Referral Worlds

So of course I’m obsessed with referral worlds.

What are they? Well, these are the currency flows behind the currency flow. The small and value-soaked (also values-soaked) pools and eddies of business introductions, networks, leads and endorsements.

We tend to talk about “referrals” generically, since professional service providers of all kinds rely on them. And yes, ultimately they involve the personal handoff of a prospective client, wrapped in reputational trust.

Having run a referral-only business for a year now, I’ve been studying how this little discussed phenomenon actually plays out. What I’ve found is that referral worlds are a bit like the solar system: depending on what planet you live on, the gravitational forces and atmospheric elements are quite different.

For example let’s start with the technology world. When your product has zero locational restraints, large numbers are the name of the game. The network refers to the users, and scale is a pre-requisite. That’s when digital and SaaS products take off, along with the success of their founders. In tech spaces, relationships matter, but the build is the star. And that colors the way people interact, and how they think about networks. Affiliate commission programs are most prevalent in Retail and E-Commerce world, but they are richest by far in digital and SaaS world.

There’s a network world that I’ll call Tribal World. In these systems, which are well bounded by paid memberships, the game is “All for One, One for All.” Here, referrals are the product and the point. You pay to be a part of a group that will send you business. Reciprocity is non-negotiable. It’s a modern take on the most ancient human arrangement. To survive, we stick together and we don’t go outside the group. Chambers of Commerce have a bit of this vibe, but it’s strongest in referral exchange networks like BNI and I Take the Lead,

Another world is Solidarity World. These are groups whose members have been historically marginalized and aren’t taking that shit anymore. I’ve run across about 15 women-only or women-first networking groups in Portland alone. There are also BIPOC and queer events and groups where referrals are happily traded. These businesses are raising each other up and raising fists at the same time.

Professions have their own atmospheres too. The FIRE world (Finance, Insurance, Real Estate) tends corporate, with sales and business development professionals working referrals for commissions, often from other corporate types. Legal and Accounting professional networks are sturdy as hell, with a built-in pipeline of business leads and, at least with accountants, a serious under-supply situation. Old fashioned social networks for old boys clubs are still around, and difficult to infiltrate without credentials and privileges.

Freelancers and small consultants in the HERE network pick up referrals from their own tiny orbits, and share them between aligned professionals with whom they’ve collaborated before. Creative agencies work this way too, and some of these arrangements are semi-permanent with contractors who are “trusted partners,” and to whom referrals are given as a matter of course. Some of these arrangements are advertised but more often it’s just a bench or slate of cozy professional relationships.

In my study of referral networks, I’ve come across Metcalfe’s Law, which says that a network grows exponentially if members can refer to each other, Reed’s Law, which says the network is stickier if it can facilitate subgroups, and the Law of Large Numbers, which says that referrals become more predictable in larger networks because of the law of averages.

But the law that still dominates all these worlds is that people do business with people they “know, like and trust.” That’s like the Olympic triple jump event that features a running start followed by a hop, step and leap. Each jump transfers energy to the next, with the goal of soaring as far as possible at the end.

You’ve got to show up again and again just to get that chain of jumps started, and to master the technique. And that’s before figuring out where you are. It takes time, effort, and incredible tenacity to succeed in these referral worlds — especially if you’re just visiting.