Building a referral network

Yet leading industry coach and News Ltd real estate advertising director Tom Panos says agents who do not engage in networking are actually missing out on potential leads, which stem from having solid relationships with businesses outside of real estate. According to Mr Panos, many of the most successful real estate agents receive a significant amount of their business from referrals rather than from cold calling.

“Roughly 80 per cent of their referrals come from 20 per cent of their referrers,” he says. “It makes sense that they have great relationships with these influencers and referrers because they are an ongoing source of listing presentations,” he adds.

“Furthermore, the quality of the listing presentations is significantly higher because referred business is generally cleaner business. What I mean by cleaner business is higher fees, more vendor-paid marketing and realistic vendors. The reason why is because it is trusted business and when there’s trust in the relationship, the terms are negotiable.”

Another benefit is that relationships with specific service providers such as mortgage brokers and solicitors can assist clients with their transactions.

Whether it is helping someone obtain a loan to buy a house, or assisting with the division of assets in a separation, the process is more seamless.

Where to start

The best places to start building relationships with businesses are local networking groups, such as local chambers of commerce, sporting clubs and school associations.

Mr Panos says agents need to be prepared to put in the hard yards to build their networks. “If you’re going to build these relationships, there’s a price to pay and that price is that you’re going to attend networking meetings, presentations and breakfasts, which you won’t be paid for up front.

But what you’re doing is you’re getting entrenched in that community,” he says.

Real estate trainer and director of Raine&Horne Callala Bay and Culburra Beach in NSW, Craig Hadfield, advises agents to be transparent about their intentions when they participate in networking groups.

“For real estate agents to attend some of these events, there’s a certain cynicism that comes with that. That’s just the nature of what people think,” he explains. “Are you involved in these groups for the benefit of the group or yourself? If you come from the wrong place, it’s seen for what it is.”

For executive director of Richardson&Wrench, Andrew Cocks, a useful method for sourcing businesses to work with is word of mouth and through endorsements from contacts.

“If you keep an eye outside real estate and look at what’s happening in business life generally, you hear of good people doing innovative things in other sectors. So I think it’s important to keep a really open mind,” he says.

“Real estate doesn’t have a monopoly on good ideas and I think if you can pick up great service and great opportunities that are in other industries and adapt them to real estate, that’s a great outcome.”

Quality over quantity

The key to a business referral network is to focus on quality rather than quantity, especially when it is community-based.

“Too often agencies and agents go out into these groups with the view they’re trying to generate more business for themselves – and that’s valid – but I think that’s coming from the wrong place,” says Mr Hadfield.

“Our community support us through the business we do, and I think we should give back to the community … then business will come back to us.”

Mr Cocks says agencies should concentrate on relationships that can be built around specialised services and delivery that go above and beyond what they offer already.

“At the end of the day, you don’t want to give people a Yellow Pages equivalent of service providers,” he says.

“My view is that quality relationships are built through understanding and making sure there’s an alignment between the positioning and the ethics of one business with another. If you have the spread too broadly, it takes a lot of time to maintain and build those relationships.”

Mr Panos says a good measure for how many relationships to sustain is looking at the size of the agency, the sort of support they have and the amount of time an agent has outside of their work hours.

“Generally speaking, I look at some successful real estate agents and they seem to work with three groups,” he says.

Sustaining for the long term

To receive the most from a business referral network, it is vital agents continually nurture and build their relationships.

According to Mr Panos, there are three common mistakes agents make when sustaining relations. The first is treating the partnership like a sprint instead of a marathon.

“If they don’t get business after two or three months, they actually believe the strategy is not working and they quit,” he says.

The second is failing to acknowledge any referrals from their partner. “Every time you get a referral, get in contact with the person that referred you the business and let them know that number one, thank you; number two, give them progress or how it went; and number three, try and reward or refer people back to them,” he advises.

The third is having a bad ‘stay in touch’ system and not having a structured and regular approach system in place.

Mr Cocks’ advice is to always seek feedback from customers and offices that have had business referred to them, and look for ways to improve the service.

“It’s never going to be perfect and there’s always going to be room for improvement, but at least you’re going to be better than you were this time 12 months ago – and 12 months ago you were better than you were 12 months before that,” he says.

However, Mr Cocks says agents should not lose sight of the reason for their networks and ensure that whatever happens in business dealings takes second place to the outcome for the customer.