# Referrals and community

> Customers who bring customers: what a referral reward really costs, how many shops it truly adds, and a community the founders serve before they sell to it.

- Course: [From Idea to Profitable Product: Building Without Investors](https://productovi.com/courses/bootstrapped-product.md)
- Module: Growth without an ad budget
- Lesson 24/30, ~29 min
- Source: https://productovi.com/courses/bootstrapped-product/referrals-and-community

## Ten thousand for two shops

**Alex Tutor:** Winter at GarageDesk. Oscar has a confession, and he wants advice from you and me.

**Oscar:** Confession: in January I spent 10,000 UAH on ads in social networks. Two shops signed up.

**Alex Tutor:** Then you've measured your first **CAC**, customer acquisition cost: what you spend on sales and marketing divided by the new customers it brings.

![A stream of coins pours into a big loudspeaker on a roadside pole, and only two small cars roll out the other side.](https://productovi.com/courses/bootstrapped-product/inline/referrals-and-community-illustration-2.webp)

*CAC: what you spend on winning customers, divided by the customers won.*

**Nina:** And how did most of the others find us?

**Oscar:** When I ask, it's almost always “another owner told me” or “I saw it in the mechanics' Telegram group”.

**Alex Tutor:** So your best channel already works, for free and out of sight. The idea now is to make it visible and give happy shops a reason to speak up.

> **Exercise:** In January Oscar spent 10,000 UAH on ads in social networks, and 2 shops signed up from them. What is the CAC of this channel, in UAH per shop?

## Who tells whom

**Sofia:** But would a shop owner really recommend GarageDesk to a competitor?

**Oscar:** To the shop across the street? Never. His regulars are their regulars.

**Alex Tutor:** Then think about where recommending costs him nothing: a cousin with a shop in Khmelnytskyi, like Dennis has, a friend in another district, the owner he meets at the parts counter. There, recommending makes him look like the one who knows good tools.

![Two mechanics in garages in two different towns talk warmly on the phone, one pointing at a screen in his workshop.](https://productovi.com/courses/bootstrapped-product/inline/referrals-and-community-illustration-3.webp)

**Nina:** So the message isn't “invite everyone”. It's “know someone in another town?”

> **Exercise:** Dennis owns a car repair shop in Vinnytsia and is happy with GarageDesk. Whom is he most likely to recommend it to?

## A reward for both sides

**Nina:** From February: every shop gets its own link. When a new shop signs up through it and pays, both get one free month.

**Alex Tutor:** A two-sided reward suits you. The new shop gets a deal and someone it trusts to ask questions; the recommender gets thanks it can feel. That's the simplest **referral program**.

**Sofia:** A free month doesn't cost anything, though. It's not cash.

**Alex Tutor:** It's money you would have received. Most recommenders are early shops at 600; new shops pay 750. So what does one referral cost?

> **Exercise:** The recommending shop pays 600 UAH a month and the new shop 750 UAH a month. Each gets one free month. What does one successful referral cost GarageDesk in lost revenue, in UAH?

**Alex Tutor:** Nina wrote two versions of the rules for February. Which one would you launch?

> **Exercise:** Which referral rule should GarageDesk launch?

## Would they have come anyway?

**Oscar:** End of May: twenty shops signed up through referral links!

**Alex Tutor:** Did you ask them how they first heard of GarageDesk?

**Oscar:** I did. Five already followed our Telegram channel and were about to sign up. The link just came first.

**Sofia:** How would anyone know who'd have come anyway?

**Alex Tutor:** One question on the welcome call: “How did you first hear about us?” It isn't perfect, but it's far better than guessing.

**Alex Tutor:** Then the program paid for twenty shops but added fifteen. Divide the total cost by the shops that wouldn't have come otherwise. That's the honest price of a referral shop.

$$
\text{cost per extra customer} = \frac{\text{referrals} \times \text{reward per referral}}{\text{referrals} - \text{customers who would have come anyway}}
$$

*Every referral is paid for, but only the customers who wouldn't have come without the program are really won by it.*

> **Exercise:** From February to May, 20 shops signed up through referral links, and each referral cost 1,350 UAH in free months. 5 of them would have signed up anyway. What is the cost per shop the program really added, in UAH?

**Alex Tutor:** The answer to that welcome-call question moves the price a lot. Try a less lucky spring.

> **Exercise:** From February to May, 20 shops came through referral links at 1,350 UAH per referral. Suppose the welcome calls had shown that 10 of them would have signed up anyway. What would be the cost per shop the program really added, in UAH?

## A community you serve

**Oscar:** The Telegram channel for shop owners has about 900 subscribers now. I post almost nothing about GarageDesk.

**Alex Tutor:** That's why it works. Seasonal checklists, how to price a winter service, an owner telling how he keeps his regulars. People stay for the help, and they remember who brought it.

**Nina:** And the meetup in April at the warehouse of the distributor I used to work for: forty owners, and nobody pitched anything.

**Alex Tutor:** Owners met each other there, not just you. That's the difference between a community and an audience: people talk to each other, and you help them do it.

![At a warehouse meetup, shop owners in overalls chat in small groups with coffee cups while the two hosts stand quietly at the edge.](https://productovi.com/courses/bootstrapped-product/inline/referrals-and-community-illustration-4.webp)

> **Exercise:** Which practices help GarageDesk's Telegram channel grow trust among shop owners? Choose all that apply.

**Alex Tutor:** One more check: how would Oscar know the channel has become a community and not just an audience?

> **Exercise:** Which sign best shows that GarageDesk's Telegram channel has become a community rather than an audience?

## Your turn

**Sofia:** How do they tell existing shops about the referral links without sounding pushy?

**Alex Tutor:** Frame it as helping a friend in the trade, say plainly what both sides get, and make it easy to act. Want to write it?

**Oscar:** Go on. It'll go to every shop in Viber.

> **Exercise:** From February every GarageDesk shop gets its own referral link. When a new shop signs up through it and pays its first month, both shops get one free month. The best people to tell are owners in other towns, who don't compete for the same regulars. Write the Viber message (3–5 sentences) that announces GarageDesk's referral program to existing shops.

> **Key ideas**
>
> - **CAC** = sales and marketing spend / new customers. January ads: 10,000 / 2 = **5,000 UAH** per shop.
> - Word of mouth usually already works; a **referral program** makes it visible and gives a reason to act. Owners recommend where it costs them nothing, e.g. another town.
> - A free month is a real cost: 600 + 750 = **1,350 UAH** per referral.
> - Count only customers the program really added: 27,000 / (20 − 5) = **1,800 UAH** per extra shop.
> - A community is people talking to each other; serve it with help first and sell rarely.

**Alex Tutor:** Next time, back to March: 120 shops ask questions, and Oscar answers them all. That can't last.

- Previous lesson: [Revenue concentration: one customer too big](https://productovi.com/courses/bootstrapped-product/one-customer-too-big.md)
- Next lesson: [Customer support that doesn't eat the week](https://productovi.com/courses/bootstrapped-product/support-that-does-not-eat-the-week.md)

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