The commercial risk of relying on referrals and repeat clients
Here’s the article in brief, so you can decide if you’d like to read it in full……
Referrals and repeat clients are valuable, but r
elying entirely on them can leave an engineering consultancy exposed. Projects may be postponed, key contacts may leave and established clients may have no suitable work available.
Proactive business development creates additional opportunities alongside existing relationships. It involves identifying suitable organisations, contacting relevant people and developing worthwhile conversations before work becomes urgent.
Start by reviewing where your work comes from, how dependable each source is and how much you can influence it.
The aim is greater commercial resilience: if a major source slows down, you already have other relationships and conversations developing elsewhere.
If your engineering consultancy receives good work from existing clients and recommendations, it is reasonable to ask why you should spend time prospecting. You have relationships to maintain, projects to deliver and a reputation that brings people to you. Approaching organisations that do not know you can feel unnecessary when there is already enough to do.
Those existing sources of work deserve attention. Repeat commissions can be evidence that clients value your service, while a personal recommendation can make an introduction considerably easier. A business built on these relationships may perform well for many years.
“Technical competence and good service matter, but neither gives you control over a client's investment decisions, project timetable or choice of personnel.”
The vulnerability appears when you depend on them continuing and have no established way of creating additional opportunities if they slow down. Technical competence and good service matter, but neither gives you control over a client's investment decisions, project timetable or choice of personnel.
My view is that an engineering firm benefits from being able to identify suitable organisations, contact relevant people and develop new business conversations deliberately. That capability gives you more influence over where future opportunities come from, alongside the relationships you already have.
What existing relationships give you
There are sound commercial reasons to value repeat work. You may already understand the client's requirements, approval process and expectations. They know how you work, and both sides have experience of resolving problems together. This familiarity can reduce the effort involved in starting another project.
Referrals offer a different advantage. Someone whose judgement the prospective client respects has suggested speaking to you. You still need to establish suitability, availability and terms, but you have a reason for the conversation and some initial credibility.
It would make little sense to neglect either source while pursuing unfamiliar organisations. Looking after existing clients, staying aware of their plans and making it easy for people to recommend you are all worthwhile business development activities.
However, a relationship can be strong while the work it produces remains uncertain. A satisfied client may have nothing suitable to appoint you on next quarter. A contact who regularly recommends you may simply not encounter anyone who needs your services. Their goodwill and your workload are connected, but they are not the same thing.
When good relationships stop producing work
Consider a hypothetical consultancy receiving around a third of its annual fees from one contractor. The relationship is good, invoices are paid and several projects have followed one another. The consultancy reasonably expects further work.
Two anticipated projects are then delayed while the contractor's clients reconsider their spending. Nobody has complained about the engineering. No competitor has displaced the consultancy. Yet a substantial part of its expected workload has moved beyond the period for which it needs work.
If the consultancy already has conversations developing elsewhere, it has other possibilities to assess. If it has spent the previous year dealing only with incoming requests, it must begin building those relationships just as pressure on workload increases.
There is no guarantee that earlier prospecting would have filled the gap. Its value is that the firm would have given itself more chances to find suitable work before the gap appeared.
A change of personnel can create a similar problem. Imagine that your main contact at a longstanding client leaves. Their replacement may bring existing supplier relationships, change the procurement process or simply need time to understand your contribution. The company remains a client, but the ease with which work previously reached you may change.
This is worth considering where you describe a relationship as being with an organisation, although nearly every conversation and commission passes through one person. Maintaining appropriate relationships with others involved can help, but it still leaves the wider question of how much the business depends on that client.
Start by examining where work comes from
Before deciding that you need more prospecting, look at the evidence within your own business. Review the previous twelve months, or a longer period if a few large projects would distort the picture.
List your main sources of work:
repeat appointments
referrals
networking
website enquiries
tender invitations
professional contacts
direct approaches
Then consider how much each contributes and how reliably it produces suitable opportunities.
“Keep the source of the relationship separate from the source of the latest commission.”
Keep the source of the relationship separate from the source of the latest commission. A client might have come from a letter you sent five years ago and have provided repeat work ever since. Recording every subsequent commission simply as “repeat business” can conceal the value of the original proactive approach.
Three questions make this review useful:
How much of our work depends on this source, organisation or individual?
How consistently does it produce opportunities that suit us?
What can we actually do to influence what happens next?
You might rate consistency and influence as low, medium or high, provided you also record your reasons. A source that produces occasional excellent commissions is different from one that reliably generates modest work. Neither is automatically better; the issue is how the combination supports your business.
Look beyond the number of enquiries. Ten unsuitable requests may contribute less than one conversation with an organisation whose projects, expectations and working approach fit yours. Fees matter, but so do the resources required to deliver them and the quality of the working relationship.
Activity gives you influence, not certainty
It is easy to overstate what proactive business development can achieve. You can choose which organisations to research, whom to approach and whether to follow up as agreed. You cannot make someone need your services or bring forward a project that has been postponed.
Nor are referrals and networking necessarily passive. You can develop relationships with complementary advisers, discuss the sort of introductions that would be useful and participate purposefully in relevant professional groups. Existing clients can also be a source of new opportunities you actively explore.
The useful distinction is whether your business takes deliberate action to develop suitable relationships, or largely waits for other people to initiate contact.
An engineering firm may use several methods effectively. The concern is whether it knows how to act when the usual flow of work becomes insufficient. Sending speculative messages without a clear target does little to answer that concern. A considered approach needs a reason for choosing the organisation and a credible basis for starting a conversation.
Build an additional source of opportunities
A practical starting point is to identify the kind of work you would like more of and the organisations likely to require it. Be specific enough to make sensible choices. Relevant factors might include the type of project, the client's role, geographical coverage, technical requirements and the scale of appointment your firm can support.
For example, a building services consultancy with relevant refurbishment experience might identify contractors regularly delivering occupied commercial fit-outs. That is a hypothetical targeting choice, not a recommendation for every firm. Its usefulness depends on the consultancy's actual capabilities and whether those contractors need the support it can provide.
The next task is to understand who deals with that requirement and how the organisation appoints consultants. A director, pre-construction manager and project manager may have different responsibilities. Finding a senior name is only helpful if there is a relevant reason to speak to them.
Your first approach should make that reason clear without assuming that a need exists. You can explain the connection between your work and theirs, then establish whether a further conversation would be worthwhile. Trying to describe every service at once can make a straightforward introduction unnecessarily difficult.
Some organisations will have no present need. Others will have established arrangements that suit them. A few may be willing to discuss an upcoming requirement or keep in touch. Responding appropriately to those differences is part of the work; every contact does not need to become an immediate opportunity.
Choose a level of activity you can sustain alongside delivery, with clear responsibility for research, contact and follow-up. Record what you learn and the next action agreed. Review whether the conversations are relevant and whether they progress, so you can adjust your approach rather than simply repeat it.
Begin while you have room to choose
“Maintaining some activity while you are busy allows those conversations to develop with less immediate pressure.”
There is a practical difficulty in waiting until work becomes quiet: the time when you most need a new commission may arrive before a new relationship is ready to produce one. Identifying a suitable organisation, reaching the right person and establishing a basis for working together all take time, and the buyer's timetable may be very different from yours.
Maintaining some activity while you are busy allows those conversations to develop with less immediate pressure. It also gives you more room to decide whether a prospective client or project is suitable, rather than treating every enquiry as work you must secure.
The appropriate commitment will vary. A firm with contracted future work and several dependable clients may need less prospecting than one facing a short order book and heavy dependence on a single relationship. The decision should follow an honest view of the business, rather than a rule that everyone needs to make more calls.
Start with your existing sources of work and ask: if our largest source slowed down, what would we do next? A clear answer, supported by relationships and activity already under way, is a stronger position than having to begin from scratch.
Best wishes - Kevin
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