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Group Therapy

When it comes to developing new business, Tom Croft has a foolproof weapon. Six years ago, Croft, a rep with Edward Jones in Santa Rosa, Calif., joined a referral network called Sonoma County Executives Association a group of some 70 business owners and executives who meet weekly for the sole purpose of exchanging leads. Over the years, referrals from members, as well as subsequent leads from those

When it comes to developing new business, Tom Croft has a foolproof weapon.

Six years ago, Croft, a rep with Edward Jones in Santa Rosa, Calif., joined a referral network called Sonoma County Executives Association — a group of some 70 business owners and executives who meet weekly for the sole purpose of exchanging leads.

Over the years, referrals from members, as well as subsequent leads from those referrals, have created a steady stream of business. Now, most of Croft's new clientele derives from the group.

Croft is tapping the power of perhaps the ultimate networking machine. While it's unclear exactly how many business referral groups exist, participants and observers say the number is growing. Most cities have at least one and, in some cases, as many as five or six. A franchise, called Business Network International, operates at least 2,700 worldwide, up from 350 in 1995. What they all have in common is a simple mission: Through regular meetings, members come to trust one another, to learn the types of prospective customers each seeks and to provide help in cultivating new clients. Only one representative from each industry is allowed, so no direct competitors are ever in the same group.

The upshot is that members gain access to prospective clients who tend to be considerably more sympathetic — and likely to sign on — than the typical referral. And in today's difficult market, such access is particularly helpful.

“The groups give us an added edge in this economy,” says David Toth, a financial advisor with Comprehensive Financial Solutions in Cleveland. A year ago, Toth joined a 20-person referral group called Professional Connections. Since then, he has won about 15 new clients, thanks to referrals from members.

All Business All the Time

But it's their unabashed, no-nonsense raison d'être that makes these groups especially effective. There's no idle passing around of business cards, no spending months developing relationships that might lead to something — eventually.

“You're not being subtle,” says Croft. “We're here to share leads to help each other expand our business.”

For that reason, meetings tend to follow a streamlined structure. Consider the 10-year-old Prestonwood Business Networking Group in Dallas. Its 45 members meet for an 90-minute lunch every Tuesday at the Prestonwood Country Club. The gatherings begin with a 30 to 45-second “elevator speech” by each person, introducing his or her company. About 30 guests — people interested in joining — also give a similar speech. Then, those people who received help from a fellow member the previous week stand up and acknowledge that effort. After that, participants discuss specific referrals they're seeking. Other groups provide each member the chance to give a 10- to 15-minute talk every few months or invite prospective members to make longer presentations.

Still, it's in the more informal meetings held at other times during the week that the real relationships are formed. Most groups require that membership hold frequent one-on-one get-togethers, often at offices of the members. There, members have the chance to provide a more intimate look at their businesses.

Those more casual discussions often lead to unexpected opportunities. Scott Morley, an advisor with Solution Insurance and Financial Services in Chino Hills, Calif., and a five-year member of a nearby BNI chapter, recently met with a new member, a photographer, at his office. After an hour of conversation, says Morley, “he paid me the ultimate compliment.” Turned out, the members' parents badly needed a financial advisor, and he asked Morley to help them. Eventually, the couple turned $200,000 in assets over to him to invest. Now, thanks to their referral, he's going to draw up a financial plan for the wife's boss.

Sign Me Up

How do you join? In some cases, applicants just need to be nominated by a member and appear before the group. Then they're voted in by the membership or an executive committee. Dues range from $250 to $1,000 or more.

The Marietta Breakfast Leads Club in Marietta, Ga., keeps a waiting list of interested applicants; when someone in a particular profession or line of business drops out, members consider a replacement for that specific area only from contenders on that list. Applicants also must provide three business references. At the Prestonwood group, applicants must demonstrate their ability, among other things, to provide referrals, especially to people in related, or “synergistic,” professions.

Those synergies, in fact, may be the lifeblood of any referral network. Most successful groups include mini-clusters composed of people in complementary professions and businesses likely to provide referrals in the natural course of their businesses. Financial advisors, for example, tend to cluster with CPAs, tax attorneys and mortgage specialists — and they tend to get a large number of referrals from that group.

Consider Toth. A member of his synergy group, a CPA, recently referred him to a client looking to find a broker. With $500,000 in her account, she couldn't find a rep willing to take her on. Toth spent three hours one Saturday going over her holdings, which were spread out over stocks, bonds and mutual funds — and ended up handling her entire account.

Connie Weems-Scott, a financial planner with VeraVest Investment in Marietta, Ga., recently made a $20,000 commission when she handled the distribution of one client's qualified retirement plans; the client had been referred to her by the group's CPA.

At other times, however, referrals may also come from members targeting similar clients, even if the business isn't complementary. Toth, for one, specializes in small business. So, he tends to trade referrals with other members, like a video conferencing specialist, who also work largely with small business owners.

The Power of Meta Referrals

Of course, it's often the referral's referral that leads to the biggest business. Soon after Jeff Thomas, a Dallas advisor with Raymond James Financial Services and one of Prestonwood Networking's first members, joined the group, he started handling the account of one member, an attorney. When that client became corporate counsel for a big company, he picked Thomas to handle the corporate retirement plan — first $400,000 in assets from a profit-sharing plan, then the company 401k account, worth $12 million. (It's now worth $25 million.)

At the same time, you can't expect instant success. Generally, it can take anywhere from three months to a year for members to feel confident enough in a new colleague to recommend their services. That's especially true for something as delicate as financial advice. Jean Loveday, a financial consultant with A.G. Edwards in Sandy Springs, Ga., for example, joined the Ali Lasson Leads group about a year ago; she's just starting to get a sizeable number of good referrals now. Toth attributes part of his success in quickly winning new clients to the simple fact that he already had established relationships with many of the group's members, who had all belonged to a different network before joining their current organization.

How to speed up that acceptance process? One possibility is to volunteer right away for a committee — say, the membership committee or board of directors. Another is to hold as many informal one-on-one meetings as you can, to help members get to know you as quickly as possible.

Ultimately, while their single-minded focus is on referrals, members find added benefits, as well. For one thing, says Croft, “I can be Mr. Answerman for my clients.” Meaning: He's provided clients with references for everything from someone to fix a leaky roof, to an enrolled agent able to provide advice about a complicated tax situation — all drawn from fellow group members. Weems-Scott, a member for 15 years in the Marietta Breakfast Leads Club, says she's come to regard the group as an unofficial board of advisors and a source for everything from how to improve her public speaking style to developing more effective personal business skills.

Then there's Thomas, who was looking to teach seminars on financial planning. Through a member's mother, who was director of continuing education at Southern Methodist University, Thomas got a gig teaching a class, starting this fall, on fiduciary liability issues for retirement plans, aimed at employee benefit specialists.

“Suddenly, every week, I'm going to be right in front of the highest-end professionals in the city,” he says. “And it's all through the contacts I made.”

Certainly worth the price of admission.

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