How to market a software development company that runs on referrals

Past 30 people, Foundry couldn't rely on whatever came in the door anymore. I co-founded Foundry, a custom software firm in Minneapolis, and we'd grown on startups that hired us because we were quick and cheap. At that size we needed bigger clients.

We narrowed to financial services and manufacturing. Once we landed a big bank, we took that work to other banks: look at what we're doing for a bank like yours, don't you want to work with us? The same pitch to a restaurant chain didn't translate.

If almost all your work comes from referrals, build your marketing on them. Pick an industry your past projects will impress, and stay in touch with the people who hired you, especially after they change jobs.

How do we get new work from people who already know us?

Stay in touch with them and look for ways to be useful between projects. That's how I filled Foundry's first 20 jobs. Work from people I already knew paid for every one of those hires. Posting a promotion every few days was never going to replace that.

Miki, co-founder and CEO of a custom software firm and a guest on my podcast, also grew that firm on referrals for a long time.

Why doesn't SaaS marketing advice fit a custom software firm?

A software development company that builds custom work sells what its people built for clients like the buyer, so the marketing has to put those projects in front of those buyers.

I made this point to Miki during our conversation. Marketing firms often take what works for a product and apply it to a services business, and it doesn't work the same way.

Should a custom software firm focus on a stack or an industry?

For marketing, pick the industry first and keep your stack focus for delivery.

Miki's firm has done both. For a stretch it worked only in WordPress, then opened up to other open-source CMS platforms close enough that the team's knowledge carries from one project to the next. Later the firm moved its focus to outdoor brands, bringing what it learned building for large digital publishers.

At a bank, the person who signs the contract recognizes another bank in your case studies long before they notice which CMS you used.

How do we reach buyers in our industry who don't know us yet?

Go after a group of companies that look like your best client, and show each of them the project you did for that client.

At Foundry we didn't pick one bank to chase. We went after a bunch of them, through a lot of networking and some cold outreach, and got meetings with several. Once we were in the space, we could have more informed conversations with people who worked in banking, including people who weren't clients. Firms that sold other services to banks started talking with us about partnerships and referrals.

Miki's firm reaches new clients another way. The firm only does the technical build and partners with agencies that handle design and UX. Those agencies are a route to clients the firm has never met. If your firm only builds, get to know the design and UX agencies whose clients are in your industry.

What happens to referrals when our best contacts change jobs?

Referrals from those people can stop, unless you follow them to their new companies.

Miki's firm ran on referrals for years. Then the economy softened, and the people the team had worked with moved up or moved to other companies. The referrals stopped. The people who liked the team's work were still reachable at their new companies.

At Foundry we'd never done any traditional marketing. When we started our first email campaign, plenty of people at Foundry thought it was gross to message people who hadn't asked to hear from us. Staying top of mind is one of the most important things you can do.

Keep a list of everyone who signed off on a project or championed your team inside a client, with where each of them works today. When one of them changes jobs, email them that week. That person already trusts your team, and the new company may need what you build.

How do we hire a marketing firm that understands how we sell?

Choose the one result you'll grade them on before the first call, then ask each firm for work it did for a firm like yours and how it measured the results.

For a firm that runs on referrals, I'd track how many conversations you have each quarter with buyers in the industry you picked who have a project you could take on. Check how the marketing firm markets itself, too. If its own marketing doesn't make sense to you, what it does for your firm probably won't either.

Miki's firm tried several outside marketing firms that didn't work out. Looking back, Miki said the biggest problem was not knowing what to look for or what to measure, so there was no way to tell if a firm was doing good work.

Does AI change how a custom software firm should sell?

Yes. When AI makes code cheaper to produce, buyers lean harder on a firm they already trust to check it.

One owner who booked a call with me wanted to talk about "using AI for improving my software development agency business outcomes." Miki's team has tested AI coding hard, so I asked Miki what it changes.

AI gets the team to a polished prototype fast and speeds up a lot of tedious early work. Security, performance and everything else a production site needs still take a senior developer watching it. Miki compared it to managing a big group of junior developers who don't talk to each other and don't learn from one task to the next.

Put your senior people in front of buyers in your industry, talking about what they caught that a prototype missed.

Where do owners of custom software firms learn what's working?

Join a peer group of owners. The Bureau of Digital and a few smaller groups are places to start. Agencies and custom software firms have nothing like the big conferences and trade shows that lawyers and HVAC contractors have.

Near the end of our conversation, Miki's advice was to join a community or mastermind of owners in a similar position. The other owners shared openly, and Miki learned a lot from them. Miki wished it had happened sooner.

In a peer group, you'll hear which marketing worked for a firm like yours from the owner who paid for it.

Key takeaways

• Email the people who hired you whenever one of them changes jobs.
• Focus on an industry or two so buyers can see work you did for companies like theirs.
• Show your best project to companies that look like the client it was built for.
• Before you hire a marketing firm, choose the result you'll measure and ask to see its work for a firm like yours.
• As AI makes code cheaper to produce, put your senior developers in front of buyers in your industry.