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Role of referrals in growing a business

8 min read

From: alexhormozi

This article outlines how initial customers were acquired and how referrals became a crucial step in scaling a business, based on a personal fitness coaching journey that eventually led to making $10,000 online [00:00:00]. The journey began with a passion for fitness cultivated since childhood, which was so evident that colleagues encouraged entering the field [00:00:09].

Initial Spark: The Realization of Profit

The idea of monetizing fitness became tangible after helping Sandy Smith with her food habits. After an hour and a half of discussing nutrition, she wrote a $100 check, which was a “light bulb moment” for the speaker, demonstrating that profit could be made from a passion [01:17:17].

Four Stages to First Customers

The process of acquiring the first customers involved four key stages:

Stage 1: Homies First (Free Clients)

The first step was to reach out to people who knew and liked the speaker [02:12:08]. Using a phone, a handful of friends were contacted, and about six agreed to be trained for free in exchange for before-and-after pictures and testimonials [02:17:17]. This was done to get “proof” and “results” to build credibility [02:47:06].

Proof over Promise

Building “proof” is crucial for any business, especially early on [03:03:06]. A business with many pieces of proof and a terrible offer will often outperform an amazing offer with no proof [03:07:07]. The proof needs to be relatable enough for potential clients to believe it will work for them too [03:16:00]. Examples included clients losing 50 lbs or achieving body recomposition [03:22:01]. This stage took about six months [03:41:04].

Stage 2: Asking for Referrals

After getting initial results for the “homies,” the next step was to ask them for referrals [03:56:06].

The Importance of Referrals

Referrals are considered the most important type of marketing for several reasons [03:58:00]:

  • They are free, making them ideal for those with limited budgets [04:03:01].
  • They have a higher likelihood of buying at higher prices [04:09:04].
  • They have a higher conversion rate [04:16:01].
  • Clients acquired through referrals are also more likely to refer others [04:22:01].

From a strategic perspective, if you’re not getting referrals, it indicates that your service might not be good enough yet [04:36:06]. It’s better to refine your offering with a smaller audience before broadly advertising [04:41:05].

The initial referrals (6 to 10 individuals) received free training, but because it was free, many didn’t follow through [11:31:00]. This highlighted a problem with purely free models.

Stage 3: The Free Training Project (Donation-Based)

To address the lack of commitment in the previous stage, the “Free Training Project” was introduced [11:56:02]. For this, referred individuals were asked to donate 1,000 to a charity of their choice for 3 months of free training [00:36:00]. This created “skin in the game” for clients, making them more engaged, while still being free to the trainer [12:09:00]. This also generated positive public support due to the charitable aspect [12:17:17].

Stage 4: Skinny to Swole Project (Monetized)

A year after the initial free project, the “Skinny to Swole Project” was launched, where new clients paid 4,000 per month, totaling $12,000 over 12 weeks [13:29:00].

Rule of 300: A Modern Application for Lead Generation

The “Rule of 100” (from 100 Million Leads book) is a fundamental process of applying 100 repetitions to various lead generation activities [05:16:00]:

  • 100 warm outreaches: Contacting people who know you (e.g., phone contacts, social media friends/followers) [05:23:00].
  • 100 cold prospects: Reaching out to people who don’t know you [05:37:00].
  • 100 minutes of content creation: Making and posting content [05:39:00].
  • $100 a day on ads: Minimum spend on advertising [05:46:00].

The “Rule of 300” is a more tactical, three-step process for warm outreach [06:01:00]:

  1. Post content: A single piece on one platform [06:08:00].
  2. Make 100 comments: Comment thoughtfully within groups or communities where ideal customers reside. This positions you as knowledgeable without direct solicitation [06:17:00]. Comments on larger posts can “piggyback” on other people’s reach [10:28:00].
  3. One-on-one outreach to a “lukewarm” list: Reach out to anyone who liked your post, commented on your post, liked your comments, or replied to your comments [07:10:00]. These individuals have already indicated interest by taking an action, making them engaged leads [07:58:00]. Begin the conversation by referencing their interaction and asking a relevant question [08:25:00].

Lessons Learned: What Worked and What Didn’t

What Worked

  • Walk the walk (Proof over Promise): Be the biggest walking billboard for what you sell [20:13:00]. Getting results for yourself and others builds credibility [20:54:00].
  • Live cheap: This provides financial runway and security to take bigger risks, like quitting a job to pursue a business [21:24:00]. Saving money (e.g., by meal prepping, not eating out, finding cheaper alternatives) allows for a longer shot at success [22:28:00]. Working more also helps save money by reducing time to spend it [23:21:00].
  • Start free: Offering services for free initially helps gather testimonials, feedback, and referrals that are often worth more than direct payment in the long run [23:30:00]. This is how you build proof and show you “walk the walk” [23:53:00].
  • Templated one-to-many solution: Develop systems that allow you to provide high value without extensive time input per client [25:40:00]. For example, a comprehensive Excel sheet for meal plans that could be quickly customized [25:50:00]. This investment during the free period builds future efficiency [26:33:00].
  • Niching down: Specializing in a specific problem (e.g., “skinny to swole”) allows for more templated solutions and deeper, more specific value to clients, costing less to deliver while being more valuable to the target audience [27:22:00].
  • Recurring business model: A model that allows clients to pay month after month, like fitness coaching, provides consistent income [27:57:00].

What Didn’t Work (Mistakes to Avoid)

  • Not ascending clients: Failing to have a second offer for existing clients after their initial program ends means constantly seeking new customers [28:38:00]. Always offer more of what they just bought [28:54:00].
  • Stopping for “new”: Abandoning a working, profitable online business (e.g., $4,000/month working 4 hours/week) to start something entirely new (like a brick-and-mortar gym) because it felt more “legit” [29:16:00].
  • No clear offer/sales process: Lacking a defined offer and a sales process (e.g., phone calls instead of just sending links) limits pricing power and overall revenue [30:38:00].
  • Judgment: Making major business decisions based on perceived judgment from others (friends, family) rather than the actual business value [31:44:00].
  • Not getting help: Doing it all solo [32:33:00]. Seeking advice and training accelerates growth [33:01:00].

General Principles for Business Growth

The speaker shares 13 instructions given to other entrepreneurs for business growth and scaling:

  1. Follow instructions. [33:31:00]
  2. Google first: When encountering an obstacle, search for solutions before asking for help [33:32:00].
  3. Post what you learned: Share solutions after you figure them out to add value to your community [34:04:00].
  4. Follow the Rule of 100 daily: Consistency in inputs leads to consistent outputs [34:12:00]. More inputs per day lead to more consistent, faster results [34:43:00].
  5. Work begins when excitement ends: True work involves confronting discomfort and doing things you don’t know how to do, separating you from the “mediocre masses” [34:54:00].
  6. Your work works on you more than you work on it: You are the product being built, and challenges help you grow [35:28:00].
  7. Everything is unscalable in the beginning – that’s the point: This period allows you to master every piece of the business, which builds skills and leverage [36:28:00].
  8. The pain of repetition forces improvement: Discomfort from repetitive, difficult tasks drives you to seek better, more efficient ways of doing things, leading to skill acquisition [37:28:00].
  9. Don’t complain: Complaining expends effort without results and seeks pity rather than envy [37:34:00].
  10. You are not special: Thousands have succeeded; repeat their actions to get similar outcomes [38:20:00]. If outcomes differ, it means an unidentified variable exists [38:29:00].
  11. Write down your “why”: Keep reasons for persistence visible (e.g., escaping a current situation or achieving a goal) as motivation fades [39:03:00].
  12. Business is shockingly simple but surprisingly hard: The difficulty lies in consistency, especially when motivation wanes or results are not immediate [39:41:00]. Potent individuals can work for long-term rewards, unlike those who need immediate gratification [40:39:00].
  13. Just win: Winning one achievement can be addictive and makes the pain of getting there fade over time, while the achievement itself stays with you [41:05:00].

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