start a referral business
Image by Spencer Lodge

Starting a referral business basically means becoming a middle man (or woman).

In essence, what you will do is to help connect the people who want to buy a product or service with those who want to sell a product or service.

Your referral business can cover virtually anything you can imagine, from a business where dentists sign up to get referrals from clients (like the old 1800 Dentist program) to a program where you help connect people who need a writer to the writers willing to do the job (like Text Brokers).

The other option is to arrange for the referral business to have a range of specialties.

For example, if you work in a smaller area, you could provide referrals for all kinds of services and not just one particular service.

In this case, you are acting more like an advertising service than like a referral business, but the concept is basically the same.

You, as a trusted source are recommending people for their services.

That last point is probably the most important thing to remember about running a referral business.

You need to be a trusted source.

If you just let any plumbers join your referral business for plumbers and some of them do a good job while others end up leaving behind flooded homes with thousands of dollars in damage, you will not last long since your referrals are meaningless.

They need to be worth something in order for both the service provider and the customer to be interested in working with you.

How Much Can You Make?

Since this is a business rather than a job, it’s difficult to quantify how much you could make.

Typically though, referral businesses work in one of three ways: they charge a fee from the business that wants to be a member (typically around $200-$500).

Or, they charge a fee from the consumer for getting their list of recommended businesses (typically anywhere from $10-$50, though presumably, if the information is valuable, you can sell many more of these than of the former).

Or, they provide both services for free and rely on advertising to pay the bills (especially if they are on the Internet).

Some people who run a referral business try to combine all three.

Therefore, how much you can make depends on your niche, how valuable your information and your referral is and how many people will care what you recommend.

Ways to Make More | Related Opportunities | Tips

Keep in mind that running a successful referral business is all about integrity.

The people advertising their services with you and the people looking at your listings need to know they can trust your referral.

Therefore, make sure that you actually have some kind of quality control in place to review businesses that apply for membership on your referral service.

At the very least, you need to have a mechanism for weeding out con artists and scammers from legitimate business people, though ideally, you should also have some kind of a rating system available as well.

Beyond that, learn to network.

Talk to anyone and everyone within 5 feet of where you are standing.

You never know who you’ll run into and so it’s important to know as many people as possible.

If the number of contacts you have gets to be too unwieldy, consider keeping a Farley file on your PDA or smart phone (A Farley file is a file where you keep basic information about a person you’ve met, which you can then review later when you meet them again.)

It gives the impression of perfect recall if you review it moments before someone walks in and you can ask, “so, how’s your wife Susan? And how are the boys? Timothy and Jeremy if I recall correctly, right? Is Timothy still in little league?” This sort of banter makes a huge impression and makes you seem much more trustworthy even though you are using a kind of a cheat).

Start a Referral Business: Qualifications / Requirements

The only thing you really need for a referral business is a good personality and a good idea.

First Steps

First, decide what niche you want to focus on.

While you can focus on more than one niche, that is much trickier to do since you are diluting your value that way.

You also need to make sure there is a critical mass of the number of businesses in your area that compete with each other that there will be a value in running such a business.

For example, if you live in a town with just 20,000 people, there may be 3-4 dry cleaners in the area that people can choose from, but it’s unlikely you could make a business out of just three or four dry cleaners.

When the choices are that limited, people will just ask friends or relatives rather than looking to a trusted service.

Finally, check around and see if there is already an established referral business for the particular area that you are interested in working in.

If there already is, do some research to find out if there is room for a second service or if your business would just end up spinning its’ wheels without gaining any ground.

Start a Referral Business: Resources

Check out these helpful resources to find out more about starting a referral business:

eHow: How to Start a Contractor Referral Business – While it’s not particularly well written and it focuses only on a specific niche, this does have some good ideas for how to get started in this business.

ABA Legal Services – This is an example of a referral business, this one focusing on attorneys.

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Eric Hammer is a personal finance expert and writer based in Washington state.

Eric graduated from Excelsior College, a distance learning school accredited by the Middle States Association and the New York State Board of Regents (the same organizations that accredit Columbia University, New York University, Cornell University, etc.).

Eric actually held lots of different jobs, including such varied positions as a sales clerk, paralegal, surveyor’s assistant, community rabbi and English teacher, to name just a few.

He has since learned how to manage money wisely and uses his experience to help others make smart financial decisions. Today, his work appears on sites like Demand Studios and Bright Hub.