As I've mentioned before, one of the best ways to get new business is through word-of-mouth recommendations. When your client refers you to someone they know, that's ideal. The prospect will likely place a high level of trust in your client's opinion of the applicability of your skills to the prospect's problem. The closer the relationship between your client and the prospect, the more the prospect will feel compelled to trust their recommendation.
Referrals like this sometimes happen spontaneously, when colleagues are socializing and discussing their common problems. Trusting to serendipity alone, however, might not be an effective marketing strategy. It never hurts to ask your client from time to time whether they know of anyone else who could benefit from your services. If you can help out a friend or colleague of theirs, then that will simultaneously increase both their prestige with their associate and your receivables.
A reputation for helpfulness, though, might not be enough to encourage your client to spend more than two mental cycles on this problem. If you offer a referral credit or discount, that might hold their attention a bit longer. You'll want to make the reward large enough to be worth their effort, yet not so large as to erase the benefit of the additional business for your bottom line. A percentage of the value of the initial contract would be fairest, but if you bill by the hour that could complicate accounting. A percentage discount on your existing client's next invoice would be easier to manage, and it would have the advantage of encouraging your client to use your services more. Just make sure that the discount isn't more than you could manage even without any new business -- you shouldn't be running things so close to the metal that you can't afford some discount at any time. State your referral incentive policy on your invoice, and draw attention to it whenever you can do so without sounding like a recording.
When a client sends new business your way, always remember to thank them -- even if you're giving them a referral incentive. Remember that business relationships are human relationships, and humans like to have their contributions appreciated.
Even if your clients don't know of anyone else you can help, they might still be able to boost your marketing efforts by providing a general, written referral addressed To Whom It May Concern. Back in the dark ages before social media, this sort of request required a good deal of effort. Your client would write or dictate a rough draft, which their secretary would finalize on high-quality cotton paper in typed original, signed in ink by your client. It surely looked impressive when you could pull four or five of those out of your portfolio when trying to sign a new prospect.
Nowadays a purely electronic referral letter will do. As technology has made it easier to produce documents, however, it has also made us less patient about it. Getting someone to write an email can often be more difficult now than it used to be to obtain a typed letter. Anything that takes longer than a tweet or clicking "Like" seems like an imposition. Don't just write off our collective ADD, though -- use it to your advantage. A Facebook or Google+ page for your consultancy might be a good place to collect "likes" -- which will also feed into the number one method that prospects use for checking your references these days: search engines.
Bucking the trend towards mindless brevity is LinkedIn. Somehow they've managed to encourage the generation of useful content, especially referrals. It's almost expected that you'll write a recommendation for your colleagues as a polite gesture. Another similar service, BranchOut, has the additional advantage of full integration with Facebook's social network (disclaimer: my son, Sterling Camden, helped develop BranchOut). It's clear that making referrals easy is not a problem that technology will ignore. Use these services and encourage your clients to do so, but keep your eyes open for what will come next.
Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant blog, he also contributes to [Geeks Are Sexy] Technology News and his two personal blogs, Chip's Quips and Chip's Tips for Developers.