First, Welcome to the industry
I worked for a multi-VA firm where we offered a "Satisfaction Guaranteed" clause and what it meant was (and we added this in writing) "We will get it right no matter what it takes".
This did not mean we would give a refund or anything like that; it simply meant we will work with the client (of course within reason) to get a job done to their satisfaction.
If we 'thought' a job was good enough, we'd take the financial hit in getting the work done another way (again, that satisfied the client). If we thought the assigned VA did not do the best, that VA took the hit and someone else that 'fixed' it got paid, but we never gave refunds until and if we had gone back & forth and it was apparent the client was just not a happy camper
If you are the only person in your business now, this means taking time out of your schedule to re-do something if needed.
Regarding the reference vs. testimonial issue; we can call them what we want, but they are essentially the same. I've found that the more a client is paying the more they want to speak with a past client and I am perfectly OK with that because most of my business comes via word of mouth which only means they got the reference/testimonial before they contacted me
Taking a small (I mean small too) 'free' trial project when you are just starting out is common (I think...I know we did it at the company anyway), but once you're established it won't be necessary.
Even better (and also better than the guarantee), offer to do a small (again I mean small) project 'for payment'. The WIIFM (What's In It For Me) for the client is that they did not invest too much to ascertain your skills, etc.
Having not worked in 7 years is a hurdle to get over, but once you do you'll be well on your way.
At any rate I wish you the best in your business!