Before anyone opens a report, ask three people one question. The founder, the growth lead and whoever runs retention each guess what share of last quarter's new customers came through an existing customer: a referral, a gift, a shared link, a friend at the checkout. Write the answers down, then pull the number. The spread between the guesses is your first finding.

Most teams guess high. A refer-a-friend page exists, a few codes get redeemed, and the room assumes word of mouth is doing real work. Then the pull says 3%, and half of those would have bought anyway.

Then open your store, your referral app and your email platform, and score each check 0 to 2: 0 if it failed or you can't answer it, 1 if partly true, 2 if clean. Don't read the bands until all ten are scored.

A referral page is not a loop. A loop is a reason to bring someone, built into the product.

The ten checks

1. Loop share, from memory · 4 minLook at: Nothing. Ask three people what share of last quarter's new customers came through an existing customer.
   Good: Three answers within five points of each other and of the pull.
   Cost if wrong: A team that believes word of mouth carries a third of growth stops funding the loop exactly when it needs work.
   Read next: Funnels End, Loops Return
2. The loop fits on one line · 3 minLook at: A blank page. Finish this sentence: a customer ___, which gives them a reason to involve ___, who then ___.
   Good: A specific moment in the product's use, a specific other person, a specific action. PayPal's version: a customer sends money to an email address, the recipient has to open an account to collect it.
   Cost if wrong: If the sentence needs the word "share," there's no trigger, only a button.
   Read next: Funnels End, Loops Return
3. The reward fires on completed value · 4 minLook at: Your referral terms. When exactly does the inviter get paid: on the invite, the signup, the first order, or the first order delivered and past its return window?
   Good: Paid on a completed, delivered first order. Whatnot pays the inviter after the friend's first purchase is delivered.
   Cost if wrong: A reward paid on signup buys fake signups. Fraud rings find it within weeks.
   Read next: Pay on Completed Value
4. You know what the reward costs you · 4 minLook at: The reward's face value beside your cost per dollar of it, after redemption rate.
   Good: A number per referred customer, beside your paid acquisition cost.
   Cost if wrong: A $20 cash reward and a $20 credit look the same on the landing page and differ by half on the P&L.
   Read next: Pick the Currency
5. The invite lives inside the use · 4 minLook at: Every place a customer can invite someone, and when each appears.
   Good: At least one placement at a moment of use (delivery, first use, a win, a gift) and not only a footer link or a quarterly email.
   Cost if wrong: The invite reaches people when they have no one in mind.
   Read next: Put the Invite Inside the Use
6. Referred customers are a cohort · 5 minLook at: Second-order rate, refund rate and average order for referred customers, beside paid customers acquired the same months.
   Good: The table exists, with customer counts, and someone read it this quarter.
   Cost if wrong: You can't tell a loop that brings your best customers from one that brings reward hunters.
   Read next: Retention Is the Fuel
7. Cycle time is measured · 4 minLook at: Median days from a customer's first order to the first order of someone they referred.
   Good: A number in days, by entry product.
   Cost if wrong: Without it you can't say whether the loop pays back inside this quarter or next year.
   Read next: Loop Math
8. The fraud brake exists · 3 minLook at: Caps per inviter, phone or payment verification, self-referral blocks, rewards held until after the return window.
   Good: All four, and a monthly count of voided rewards.
   Cost if wrong: The loop scales its own abuse. PayPal set aside $11.0M for transaction losses in 2000, 0.87% of payment volume.
   Read next: When Loops Break
9. Counsel has read the mechanic · 3 minLook at: Any reward with a chance element, any bonus tied to a purchase, any text or email the program sends on a customer's behalf.
   Good: Reviewed in writing, with a free method of entry wherever a prize and a purchase meet.
   Cost if wrong: Prize, chance and a required purchase together can make an illegal lottery.
   Read next: The Game Is the Loop
10. The loop is counted on total inflow · 3 minLook at: How the program is judged: referral-attributed signups, or total new customers against a group that never saw the prompt.
    Good: A randomized holdout, or at least a before-and-after on all new customers with the referral count beside it.
    Cost if wrong: Codes get used by people who were coming anyway, and the dashboard counts them all.
    Read next: Count the Loop, Not the Link

Score as you go; your band appears when all ten are in.

Read your score

Fix zeros before ones, in check order. The early checks feed the later ones: you can't price a reward until you know when it fires, and you can't count a loop you haven't drawn.

Set your two lowest beside the answers to check 1. If the room guessed 20% and the pull said 3%, the loop is a story the team tells itself. The rest of this book turns it into a system.

Do this

• Score all ten. Write the total, the three guesses from check 1 and the real number on one page, and hand it to whoever owns growth before Monday.