A referral is an enquiry arriving because someone recommended the business.
Why it is the most valuable source of work
It arrives pre-trusted. The recommendation has already done the persuading, which shows up as a materially higher close rate and less price resistance.
It costs almost nothing to acquire, so cost per lead on referred work is a fraction of any paid channel.
Asking
Most referrals are not given because they are never requested. The people most likely to refer are recent customers who were pleased, and the moment to ask is while that is current.
Asking for something specific works better than asking generally, because it is easier to act on.
Referral sources that are not customers
Adjacent trades serving the same customers, suppliers, and businesses whose work naturally precedes the business's own.
These relationships produce steady volume rather than occasional enquiries, and are usually reciprocal.
Paying for them
Referral fees are lawful in many trades and restricted in some regulated ones. Where they are used, the fee belongs in marketing cost so the channel can be compared honestly against the others — see marketing costs.
Tracking
Referrals are the source most often recorded as unknown, because nobody asks how the customer heard of the business. Untracked, it looks like the channel produces nothing and paid channels look better than they are.
Where the referring party is another business rather than a customer, the arrangement is a referral partnership.