The most common question that I get from readers is: "how can I get new customers?"  Most of the time they're doing the typical "lead generation" stuff: cold-calling, advertising, building websites, and so forth.

There's an easier and more effective way to find new customers: Get other people to find them for you.  This is called "referral selling" and it works better than any other lead generation method, because the contacts you get through referrals are highly likely to buy from you.

Before explaining why, let's get some terminology out of the way.

A referral is when one person connects a business contact with another business contact, in the hope that they will both benefit. That's different from a reference, which is a current customer who's willing to talk to a future customer about you and your firm.

Best Way to Get New Sales

Research shows that well over half of the sales opportunities generated as the result of referrals end in a sale.  That's much better than other lead generation methods, which typically have single digit conversion rates. In addition, sales generated through referrals tend to be larger, on average, than sales resulting from other activities.

Referrals are more effective than other lead generation methodologies because the "referral source," simply by making the referral, is eliminating the uncertainties that block a sale in the early stages–such as "Can this person be trusted?" and "Is speaking with this person worth my time?"

So let me be clear on this: don't waste time and money on cold calling or other forms of lead generation until you've exhausted your list of contacts and tried to get great referrals.  With that in mind, here are five rules:

1. Ask people who trust you. The most effective referrals  always come from people who already know and trust you.  Because of this, the best referrals come from people whom you know from outside the business world, such as relatives, neighbors and friends.  Your current clients are another good source of referrals–but before asking, you must have helped that client to be successful in the past.

2. Ask when it's natural to ask.  Getting a sales referral is a social activity, even when those connections are in a business context. Each contact with a potential "referral source" should more the feeling of a meeting between friends (or potential friends) rather than a formal interaction between business folk. It's about the relationship, not the referral.

3. Ask for an action, not a contact. You want the person who trusts you to take some action to bring you together with the person you "should be talking with."  Rather than asking for a name and number, ask your contact to call or email the other person, and then get back to you to confirm that the action has been taken.

4. Follow up immediately.  Once you're certain that your contact has emailed or called the other person, get in contact with that person. This is not a cold call, because the original contact has already "endorsed" you.  As a result, you're far more likely to have a meaningful conversation or communication.

5. Thank the referrer three times. Within one day of the original conversation, contact the person who gave you the referral and thank him or her (and, if necessary, remind them to take action).  Send another thank-you email after you've spoken to the person to whom you were referred, along with a status report on the relationship. Finally, if the does result in a sale, send a third thank-you note.

The above is based on a conversation with Joanne Black, author of the truly excellent book No More Cold Calling.