Danger, Danger Will Robinson

It was before my time (at least the original series was), but the show “Space Family Robinson” had a robot character that frequently spouted the line “Danger, Danger Will Robinson”.  That line seems apropos to making referrals.

Do you know the qualifications of the person doing your books/accounting?  Getting a referral to someone for bookkeeping understand what the qualifications and limitations are on that person’s capabilities and skills.

From personal experience, getting a referral to another person or business for services or products isn’t enough.  Checking references and getting testimonials is also important.  Always check to see if the referring person has used the products or services – when and to what extent.

If you are the one giving the referral, it is important to understand that your referral may be perceived as vouching or a reference.  If you truly don’t know how to access the skill set, qualifications, and abilities of the person or entity, then be cautious in how far you go with the referral.  It is perfectly acceptable to introduce, set up a meeting, or facilitate a connection, but you may want to draw the line at saying this is the person or company for the job.

One particular area in which I see referrals occurring is accounting and bookkeeping services – often encompassing taxes, payroll, and other regulated activities.  Many people are capable of handling the paying of bills and the receipt of payments – the recording of transactions.  Those same people may not be fully qualified to prepare taxes, to ensure compliance with accounting and tax regulations, and a host of strategic and compliance issues.

Another area that has risks yet many people say they are able to “do”, is that of selecting a legal and tax structure for a business.  The completion and filing of papers isn’t all there is to setting up a business.  There are many liabilities, compliance, and other issues related to various ownership structures which need to be considered and are often overlooked by advisors who view the setup process as paperwork.  Working through the financial, liability, risk, funding, and other ownership issues is a strategic, tactical, and practical matter.  Missing out on addressing key elements of business (and accounting/tax) setup can create significant issues down the road when circumstances change.

Before making a referral, be sure you have covered the following:

  • Know the limits of what the referral will mean – introduction or reference and vouching
  • Understand and know the business or individual’s track records – you don’t want bad business to impact on your relationship with the person to whom you are making a  referral
  • Set parameters on the types of referrals you will give
  • Avoid absolute commitments which require exclusive referral to a certain person or company – not everyone is a good “fit,” so keep your options open
  • Don’t allow self-interest (compensation for referrals) to outweigh independence – stay true to your ethics and integrity
  • Prepare to disclose any and all financial relationships when making a referral
  • Disclose whether this is a company or individual with whom you have direct experience,  is someone you know casually or in a different business relationship, or is someone you know through a group

Once lost, your credibility is something that is difficult to recover.  Making a referral which turns into bad business for either party in the referral can have far reaching consequences, so be strategic in making decisions on who you connect.

Referrals are fabulous opportunities to grow your circle of “sales” people, make connections, and build business.  Whether they are formal relationships (by contract or by group membership) or informal in that you “know people,” referrals done well are revenue generators.  Be strategic, be tactical, be cautious, and be successful with referrals.

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