We need to talk about referrals. They are like crack cocaine for an agency - amazing at first, absolutely terrible in the long run.
Here's what happens. You start your dev shop, maybe you've got a good network from your last job. The first few clients come in through word of mouth. You do great work, they tell their friends. More work comes in.
You're drowning in opportunities. So you hire people. A few devs, maybe a project manager. Your costs go way up but hey, there's work to be done and money to be made. The machine needs to be fed.
And then one day the flow slows down. Just a bit at first. A deal falls through. A client takes longer to close than usual. No biggie, you've got reserves.
But then another month goes by and there's still nothing new in the pipeline. Your network has been tapped out. Past clients aren't sending new ones your way - they're busy with their own stuff.
This is when panic sets in. You've got a team to feed. Rent to pay. Benefits to cover. The fixed costs are absolutely crushing when there's no new work coming in.
And here's the problem though - you can't force referrals. You can't make people recommend you just because you need them to. You can't manufacture trust and goodwill on demand, and most people when you ask them if they have somebody in mind they could recommend you to come up empty.
The truth is, referrals work great when you're starting out and you're all by yourself. It sort of like beginners luck. And they work amazing when you've been in the game long enough to have hundreds of past clients generating a steady stream.
But that middle period? That 2-5 (or 10!) year mark where you've grown but aren't huge yet? That's where referral-only businesses go to die.
I've seen it happen more times than I can count. Good people, great work, but the math just doesn't work out.