When speaking with small business owners about internet marketing, one of my standard questions is " How do you generate new business now? ".

Most small businesses generate most of their new business as a result of referrals from happy clients. If the business owner (or their sales people) are good at networking, they also get referrals from their network of contacts who know and trust them to do a good job.

I usually ask them if they're able to predict and control the amount of new business they get from referrals. Some people can honestly answer "yes". They are the rare people who have an excellent reputation, as well as excellent sales skills. Most businesses are unable to control the pace at which they generate referrals. As a result, they can't rely on referrals to reliably grow their business.

This is usually why we're talking. They want to know whether internet marketing can help them.

What most small business owners don't realize, though, is that generating leads online and generating referral business are tightly connected. It's hard to do one without the other. Most savvy business owners will intuitively understand this, once explained. However, they don't usually understand exactly how it'll happen.

So, I thought it'd be beneficial to lay out what I've observed are the most important ingredients to leveraging the web to generate more referrals from clients.