Referral Service Business

How Profitable Is A Referral Service Business? (Updated for 2024)

Pat Walls

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Updated: October 5th, 2024

How Profitable Is A Referral Service Business? (Updated for 2024)

So you want to start a referral service business?

And the first question that came to your mind was, “well, are referral service businesses actually profitable?”

With a market size of $2.8B - there’s plenty of business to go around.

Especially considering:

You could start a referral service business with as low as $2,000
Based on our data, referral service businesses generate an average of $384K per year
You could see gross margins as high as 60% with referral service businesses

There’s money to be made. Don’t worry.

But, I don't want to spoil it all. Below we’ll cover everything you need to know when it comes to the profitability of a referral service business.

Let’s dive in!

Is a referral service business profitable?

Yes, a referral service business is generally a profitable business. However, you still need to consider several factors since these things always impact the overall outcome.

For instance, since average revenue is $384K per year with an estimated gross margin of 90%, you could expect to recover your investment within 7 months or even less.

But of course, it all comes down to how much you earn compared to the potential revenues of your referral service business.

To determine whether your business is profitable, you should earn more than your expenses in the beginning months. However, while you're in your first month, it can be challenging to know what to expect.

Therefore, you should maintain a record of your monthly expenses and income to determine whether you're meeting your goals. By doing this step, you can see how your referral service business is doing and if any changes or adjustments need to be made to enhance or maintain your efforts.

Is a referral service business worth it?

If you’re wondering if a referral service business is worth it, the answer is a big YES. With referral service businesses, you have the potential to earn $384K per year (this is based on data reported by real founders).

Further, you could have your initial investment back within months. Simply put, it’s a business worth a shot, especially if you have the resources and make the necessary efforts to achieve or surpass the target.

With a market size of $2.8B, it will be possible for you to build something that grows and turns into a flourishing business. As such, it’s the type of business you might want to consider starting.

Of course, you must learn and understand every aspect of running a referral service business to ensure success. Still, as long as you have the initial investment and can endure a few months before your actual gains, this business could be worth it.

You might want to consider reading more specifics about successful referral service businesses case studies.

Examples Of Profitable Referral Service Businesses

Here are a few examples of profitable referral service businesses, and a few more details about them:

1. CJAM Marketing ($312K/year)

While dining with a colleague, Behdad "Bee" Jamshidi was astounded by a friend's mention of someone earning over $50k monthly from SEO for dentists. Intrigued by passive income, Bee transitioned from his lucrative engineering career to founding CJAM Marketing, which generated $430,000 CAD in 2023.

Is it profitable? Yes
What's the gross margin? 60%
How much money it makes: $312K/year
How much did it cost to start: $2K

How I Grew Business Matchmaking Service to $300K/Year

Matchmaker solves marketing puzzle for businesses, profits over $430k CAD in one year, connects companies with vetted agencies at an 80% success rate.

Read this case study

Read by 3,337 founders

2. Spreadtheworld ($24K/year)

Xavier Coiffard, a developer turned solo entrepreneur, came up with the idea for his business, Spreadtheworld, after struggling to find online places to post his startup. He curated a list of 100 places and shared it on Reddit and IndieHackers, which gained significant traction. This led him to create a product, and from there, he launched several other successful ventures following a similar approach.

Is it profitable? Yes
How much money it makes: $24K/year
How much did it cost to start: $0

How I Created A $2K/Month Startup Marketing Database Using No-Code Tools

Learn how Xavier Coiffard generated $2000 per month in revenue by building 4 products in 4 months with no-code tools like Carrd, Airtable, Gumroad, and Zapier, as well as how he soft launched his products on Twitter and iterated on his launch strategy.

Read this case study

Read by 4,396 founders

3. GrowSurf ($1.2M/year)

Kevin Yun, co-founder of referral software company GrowSurf, came up with the idea for the business after realizing that there was a lack of suitable referral software available on the market. After years of waiting for someone else to build the ideal solution, Kevin and his co-founder decided to create it themselves, with the vision of making it as streamlined as possible to integrate a referral program into any product. Since launch, GrowSurf has achieved an impressive $25k MRR and is focused on increasing customer retention and reaching $1 million in annual recurring revenue.

Is it profitable? Yes
How much money it makes: $1.2M/year
How much did it cost to start: $0

How We Developed A $25K/Month Referral Software For Tech Startups

Co-founders of B2B SaaS startup GrowSurf, Derek and Kevin, developed a referral software for tech startups that has brought in around $25k MRR with a 6% monthly growth rate, overcoming generic messaging and a compromised product that wasn't a good fit for anyone.

Read this case study

Read by 7,925 founders

Learn more about starting a referral service business:

Where to start?

-> How much does it cost to start a referral service business?
-> Pros and cons of a referral service business

Need inspiration?

-> Other referral service business success stories

Other resources

How much can you make with a referral service business?

With a referral service business, you can make an average of $384K revenue per year (based on data reported by real businesses).

You can start with an initial investment as low as $2,000. Then, with proper knowledge and sustained effort, you could have an ROI (return of investment) within 7 months.

How much does a referral service business make a week?

Based on our data, average weekly revenue for a referral service business ranges around $8.01K. As such, you could see monthly revenues of $32K.

To know if your referral service business achieves the weekly profit target, you need to keep track of the total earnings you get per day. Afterward, you'll want to consider subtracting the expenses you have daily.

Learning your weekly profit can also show whether you're hitting your target goal for your referral service business.

How much do referral service businesses owners make?

The income of a referral service business owner can vary depending on various factors such as location, size, competition, and the owner's business skills.

But to give you some idea, the weekly revenue of an established referral service business is about $8.01K. But this can be lower or higher depending on so many factors - it's almost impossible to say exactly.

While the potential for earning a good income as a referral service business owner exists, success in this field requires a commitment to providing quality products and services and building a strong reputation within the community.

Referral Service Business Profit Margins

Generally speaking, a referral service business can expect profit margin of around 90%. Profit margins refer to the percentage of revenue that remains after deducting all expenses associated with running a business. In the case of a referral service business, profit margins can vary depending on various factors, such as the type and quality of products sold, the size of the store, and the level of competition in the area.

However, these figures can vary depending on the pricing strategy, inventory management, and overall efficiency of the business. To maintain healthy profit margins, referral service business owners must focus on managing costs, negotiating favorable supplier terms, and providing high-quality products and services to attract and retain customers. By doing so, referral service business owners can ensure long-term sustainability and profitability for their business.

Referral service business owner salary

The salary of a referral service business owner is an unpredictable figure. It's significantly influenced by numerous factors, including the store's location, its size, and the degree of competition. An owner of a well-established referral service business, in a prime position, might see an average weekly salary around the ballpark of $7.21K.

But it's worth noting, such numbers aren't always consistent. The earnings can vary wildly, potentially swinging by as much as 80% either way.

Achieving consistent success and maintaining a reliable income stream in this industry requires a deep commitment. It's imperative to offer high-quality products, deliver impeccable customer service, and nurture a trusted bond with the community you serve.

Conclusion

In a nutshell, based on many of our examples, a referral service business may be a promising business to start - but the success of your referral service business mostly depends on your effort and your approach.

If you focus on these, you'll have a much higher chance of a profitable referral service business.

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