CHAPTER 1
BUSINESS RELATIONSHIPS ARE A PROCESS, NOT AN EVENT
HOW TO CREATE LONG-TERM CLIENTS AND CUSTOMERS
THE CHARACTERISTICS OF A RELATIONSHIP BUSINESS
Referrals are recommendations to hire you. This concludes my prepared remark. Questions?
All right, you purchased a 200+-page book, so I’ll provide some details. But let’s not stray from the basic premise. Every day, people are providing advice, counsel, recommendations, suggestions, and urgings for others to follow in securing personal and professional products and services. If you’re like most of us, you’ve sent people to your attorney, your dentist, your accountant, your auto mechanic, your favorite Internet product site, your favorite vacation property, and so forth. And you’ve listened to others’ similar advice.
Listen Up!
For most people, the most credible referrals originate with peers or with recognized and respected experts in a field.
Business relationships are a process, not an event. That is, they are an ongoing movie, not a static snapshot. The longer you maintain productive and valuable business relationships, the longer you will be the beneficiary of the referrals that can emanate from that source.
Clients have more value than “merely” the fee they pay you! If you view client relationships as long-term and worth maintaining, you can derive
• Referrals. The client makes ongoing recommendations to third parties to contact you for projects and engagements.
• References. The client serves as a source of credibility and endorsement when you refer prospects to him.
• Testimonials. The client provides an “evergreen” endorsement that you can use in print or video on your website and within your marketing materials.
• Repeat business. If you are always topical and “on the radar screen,” you may have the inside track on future business.
• Independent credibility. Recognizable names on your client list add to your credibility and legitimacy.
Those firms that merely “process” clients through their systems are losing longer-term value from those clients and customers. Those that “harangue” clients with constant offers and requests risk driving their goodwill away. Thus, you must reach an intelligent, planned relationship with clients that creates the leverage needed for expanded future business and the reciprocity that the client finds of value in doing so.
In Figure 1.1, you can see that I consider relationships to be as important as products and services. Relationships are based on
• Trust: Do you live up to your promises and claims?
• Value: Do you demonstrably improve the client’s condition?
• Responsiveness: Are you accessible, and do you respond rapidly?
• Credibility: Does the client feel it’s impressive to be partnering with you?
• Reciprocity: Do you recommend people to the client where appropriate?
• Professionalism: Are you on time and on deadline?
• Innovation: Are you leading-edge, state-of-the-art?
• Reputation: Are you seen by others as being the best of the best?
The more strong and powerful these factors are, the more you move toward “breakthrough” in Figure 1.1. The more you create and maintain breakthrough relationships, the more you will receive unsolicited referrals from your clients.
Figure 1.1 Strategic Profile Potential
Of course, there are other sources of referrals, beyond clients. They include friends, professional associates, colleagues, the media, and so forth. However, clients are the most powerful source, since they have actually invested in you, and they are the most credible sources for others who want to invest in you.
A fascinating aspect, however, is that powerful word of mouth creates referrals from people who have never been your clients, but who want to appear to be “in the know” and knowledgeable by having the intelligence to recommend you!
A relationship business is possible with almost any type of organization. It isn’t a matter of content, but rather a matter of intent.
Many auto dealers provide a gift or an incentive for a customer who recommends a new customer. We once had a dentist who sent my wife a rose for every person she recommended. I routinely provide a discounted or free seat in one of my workshops for people who bring others to the event. Internet sites often provide coupons and discounts for others.
The nature of a strong relationship business that engenders referrals usually requires
1. Immediate value. I’m so impressed that I want others whom I respect to know of your value. Note that this isn’t time-dependent, and I don’t have to have been using your services for a long time. This is usually promoted through rapid responsiveness, a pragmatic product or service that can be used immediately, and short-term gratification.
2. Universality. The wider and more flexible the applicability of your value, the easier it is for me to find people to whom to recommend it. Otherwise, if I have to wait for the “right circumstances,” I’ll tend to forget about it.
3. Requests for referrals. We’ll discuss the exact language later, but it’s important for you to let me know that you need and seek referrals. A doctor I visited once had a tiny sign in the lobby saying, “We appreciate your referrals.” It would have been better if he had mentioned that to his patients, especially those who were delighted with his advice and regimens.
4. Flexibility and depth. Ironically, some people who love you won’t tend to give you referrals if they suspect that either you won’t have time for them or you can’t handle any more work. You need to make it clear that you have the resources to handle more business and that your current client will always be a priority for you.
The first step in creating Million Dollar Referrals is to appreciate that they originate in trusting relationships with current and past clients. You must regard those relationships with the same planning and priorities you provide for your products and services.
Referrals are simply another powerful source of current and future revenues.
INITIAL LANGUAGE AND BEHAVIORS TO STIMULATE LEVERAGE
The potential for referral business begins with initial meetings. We’ll focus for the moment on business relationships, since clients who partner with you and benefit from the value of your work are your most important referral sources of all.
Here are my suggestions for language to use in four stages of a client relationship:
New Clients, Project Launching
• “As we move forward, it’s common for me to request referrals from my client partners, since that is the source of most of my business. I hope you’ll consider agreeing to do that when the time is right.”
• “Referrals are the ‘coinage of my realm’ in this business, and I’m going to work very hard to maximize your project’s outcomes so that you’ll be very comfortable in providing them at the right point.”
• “It’s very early, but my experience is that it’s not uncommon for my clients to want to share their results with others. I want to assure you that when you provide referrals, and if I accept their business, you will always have my highest priority, and I would never endanger that.”
• “Since you and I actually met through a referral, you know how effective that can be for others for whom we both believe I may be a good ‘fit.’ I’m happy to discuss that with you if you are ever questioned about our work together.”
• “If you encounter people inside or outside of the organization whom you believe could benefit from my help, I’d be happy to be of further service to you and to them.”
Existing Clients, Project Underway
• “As we’ve progressed, I’ve received some indirect inquiries from some of your colleagues. Would you be comfortable introducing me?”
• “Would it make sense to approach the other units that have relationships to our project to see if they are amenable to becoming part of it?”
• “When the project began, I mentioned the potential of referrals from you to people who might also benefit from this value. While it may be premature to approach them, it’s probably a good time to understand who they may be.”
• “Are there people outside of the organization with whom you’d like me to share some of these approaches?”
• “Who else within the organization do you think I should be talking to as this project approaches completion?”
Existing Clients, Project Concluding
• “As I mentioned at the outset and along the way, referrals are the lifeblood of my business. To whom would you be willing to introduce me at this point?”
• “While we’re still together, and before this project concludes, as it will soon, can you suggest who else I should be talking to here for similar benefits?”
• “If you had to choose three names of people who might be interested in this type of value, what would they be?”
• “It seems to me there are three logical continuation points for me. Do you agree, and would you introduce me to your counterparts?”
• “You had mentioned several people whom I should meet when the time is right. Are you prepared to introduce me at this point?”
Past Clients, Projects Concluded
• “I thought I’d contact you to provide some things that might be of interest, update you on my work, and ask if you have anyone whom you would recommend that I contact.”
• “Looking back at our project’s results, and forward to what’s likely in the future, whom in your organization would you recommend that I be contacting to provide similar value?”
• “Have you met or considered anyone in your professional circles outside your organization for whom an introduction would be a win/win/win dynamic?”
• “I’m making one of my quarterly calls to see how you’re doing and inquire as to whether you might have some people to recommend to me.”
• “I’ve thought of some people with whom it might make sense to work, and I was wondering if you had a relationship with any of them and might agree to introduce me.”
Listen Up!
Some referrals may readily come your way with no work, but the more discipline and work you put in, the more referrals you will acquire.
I know what you’re thinking: this is kind of aggressive, or at least assertive, or certainly stronger than anything you anticipated. Your behaviors will determine your success with referrals. You needn’t (and shouldn’t) ask all these questions and make all these statements. I’m simply giving you options and showing you that there’s a range of approaches you can use at various junctures in the existing client relationship.
Your behavior must reflect your language and vice versa (that is, walk the talk and talk the walk). Your clear intent must be to bring value to colleagues of your buyer, hence, the repeated use of this term in the language just given. It’s not about getting business; it’s about sharing the value.
Consequently, your behavior and use of such language will be dealing with these variables:
• Preparing the buyer very early—from prior to the project launch—for the idea that you are expecting referrals as a normal part of your relationship. This “sets the stage” for more assertive language to come later, but it also removes the possibility of the buyer saying later, “I had no idea,” or “Why didn’t you tell me earlier?”
• Assuring the buyer that his own best interests will not suffer from
– Your time being shared with others1
– Your expertise being used by an internal “rival”
– Your focus on the buyer diminishing
– The current project being hastily completed
• Trying to maximize the worth of the referral:
– A peer or better of your buyer (for example, another buyer).
– A personal introduction over “just use my name” is not as good.
– “Please keep my name out of it” is certainly not as good.
• Maximizing the number of referrals from any one source, over time.
These are the basics of the language, attitude, and behavior you should try to create and manifest in order to maximize your referral success. You can adapt them to your style and culture, but you must be relatively assertive in pursuing them. The last thing you want to hear, which too many of us have heard, is: “So many people ask about you and there are still others I’d love to recommend you to, but I realize you’re just too busy and too selective to need this kind of volume.”
THE CRITERIA FOR HIGH-POTENTIAL, LONG-TERM CLIENTS
Long-term clients create long-term referrals, an endless and renewable source of future business. This is like finding a gold mine, only easier; like hitting a hot stock when it was a $6 pershare start-up, only easier; like hitting the trifecta at the track, only easier; and like getting the best table at every restaurant, only much easier.
So if it’s so easy, why isn’t it being done every day?
One key issue is that we don’t recognize the criteria for high-potential clients. I pointed out earlier that many of the most successful people can point to a mere handful of important sources for all of their current business. Those sources may already exist for you, or they could be just around the block or underfoot, but if you don’t know how to recognize them, they’re no more important than any other client or prospect.
I’ve also found that many successful professional services providers never change their original mentality of “business at any price or cost.” That means that while once, when they were hungry, they intelligently sought and captured every available piece of business that was on their radar screen (I remember doing $25 career counseling sessions), they still have that same nagging fear of never eating again, even though the refrigerator is currently fully stocked (and isn’t their only larder).
We need to lose the desperation mentality and adapt an abundance mentality, to stop fearing losing and start rejoicing in winning.
Therefore, we don’t need every single potential piece of business, we are not being rejected, and we are not personally without worth if someone chooses not to do business with us, and there is some business (quite a lot of business) that we choose not to accept.
Listen Up!
Every year you should be abandoning about 15 percent of your least profitable, least interesting, lowest potential, and most troublesome business. Not only don’t you need this business, but you can’t reach out to new business unless you let go of old business.
Who are your ideal clients? That is, which of the clients that you are currently working with or have previously worked with have the most value? And which prospects are the most attractive to you?
Here are some criteria, which you should modify according to your business, your temperament, and your strategy:
• Revenues. The likelihood of their providing significant (six-figure) income over a period of years from a variety of buyers.
• Profit. The ability to meet the client’s objectives with a minimum of overhead, such as personal visits, subcontracted staff, special technology, and so on.
• Referral potential. The client’s ability and willingness to create relationships with other buyers internally and externally.
• Reference potential. The degree to which the client will gladly serve as a reference point in writing, on video, or electronically for other prospects you develop.
• Prestige. The cachet and automatic credibility you garner from citing this organization as a client, and its immediate recognition by others.
• Interest. The degree to which the work is exciting, a “stretch,” and a potential laboratory for you to try new methodologies and new approaches.
Add to these or modify them as you wish, but this set of criteria should help you determine
1. Which of your current clients you should do the most to retain and develop, and seek referrals from.
2. Which prospects you should direct your marketing toward and try the most to retain visibility with.
What you emerge with is your personal gold mine, stock, pari-mutual bet, and table on the water. You’ve arranged it, without the need for luck, survey equipment, financial theories, tips to the captain, or touts.
I relate Hal’s story to you because your high-potential clients and referral sources can be deceiving. I was young and without much money. But I could afford basic insurance (in fact, I had to have it), I was on my way up, and I had a lot of other young friends who were starting families and were on their way up.
CASE STUDY: The Irrepressible Insurance Impresario
When I was 22 years of age and newly married, I went to work at Prudential Insurance in home office management. My wife was a teacher, and between us we had zero money after paying the rent.
One day, Hal Mapes, an agent from Prudential, arrived at our apartment door and informed me that his main prospects included new members of management. He convinced me of the logic of buying Prudential insurance (“Think about your career”).2 He then asked me for “three names.”
When I told him I didn’t know whom to recommend, he prompted me about college friends, work colleagues, community acquaintances, family members, and so on. Every six months he would return like clockwork, first to see if we needed more insurance, and second to get his three names. (Once, when I told him I would not give him three names, he simply asked my wife for another cup of coffee and didn’t budge. I gave him three names.)
Hal probably had 200 clients, which meant 400 visits, which resulted in 1,200 names. If he closed just 10 percent, that was 120 new policies, each with about a $2,000 commission over time. And the next year, of course, he had 320 clients, 640 visits, 1,920 names—you get the idea.
He retired a wealthy man merely by asking for three names.
Metaphorically, are you establishing relationships with (and attracting) clients whom you can ask for “three names”? That’s really what we’re talking about here, and I don’t want to make this any more complicated than that. Direct income from clients is wonderful, but it is only one of the sources of client value. The (1) ability and (2) willingness to provide referral business is a close second.
I worked with Merck, the pharmaceutical giant, for more than a dozen years. During five of them, Merck was named “America’s Most Admired Company” by the annual Fortune magazine poll of executives. Over the course of 30 projects, I was paid about $2.5 million. But during that time—and particularly over those five years—I attracted twice that much business from Merck’s referrals and from Merck’s serving as a high-profile reference. If I were good enough for the best, I was good enough for the next prospect.
I often talk about “thinking of the fourth sale first.” You also have to think about the ROF: return on referrals.
THE 10 CRITICAL DOS AND DON’TS
The 10 things it is essential to accomplish for powerful, high-potential business relationships are
1. Deal exclusively with the true economic buyer (the person who can sign a check) at the outset, and deal regularly with that buyer throughout the project. Don’t allow yourself to be delegated downward or to lose touch. Insist on the reciprocity of rapid responses for both of you, and acquire private e-mail, phone, and cell phone addresses.
2. Be diagnostic in your marketing efforts, but be prescriptive in your delivery and methodology. During your acquisition stage, it’s fine to ask where the prospect is, where the prospect stands, and what the prospect desires. But once you have the business relationship and the project, the client wants guidance and your best advice, not, “Well, what do you think?” Save that for the therapist’s couch.
3. Provide extra value along the way. Don’t expand the project by taking on more work than you’re contracted to do, but do suggest ideas and improvements based on your professional observation. The client may choose to implement them independently or may ask you for another proposal. But the point is to be a source of continuing input for organizational improvement.
4. Move fast. The more quickly the client sees improvement, the better off and happier she will be. Find rapid, “easy” initial victories to create positive momentum and a perception of success early on.
5. Transfer skills to the client to perpetuate the gains. Don’t be proprietary about your intellectual property and methodologies. Equip the client to self-direct and implement under your guidance. This will solidify the impact and prevent the collapse that can happen if you’re the only one holding things together.
6. Raise the bar. Mere problem solving is not that valuable (it merely restores past performance) and is readily accomplished by the client in any case, given the myriad of skills and techniques available today. See that you create improvement over and above the client’s current and satisfactory condition. New levels of performance are where the most dramatic ROI resides.
7. Share credit. Readily provide kudos to client personnel for helping, assisting, improving, and generally ensuring the success of the project. This enables you to be seen as “one of the team” and not “the outsider.”
8. Create new relationships throughout the project duration. Reach out to other buyers, invite other areas to view the results, and share information with others. So long as your buyer approves, find ways to create multidimensional and varied relationships throughout the organization.
9. Make success visible. Use client media (intranet, newsletters, magazines, and so forth) to explain and promote the project’s success and impact. Create great publicity for the project, with you as a part of the team.
10. Use the client as a reference base and part of your client list. If others ask your client about you, ironically, it keeps your name and past successes in front of your client and frequently in mind.
Listen Up!
Your project may be a 50/50 proposition between you and your buyer, but your ability to create a long-term, powerful relationship is 85 percent your initiative.
Here are the things to avoid on your way to a long-term client relationship. I could have said, “The reverse of the 10 above,” but I want to be specific about some additional land mines:
1. Don’t engage in endless information gathering and consensus building. Get on with the project. Don’t fall victim to the often-true bromide: “A consultant is someone who arrives to study a problem, and stays on to become part of it.”
2. Don’t become overly friendly and collaborative with the HR and training people. You do not want to be seen as a peer of these folks, but rather as a peer of the buyer. They may love you, and they may be heavily engaged in the implementation, but don’t let them become your regular chums. HR is, deservedly, one of the least credible (and least powerful) elements of any organization.
3. Don’t lavish insufficient attention on the client. Clients (and buyers) want to believe that they are your highest priority and that they are special. Find ways to make them feel it, and do so often. But this leads to point 4.
4. Don’t spend inordinate amounts of time with the client, or fall victim to inappropriate labor intensity. Clients can feel good, “in the loop,” and well taken care of without your physical presence. Find ways to use technology, the client’s own resources, and judicious personal visits to create a great relationship without living there (and thereby jeopardizing other potential great relationships).
5. Don’t disengage without next steps. That may involve quarterly follow-ups, agreement to send your monthly newsletter to 100 people, a semiannual audit, or whatever. Never walk away “for good.” Always plan something else, whether or not it involves revenue.
6. Don’t try to create a flying goat by strapping wings on it and throwing it out of an airplane. By that I mean, be honest—don’t cover up your shortcomings or failures. Treat your buyer as a true partner who deserves to know what’s going wrong and why, and what he has to do about it using appropriate internal clout.
7. Don’t take advantage. For example, submit reasonable amounts for expense reimbursement, but don’t charge for lavish meals, alcohol, postage, suites, or “administrative support.” No matter how large the client, you will eventually be found out. Don’t “borrow” equipment or materials from the client. Treat the client as a trusted friend, not an ATM machine. (I don’t even charge clients for mileage.)
8. Don’t be an ideologue about methodology. You may have a “six-step sales sequence to success,” but the client may need only four steps, may also need a seventh, or may hate your fifth. Go with the flow. Change what you must instead of insisting on arbitrary delivery options. Use the client’s culture as your guide, not your own.
9. Don’t be paranoid. Allow the client to have copies of slides and templates; encourage recording of small meetings; share your own intellectual property. Assume the client is as honest as you are. (If that means that you are suspicious of the client, figure out what that says about you!) Don’t treat the client’s personnel as if they’re thieves in the night.
10. Don’t be tone-deaf. Listen for opportunities. Avoid being consumed by your current project to such an extent that you miss the potential for providing additional value and developing longer-term relationships. Don’t operate in an isolation ward.
At any given time, these guidelines will help you view any given client as the long-term resource you should be continually seeking. That’s why I call it a “process” and not an “event.” You want to create an ongoing source of business and, sometimes even more important, business referrals. (There may be only so much work to be done with a single client, but the potential for referrals is virtually limitless.)
THE BEST POSITIONING FOR YOU
Your positioning within a client (not as a brand or generically) should depend on these factors:
1. The nature of your project and its impact
2. Your relationship with the buyer or buyers
3. The recognition factor of the client
4. Your ability to cite the client and your work
5. Your chutzpah3
1. The Nature of Your Project and Its Impact
Your positioning will be dependent on the type of project you are doing and the difference its outcome represents for your client. We’ve discussed earlier, for example, the higher value and visibility of innovation (raising the standard of performance) as compared to problem solving (restoring the old level of performance).
CASE STUDY: Merck and Diversity
I was asked if I would help in the baseline (first) study of diversity at Merck. Since the study methodology we agreed upon comprised focus groups, interviews, observation, and surveys, it was ideal for me. What was needed was not a diversity “expert,” but rather an expert on evaluating behavior and beliefs.
As a result of my work and that of others, Merck embarked on a much more aggressive campaign to foster diversity in ethnicity, culture, race, religion, beliefs, origins, and so on, under the guidance of then-CEO Roy Vagelos. This included what we called “heroic” efforts to find, recruit, and nurture a variety of people.
This was high-impact and very public, talked about throughout the organization. I chose (wisely) not to position myself before or after the engagement as a diversity expert, but rather as an organizational development consultant who focused on the processes of improvement, not the content.
2. Your Relationship with the Buyer or Buyers
The “tighter” (more trusting) your relationship with your buyers, the more you can position yourself in certain perspectives, such as a “strategist” because you work with CEOs or a “sales accelerator” because you work with vice presidents of sales.
3. The Recognition Factor of the Client
Not all clients, no matter how much they love you, are valuable positioning sources because no one else knows of them. They may be specialized within an industry, relatively small, better known in other countries, or deliberately maintaining a low profile.
CASE STUDY: Hewlett-Packard and Change
HP was a client with tremendous talent and confidence. It routinely worked on projects with top internal people and a half-dozen external consultants from different firms, concurrently. HP believed that this combination created the best thinking and destructive testing of new ideas. “We don’t want to get stuck breathing our own exhaust,” my buyer was fond of saying.
During one marathon session, everyone had talked and explored and talked some more. I had kept quiet, trying to understand the impasse. Finally, I walked up to the whiteboard without invitation and drew a visual describing why we were stuck and how to break the logjam. Everyone agreed (perhaps because they were eager to get home), and the meeting adjourned on a positive note.
The next day, my buyer handed me a plum assignment. “You are obviously the top change management expert around here,” she said, “so we won’t be needing a roomful of people anymore.”
From that time on, I was able to position myself as a change management expert with my buyer’s complete and generous endorsement.
CASE STUDY: The Federal Reserve and Shredded Money
It was quite an ordeal to pass muster with the Federal Reserve Bank of New York; it included three formal meetings in front of different people and a legal review that changed my 2.5-page proposal into 32 pages (I am not making this up) without, unbelievably, changing anything substantive.
I decided early on not only that the business was wonderful and worth fighting for, but also that having the “Fed” on my client list would be invaluable, because its customers were major financial institutions that were my customers and prospects.
The toughest part was that, periodically, a new acquaintance at the Fed would ask if I’d like a million dollars, then, after a proper delay, produce a package of shredded money equaling a million. The first time it was funny.
Thus, it’s best to find the “high flyers” to add to your client list and nurture them to improve your positioning and your ability to create other long-term clients.
4. Your Ability to Cite the Client and Your Work
Some firms may be unknown, but some highly known firms don’t want to be known—at least, not on your client list. Thus, a major aspect of positioning is to find and use the names of recognizable clients who don’t mind being cited.
This is often easy, so long as you don’t discuss the nature of any confidential or sensitive work. But it’s often tricky, especially if anyone, at any time, contacts the legal department.
CASE STUDY: The First Breath
I organized my conversation and a great deal of my collateral material and introductions so that a “critical mass of critical names” emerged immediately. In other words, once I say, “I’ve worked with JPMorgan Chase, Mercedes, Toyota, HP, the Federal Reserve, GE, and IBM,” the other party is generally nodding and asking me the next question or inviting me to sit down before I can take another breath and continue the list.
I use these names very strategically and for highest impact. Companies’ reputations rise and fall. Arthur Andersen used to be one of my “first breath” names, but it had to be removed. Your positioning will be quickly enhanced by your ability to develop and nurture enough marquee names to fill that first breath.
5. Your Chutzpah
There is no case study needed here. Your willingness to “blow your own horn” and let people know of your successes, track record, and “war stories” is vital to your positioning.
Perception is reality. People act based on what they perceive. They often perceive a solo practitioner in any professional services work as being “between jobs,” acting as a subcontractor, or appropriate only for small businesses. It’s up to you to change that perception by creating the perception—the positioning—that you think best.
The first step in Million Dollar Referrals is creating high-quality, long-term client relationships that serve as the basis for those referrals. The next step is to ensure that these remain as annuities.