My one-person consulting practice generates about one million dollars a year in revenue. I spend zero dollars on paid advertising. I don’t do cold outreach. And when one client engagement ends, I have a waiting list that I turn to to fill the vacancy.

My business creates customers from referrals, and I’m not unique here.

Companies much larger than mine still use referrals as their primary customer acquisition motion. Financial planners, concierge doctors, consultants, and business buyers (private equity and venture capital) will tell you no that other acquisition channel outperforms referrals.

So why not ask to be referred to elite salespeople?

Referrals are arguably the highest value resource for identifying sales talent and the most underutilized. Just like clients referred to you, the candidates come from a trusted source. Optimize your talent pipeline by encouraging as many high-quality referrals as you can find. You already know that elite salespeople must be found–a referral is the ultimate find.

But referrals are also the channel you’re most likely to get wrong

Because they come from a trusted source, you might be tempted to accept the recommendation at face value without testing whether the candidate is a good fit for your team. You’re also most likely to get blinded by your biases when interviewing a referred candidate, so tread carefully and follow the hiring process that you’re building through the chapters in this book.

Broadly speaking, there are two categories of referrals: Internal and External. Internal referrals come from within the organization or your personal network. This category includes employee referrals and people you know from work or in life outside of work. External referrals are everything else and include customers, partners, and various stakeholders in the business.

In this section, I’m going to show you how to use referrals to build a better talent pipeline.

Employee Referrals

Few companies utilize employee referrals, and when they try, they’re often completely ineffective.

Offering an employee $500-$1000 to refer someone to a six figure sales job is a joke, and your employees won’t spend any effort trying to help you find sales talent.

Why not offer your employees 15% of the salesperson’s first-year salary? If that sounds ridiculous, ask yourself, why you’re willing to pay a recruiter 20-30% of the first-year salary? Recruiters play the referral game for a living. When you hire them, the first thing they do is start asking their professional network (LinkedIn connections and contacts in their applicant tracking system) for referrals to candidates that could be a match. Yes, they’re good at this tactic, but it’s not hard. With the right incentives, your employees can and will play the same game, but they can be better than recruiters at:

selling the company to a candidate
communicating the company’s mission, values, and culture
convincing a candidate that the grass is greener in your pasture

What I like about employee referrals, especially if you have an existing sales team that you built (not inherited) is that they know the importance of character and chemistry, not just competency. The referral source shares the same values and motivations as you, and that’s rarely the case with recruiters. If I work for you, I'm not referring someone who isn't going to fit our character and chemistry style because I don't want to jeopardize the team we’ve worked so hard to build. I'm not vouching for someone who I’m not certain is going to make it in our culture and can do the job well.

“But Nigel, if chemistry and character are so important to our people, why do we need to offer them a huge bonus?”

If chemistry and character are important to you, the character you have will motivate you to reward the effort and commitment of the referrer. Also, money talks and incentives drive a sales organization. If I tell you that character and chemistry are equally important to competency, and that I think you, the existing sales team, are good judges of chemistry and character, but I'm not willing to spend tens of thousands of dollars on a bonus for you, is it that important to me?

Second, money and incentives represent attention. If you only offer a $1,000 referral to a six-figure employee, it's not going to get their attention when they’re trying to earn larger bonuses and commissions. You need something that carries enough gravitas that it's on the front of their mind.

And even when you’re offering a meaningful bonus, it’s still a cost-effective strategy. Paying a bonus of say $8,000 is a fraction of what you’ll pay a recruiter and a fraction of the additional income an elite-level salesperson will contribute to the team. If you read that last sentence and thought something along the lines of, “We don’t have the budget for a recruiting fee, so I doubt we can afford a larger employee referral bonus,” Imagine what it’ll cost you if you keep things as they are and source sales candidates through your job posting. Think about the expense of your time (that could be used for growing the business), your HR department's time, and lost revenue while you wait for a unicorn applicant to magically appear.

Now, that’s expensive.

Tell your sales and marketing teams that you’ll pay them thousands of dollars if you hire a sales rep referred by them, and they will treat it like a personal challenge. In just a few days, you’ll have good candidates to interview.

P.S. Pay them quickly just like you would a recruiter. Skip the games. Honor the same terms a recruiter would expect if they filled the job for you.

Your Personal Network

Your network includes family, friends, and colleagues—past and present.

Ever get on LinkedIn and see someone you went to college with 10 years ago, who you remember them in the college context, and you're like, “Damn, I didn’t know they grew up and went on to do that.” It happened to me recently. I played college football with someone who is now the CEO of a successful healthcare company. He graduated when I was a freshman. We spent five months together on the same team, which may not seem like much time together, but it's a lot when you play a sport together. I didn't know he was the CEO of a healthcare company—an ideal client for my consulting practice. Shame on me. I sent him a note and we scheduled a call within days.

The point here is that you have a natural network that you have mis-contextualized because your framing of who they were yesterday has not evolved with the reality of who they are today. Or maybe you’ve compartmentalized your life to the extent that your friends and colleagues don’t really know what you do. They might know that you’re in sales, but they don’t know exactly what you do and don’t think about people they know that you would benefit from knowing.

I'll give you another example. My Uncle Dale was my first sales leadership mentor. It might seem like an obvious choice, but I always knew Uncle Dale as *just “*Uncle Dale” who was always happy, funny, and loved the outdoors. That's how I knew him. One day, I was on the phone with my mom and she asked about work. I said, “I'm really struggling with this new job. I’ve got to restructure this sales team right now and its the last thing I expected to do less than 90 days into the job.” My mom didn't know the first thing about sales teams, but she said, “Well, you know your Uncle Dale was in sales at Novartis.” I wanted to immediately dismiss this recommendation, but then I checked out at Uncle Dale’s LinkedIn profile. What Mom didn’t know was that his “sales job” was to run a 400-rep division for a publicly traded pharmaceutical company named Novartis.

I called Uncle Dale, he answered the phone sounding just like Uncle Dale, “What’s happening, nephew?” He's as Southern as they come and lives in a rural part of Mississippi near the Gulf of Mexico. I explained my situation with very low expectations that he would be helpful. He immediately put on his VP of Sales at Novartis hat and took me to school. He started asking questions that I couldn’t answer and hadn’t even considered.

“Whoa, Uncle Dale's got some chops.”

The lesson here is, don’t ignore your personal network. You could be missing out on a lot of opportunity because you’re context is all wrong.

Other Stakeholders In Your Business

The last category of internal referrals is other stakeholders. This group includes, but isn’t limited to, other executives and leaders from other functions, investors (private equity or venture capital) and their network, and parent company leaders (if that’s your situation).

Other Executives

Chances are, you were recruited from another company to serve as the sales leader for your current company. At your last company, were any of the executive team talented? Of course, they were. I’d also bet that many of your current leadership team were recruited, like you, from another successful company to replicate that success.

All of that is to say, the other executives on your management team know other smart and talented salespeople. Ask them.

One of the best things about getting referrals from other executives is they are sometimes better at:

convincing a candidate to come to work with you, and;
contextualizing the three Cs to know if that elite rep from a past life would thrive or not on your sales team.

One last bonus to this group–They rarely accept referral bonuses, even if you offer them. They do it because they are invested in the company, and it's in their best interest to help. The money isn’t important to them. They’re already paid well.

Investors

Sometimes sales leaders fail to go to our private equity investors for help because asking for help might signal “we don’t know what we are doing.” But elite leaders know that asking for support doesn’t represent a sign of weakness.

When it comes to talent, it’s hard to beat the network of a good investment firm. I work with a handful of private equity (PE) firms and they all have an entire department dedicated to talent. They’re always interviewing for future and current leadership needs. PE firms also study hundreds of companies a year that they don’t purchase, but agree to stay friendly. Those companies they met with but didn’t acquire also have talent that could be useful to you and your team.

Remember, your investors are looking for any and every competitive advantage that might improve the valuation of your company and make it more desirable for a potential acquirer. If the sole purpose of a company is to create a customer, and customers represent revenue, then the sales team is important to them. They’re highly motivated to help you find the talent you need to be elite.

Just like executives, your investors are paid well. They’ll help because they want you and your company to be worth more. They don’t want your referral bonus.

Your Customers

Customers are a good judge of sales talent. They won’t tolerate bad salespeople. When they’re dealt a bad rep, they usually choose another service provider. If you’re lucky, they complain to you about how bad your salesperson is and give you a chance to make it right. Either way—zero tolerance.

Many times, your next best sales rep is walking into your customer's office after you. Elite sales reps that call on your customer for a different offering:

know how to sell
have the attention and respect of your customer
probably know enough about your offering category to be dangerous
aren’t applying to your job

Put yourself in the customer’s shoes. If I tell the customer:

“Julie, your existing rep representing my business is going on maternity leave and may not be your rep for much longer. We see you as a partner, and you view me as an extension of your business because of Julie and how she solves your problems. You have a vested interest in making sure that the rep who replaces Julie is damn good. If you could pick your next rep to manage your account, who would it be?”

I’ve asked this question a few dozen times and each time I ask I become aware of sales talent that is under my nose, and I’m oblivious.

And sometimes your next best rep works for your customer. I know it sounds crazy, but I’ve hired salespeople from my customers. It needs to be done with integrity and complete transparency, but it happens. It only works if it's a win-win-win. Good for the rep and good for the customer before it's good for you. Generally, the situation is that the salesperson has maxed out their earning potential, and my customer is at a loss to come up with creative ways to keep them engaged. I can pay them more, and they still get to work with their colleagues—just in a different capacity.

Just like interviewing a candidate referred by you or an employee, stick to the interview process. The last thing you want is to make a bad hire and lose a rep and customer at the same time.

Partners

If you have a channel partner or joint ventures, you can't ignore these relationships when it comes to hiring sales talent, including maybe even hiring their sales team.

Here are two examples of that in action.

Put your Offering in a Partners Bag

If your offering is a transactional need-to-have, you can put the product in the bag of another sales team and you don't need to have more sales reps. They can sell your product for you and they may become your best sales rep, and eventually your sales team. Guess what? This can be a beautiful outcome for you. Now you don't have to be burdened by the expense of salary and training that comes with employing a sales team. The offering sells itself or compliments the offering of a partner so well that they go hand in hand. You still pay commissions on sales, but your fixed expenses of salary and wages are now variable expenses that are only paid after sales are made.

Another example is in the consultative quadrants where the salesperson needs to be an expert. Sometimes your channel partners are the experts. I have a contemporary in this space named Scott Lease. He has about 70,000+ LinkedIn followers, a podcast, and a number of sales books. He’s deeply connected in the technology space for sales. You could go hire someone really good at selling your software and pay them $250k a year guaranteed. Or you could make a guy like Scott Lease an advisor to your company. Give him a percentage of equity and tell him you'll give him 20% of every deal. He has the attention of the customer. They see him as an expert on all technology. So if Scott tells his readers, you need to go buy Zoom Info, there's no sales process. The customer's going to do it because Scott so.

How do you prevent making a hiring mistake through a referral?

The downside and danger of hiring through employee referrals is that, if it’s not a good fit, the repercussions are hard to navigate. It’s arguably worse than hiring the wrong person through any other channel because it could damage the reputation of the person who made the referral. Their relationship with that individual who I, the sales leader, made a mistake on hiring could be irreparable.

The trap is that the candidate is being vouched for by someone on your team, and we tend to over-appreciate the referring employee’s assessment of the candidate’s talent. That’s why it’s even more important with a referral to stick to the interview process and let the process stop you from making a bad hire. After all, an employee you trust believes they're credible, and you want to trust the person who made that referral.

This includes your own referrals. If I want to bring in someone who I used to work with, I’m bringing them into a new selling environment. I have to remind myself that my impression of them is of a different person, at a different time, on a different team. This is a big responsibility on my part as sales leader. I cannot convince them to leave a job where they're already being successful to come over here and fail. So I have to be really clear about the job analysis and ask myself, is the job analysis of this current position exactly the same as it was for their previous position? Do they still have the same skills they did when I interviewed them four or five years ago? The process driving the outcome is critical.

Leverage Referrals to Find Elite Salespeople