Five Ways to Boost Referrals to Find Customers When it comes to finding customers, advertising is expensive. Here's how to find customers through referrals.

By Diana Ransom

Opinions expressed by Entrepreneur contributors are their own.

Five Ways to Boost Referrals to Find CustomersWe all know it takes money to make money, but is spending big bucks on advertising really worth the cost?

Most businesses stand to benefit from advertising, but many do it poorly. Few actually test or measure their results, and fewer still truly understand the numbers their advertising needs to generate to be profitable.

Of course, a certain degree of trial and error is to be expected when hammering out an optimal advertising strategy. But for start-up business owners who tend to have more limited means, making too many costly mistakes can be disastrous for business.

For this reason, referrals, which tend to offer the lowest cost per lead and highest customer retention rates, may be a beginner's best customer-finding strategy. Here are five ways to boost referrals:

1. Find a Focus. Beyond having a product or service people want, figure out who your ideal customer is. That way, you can communicate to others in your network what type of customer you're looking for. It'll also help you focus your own product or service offerings to meet the needs, wants or desires of that specific profile.

2. Ask. And whatever you do, don't forget to ask for referrals. You need to continually remind customers who had a positive experience to tell their friends, family and network. And even if you're not shy about asking for referrals, you should also find ways to thank your sources for their continued advocacy of your business.

3. Team up. You might also consider teaming up with another business with the same target customer. This type of arrangement, which is known as a host-beneficiary arrangement, allows you to leverage another company's database to promote your own business. A good example of this includes: a high-end boutique and a tony hair salon or a chocolate shop and a florist.

4. Provide a sweetener. To get other companies to buy in, suggest they offer a gift voucher or another discount deal through the other business. To sweeten the deal, you might offer to pay for the business owner's mailing or email expenses, or offer the business owner commission on any sales.

5. Partner up. To cultivate a referral stream, look for companies that may make ideal strategic partners. For instance, good examples of strategic alliances include: a landscape company and a landscape architect or a roofer and a general contractor. Since you and the other company have a shared target audience but complimentary businesses, a partnership may behoove you both.

Do you have a system for boosting referrals? Let us know in the comments section.

Diana Ransom is the former deputy editor of Entrepreneur.com.

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