A common refrain we hear from agency operators: "Most of our leads come from referrals."

This is often followed up with a comment like: "We need to try outbound" or "We need to do a better job with marketing."

But the fact is, it's possible to build up a very successful agency business purely on referrals. What's important to note is that referrals come in many different stripes, and it's worthwhile to examine these separately.

Types of Referrals

We typically classify referrals through the following types. You may call them slightly different things, but you'll find many of these recognizable. 

We'll explore each one of these in detail below.

• Client referral

• Investor referral

• Tech Platform / solutions partner referral

• Complementary agency partner referral

• Competitor agency referral

• Broker / agency search consultant referral

• Employee referral

• Friend / acquaintance / family referral

Client Referral

Of all the referrals, client referrals have historically been our strongest in terms of quality and win rate.

We know that whenever our agencies do a great job for a client, they immediately become our advocates and they're likely to make some kind of introduction or pass along our contact info to someone who needs a similar service.

This is why going above and beyond for a client is often a great marketing investment.

Most leads that come through a recommendation from a client end up with a high chance of closing provided they are a good fit, especially if the client stakeholder making the referral has high status among peers (e.g. works for a successful brand).

Investor Referral

Many of our clients have investors (private equity, venture capital, angels), and many investors play an active role in the businesses they invest.

For these investors, they get front-row seats to our performance on the project. If they like what they see, they're likely to refer us to other companies in their portfolio.

We've been in situations where we've worked on multiple companies through the introductions from a particular investor.

An investor's intro comes with instant credibility and is likely to be received well by the founder.

Another way we've cultivated investor referrals is by getting to know people who work for VC and PE firms. These might be at various networking events, through friends, or sometimes even a cold outreach on LinkedIn.

Once we've developed a relationship with these folks, we show them what we're capable of doing and try to keep in touch. Every now and then, we'll get pinged about an opportunity for one of their portfolio companies. At Barrel Holdings, we even have a very direct offering for private equity firms to connect with us and use us as a resource.

Tech Platform / Solutions Partner Referral

There are many different tech-based ecosystems that play along with agencies.

We've partnered with a fair number of tech platforms and independent software vendors (ISVs) over the years. These include hosting services, e-commerce platforms, content management systems, makers of specific apps that plug into these platforms, analytics solutions, email service providers, and more.

Depending on the ecosystem and the strength of the partners, there's potential for co-marketing and co-selling to target prospects, which can turn into quality leads.

There are many agencies that have built up incredible businesses through the tech/software partnerships channel. These agencies typically check the box in two areas: 1) they've demonstrated ability to deliver great value to clients using the tech/software and 2) they've brought a high volume of customers and/or high visibility to the partner through their own selling efforts.

These partners will recognize such results by feeding the agency with the highest quality leads. Some of our Barrel Holdings agencies have pursued this path with platforms like Shopify and Webflow.

If you have a clear sense of which partners make the most sense depending on your agency's positioning, make the effort to build relationships with their partnerships team and find out what it takes to become a really valuable partner.

Further reading: check out this extensive post on partnerships and the various players in an ecosystem.

Complementary Agency Partner Referral

We've been in many situations where we've come into contact with other agencies working on a different part of the same project.

This may include:

• a branding agency that's provided a style guide for the website or even taken a shot at the initial designs

• an SEO/PPC firm that's responsible for ensuring the SEO on the new site is in good shape and that Google Ads is set up

• an analytics firm that makes sure GTM and GA are set up properly along with any other analytics tools

• a QA firm that provides a second set of eyes during the QA process

• an accessibility firm that checks the site's compliance with accessibility standards

• a content production agency that provides the photo and video assets; and others that add value in different ways.

We've tried our best to become friendly with such firms and to gauge their level of competency so that if they're good, we can recommend them to our other clients.

In many cases, if they like what we're doing and we're nice to them, these firms can become lead generators as well.

We've been lucky to get a good number of referrals from such partners over the years, and we work to send them referrals as well.

Competitor Agency Referral

Unlike the complementary agency partners above, competitor agency referrals are from companies that do pretty much the same thing as our agencies, but for various reasons, they can't take on the project and pass it on to us.

These are the most common reasons for why a competitor agency passes along a lead to us:

• The prospect's budget was too low, so the agency thought we'd be a better fit as they see us as lower in the food chain (no big deal here, we pass opportunities down if it doesn't meet our threshold as well)

• The agency has a conflict with an existing client, so they can't work with the prospect

• The agency is too busy and cannot take on the work; this is often coupled with the prospect having a timeline with a hard launch date

If you've grown as an agency and require larger budgets, the ratio of referrals from other competitor agencies to you vs. opportunities you pass along to others may tip towards you passing along more opportunities than being on the receiving end.

For smaller upstart agencies, building relationships with larger ones and getting their overflow work is a good way to build up a book of business in the early days.

Broker / Agency Search Consultant Referral

There are various pay-to-play options when it comes to referrals.

Marketing brokers create semi-exclusive agency shortlists and try to drum up leads either through their connections with brands or by pooling passed-off leads from their agency group and re-directing them to others in the group.

If an agency ends up landing the prospect, the agency that submitted their poor-fit lead to the pool gets a cut of the project fees as does the marketing broker. If the marketing broker sends you a lead from their direct brand contact, they take the entire commission for themselves.

Commissions can range from 10% to 30%, so the opportunity has to be very attractive with budgets that'll help cover marketing broker's cut.

Agency search consultants also build relationships with agencies, creating their own shortlists. They are often hired by brands to help curate agencies for an RFP and may be deeply involved in running the process of agency selection.

Some agency search consultants are paid by the brand and don't charge commission while others don't charge the client and take commission from the winning agency. Some agency search consultants, like some marketing brokers, may take an upfront fee to be in their initial consideration set.

Some agencies, especially more traditional advertising agencies, rely heavily on this lead source. One could argue that these leads are not referrals at all but commission-driven sales leads, but you could also argue that these brokers and consultants are careful about who they put forward since their reputations are at stake when they put forward an agency to a prospective client.

Employee Referral

We've had instances where an employee brings us a lead that turns into new business.

It may be rare, but we've experienced and have heard stories of some incredible referrals that originate from employees (e.g. so-and-so's parents are executives at a big company). It's a good idea to have a policy in place providing some kind of commission bonus fora referral that converts.

Also investing in some basic sales education for the entire team may be a good idea to ensure higher quality referrals. Teaching your employees about the agency's ideal client profile, types of services it provides, and typical budget ranges could arm them with information to be more proactive. You'd be surprised by how, in countless agencies, most employees don't really know more than surface-level information about what the agency actually sells.

Another thing to consider is that employees who've worked at a number of other places and have an extended professional network from their years of working are likely to know folks who may be decision-makers at prospective client organizations. As you welcome more senior-level employees into the agency, onboard them with information about employee referral benefits.

Friend / Acquaintance / Family Referral

This last referral type really depends on the friends and family you have, their backgrounds, as well as the social circles you run in.

If you mainly know and hang out with people who're very different from the clients you have (e.g. marketing/e-commerce directors of consumer brands or founders of venture-backed start-ups), you're less likely to get quality leads. For example, if most of your extended family members are doctors or academics and you have a target audience similar to ours, you'll find that their referrals, if any come at all, are less likely to be a fit.

Over the years, we've tried to cultivate relationships with people who're likely to interact regularly with people who may be potential clients for us. This isn't a blatant sales move where we're hoping to get something out of someone, but we've found that these people have shared interests with us and are generally great to hang out with. We're perfectly happy to help people who value our expertise with zero expectations of anything in return. The important thing is to keep in touch and use a social network like LinkedIn or a newsletter to stay top of mind whenever there's something interesting and relevant to share.

In time, it's quite possible to build up a vast enough network that your name might pop up when people talk about needing something, and this is when referrals from an acquaintance or friend can be quite valuable.

Building a Referral Engine 

There are no short cuts to building a quality referral engine. It can take years of building relationships, producing good work, keeping in touch, telling people what you do, and helping folks whenever you can to get to a point where you're able to see a meaningful number of referral-based leads per month.

Besides the virtuous cycle of doing our best to please our clients (who then refer new clients), the most powerful activity that we've found for keeping the engine going is actually a really simple one: every week, email a few people and say hello.

A monthly newsletter is also a great way to remind our contacts that we exist and that we're putting out some great work. The list can be made up of former clients, old friends, former employees, and others you've met over the years. We've found this to be a powerful way to stay top of mind.

Check out The List for more details on these two agency habits.

When it comes to building a referral engine, there is no silver bullet – it's a combination of many moves done well over a long period of time.