively with incentives trying to get a transactional thing going — but there is an exception. Over the course of working with various types of people, every now and then you come across these super connector types who love making referrals but also love stacking up commissions. It's almost like a sport for them — for whatever reason they love to monetize their network, which is totally fine. A lot of them come from a sales background or they just have a deep network they love to mine and they love facilitating deals. For these types of people, it is important to have that conversation of, hey, we recognize this is what you'd like to do, let's enter some kind of agreement. This is where things get a little blurry between what we talk about as the emotional side of referrals and what becomes more of a partnership type of relationship. That's something to look out for — and it's not something to run away from. We've benefited a lot from that. It's just important to be intentional about what bucket you put these people in. Sei-Wook Kim (21:30.994) Yeah, that's the right point. You don't know what everyone's intention is or their desires or what motivates them. So it takes a little nuance in reading the situation and knowing how you can incentivize and motivate the right people. So yeah, we talked a lot about referrals and the importance of referrals. For many agencies, this is a significant source of new business. If you can be intentional about it — going through everything we talked about today — you can build a significant business on the back of referrals. Of course, you have to invest in other channels and activities to build up your pipeline, but referrals can be a very meaningful part of what you build your business on. Peter Kang (22:17.035) It's the cheap, relatively simple pipeline. Yeah. So with that, check out The Referral Code. It's a really good read and you'll get a lot of ideas out of it. We'll see you all next time. Sei-Wook Kim (22:38.385) Thanks.