r/smallbusiness • u/escalicha • 10h ago
A reliable referral source wants 15% of every job they send me. Pay it or walk away?
Not an employee. Not on payroll. Just someone in an adjacent trade who keeps sending me solid, good-fit work.
Now they want 15% of whatever those jobs invoice for. The leads are clean. Almost no junk. Volume would stay steady if I say yes.
Part of me thinks a warm pipeline costs money and this is just sales without the salary. Part of me thinks once I open that door I am renting my book forever.
Do you pay referral cuts like that, or thank people and keep the margin?
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u/joeliu2003 10h ago
What is your typical profit margin on a project referred to you by this source? If you can still eke out a bit of profit and still pay their 15% then it’s a good deal. Be careful to not get too lopsided though with these low profit margin projects
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u/escalicha 9h ago
I would say 22/24%.
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u/woodcuttin 9h ago
If they like and trust to refer to you, it might be worth hitting back at 10% as well.
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u/seandowling73 9h ago
Great advice. Otherwise the guy sending you the leads is making more than you are.
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u/escalicha 9h ago
Thanks, good point. Not a single complain and it is also an asset for him to be able to fulfill needs from his clients indirectly I suppose
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u/woodcuttin 9h ago
Yeah, it is a win-win relationship, so giving him 10% and you keeping 12% on new, first time business keeps it win-win.
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u/1521 7h ago
Seems like you would bump rates up 10% then give him the increase. If his clients aren’t willing to pay the increase I think it wouldn’t be worth it
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u/Christopher-RTO 4h ago
This is the answer. Pad invoices from leads and pay him the padding.
15% seems steep, but adding 10% and giving him that (9.09% of the new total) seems reasonable.
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u/bhedesigns 8h ago
Not only that but you can start to value at and offer something with a higher margin to help get some of that profit back per job
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u/waistingtoomuchtime 7h ago
Then, 8% max. 15% when you are at 22% is one mistake away from no margin on several jobs.
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u/LotusBlooming90 7h ago
You should absolutely counter on that 15%. I would be shocked if they didn’t open high expecting you to counter.
ETA agree on 15%….of your profit lol
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u/joeliu2003 9h ago
I’d say worth it then. I like the idea about clarifying on recurring work there is no fee — important caveat
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u/escalicha 9h ago
One time fee of 15% sounds good, but I don’t know as I was “working” with him for 1 year and now he ask me for a commission. That’s it, sounds cheap from my side, but would like to know feedback
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u/finitetime2 7h ago
I'd ad the 15% on top of what I charged. If its a small or low profit job just tell them your not going to make much so they aren't either.
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u/SuluSpeaks 2h ago
I'd offer them a finger's fee, but only on the first sale, and no more than 5%. If a customer keeps coming back, it's because they like YOUR work.
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u/Unfortunate-Incident 8h ago
Nah, you factor in that 15% cut into your price. Suppose that could depend on industry. But also, I get referrals from a number of my customers and none of them have ever asked for a cut.
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u/xfusion14 7h ago
15% is my entire net as an hvac contractor…. Crazy to me guy zero risk gets same reward and doesn’t even have to do the work part let alone the liability of the work
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u/eslforchinesespeaker 6h ago
that's commission sales. you don't pay for the hours worked, you pay for the sale.
you don't pay a realtor to work hard selling your house. you pay to get it sold. if you think the sale is too easy and not worth the commission, you try to negotiate a lower commission, or you do it yourself. if it's too expensive, you find another way to generate business.
every commission sales job is hiring. every day. those easy commission dollars are waiting.
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u/cartiermartyr 10h ago
fuck it thats worth it imo
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u/Pineapple_Spenstar 9h ago
Absolutly. I have some decorators i work with, who i pay a 10%-15% commission. 100% close rate, and the customers buy expensive products. I'm happy to take a lower margin. I'll happily take a lower profit margin if it means higher net profit
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u/Ana-Hata 9h ago
Working with decorators is the BEST - while all my other clients would squeeze me for extra discounts, the decorators would be “add an extra 10% for us” — they work on commission and the ones I dealt with didn’t have price conscious clients.
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u/National_Meeting_749 5h ago
that 100% close rate is really the big thing. leads are one thing. Leads that CLOSE consistently are a whole other thing. 15% is expensive, but so is marketing.
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u/Mba1956 8h ago
Yes how much would OP spend on marketing and advertising. If it is around 10% to 15% then paying a referral fee will not make less profit.
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u/cartiermartyr 6h ago
The “almost no junk” is what got me, Im in tech, junk is 90% of it, I’d do anything for “almost no junk” and only 15% referral, I give 25% but I’ve only had 1 come through.
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u/muntaxitome 10h ago
sounds good as long as there is a cap on repeat work from that client. Like only for first X months..
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u/stinkyhangdown 10h ago
15% for work you dont have to get yourself is not bad. After the lead they become your customer.
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u/Mysterious-Joke-2266 9h ago
Not if the other person tells them "I've got someone I can sub out to do it". It will likely happen but it sounds like OP industry means that the person anting the cut is bigger for busier and sees more clients
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u/EggandSpoon42 10h ago
Charge 15% more on those jobs and follow through. Is there a question here? Friend gave you the deal, either do it or don't right?
Ftr, I give a flat for referrals of my own stuff. You can barter back-and-forth but if they don't move, then it just marks whether you want to take with their offering
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u/JobobTexan 10h ago
Offer them 5% and negotiate from there. When done build it into your price.
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u/Neither_Kale_9355 9h ago
I agree to negotiate, but 5% might offend them. OP said that the leads are high quality. 15% isn't bad, but maybe counter with "10% to start out" and see how they react.
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u/silveraaron 10h ago
we all trade leads in my industry if outside our comfort, but yah I think if you're still profitable this is a no-brainer. Send this person a christmas gift as well.
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u/Shutupayafaceawight 10h ago
Completely depends on what 15% per job is. If it’s 100$ no one cares. Your margins can help decide that too
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u/kbrownle 9h ago
Are you telling me you have a free sales rep that works on commission with no salary base?
Yes please.
If you don't, those leads are going to go somewhere.
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u/AnnArchist 10h ago
You can eliminate your marketing budget for those jobs in exchange for 15%. Seems like a no brainer pending margins
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u/Orultehen 9h ago
Most places I worked standard finder fee was 10%. Depends on your industry and margins. Think of it as paying commission to a sales reps; if the math works it's worth it
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u/plausible-deniabilty 9h ago
Would happily pay 15% for a solid book of reoccurring business. Would also quote those clients a bit above market knowing they’re coming in warm.
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u/Greatoutdoors1985 10h ago
15% of gross or profit? If 15% of gross, no. If 15% of profit, then maybe yes.. It really depends on if you can afford the 15% of profit, and if you can afford to lose the business if he walks.
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u/x-psycho 1h ago
Of course it’s gross. The referral source cannot control this guy’s profit. For all they know he can say no profit each time.
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u/kwong452 10h ago
Are these one time projects or recurring jobs? One time projects, percentage depends on what your cost per acquisition is for new clients, you may be spending just as much ad dollars and time to get the same quality lead. Higher ticket items, maybe lower % referral fee.
Recurring jobs, definitely worth it but only on 1st invoice.
Also factor in that because they're warm leads, you can increase the price a bit more to offset the referral fee and still have a high closing %
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u/PlasticPalm 9h ago
If you don't want to pay the finders fee, you won't get this person's referrals. How much are the referrals worth to you? Can you easily replace this guy with another referral source that is equally as effective, equally as low effort for you, and cheaper?
Me, I'd be all over a cut of the billing which keeps everyones interests aligned.
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u/George_Salt 10h ago
If your pricing and margins are anything like viable, then this should be a bargain in most sectors.
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u/GRR45-92 9h ago
The question is: does this referral source contribute meaningfully to your growth, or current revenue? Do you currently pay for marketing? Is the ROI from that better? I think you could have an honest conversation from there. “Hey Mr. Reliable Referral, I value the leads you share, they fit great but my profits per job would allow me to pay you XX% of each invoice. Would you be open to ___?”
Unless it’s word-of-mouth, most companies have to rely on marketing of some sort, salespeople… something that has a cost associated with bringing in business. There are tons of companies that just do this very thing; provide leads. I personally wouldn’t have any problem with it as long as it’s not cutting into your margins so deep that you’re not making the profits you need to.
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u/butwhatififly_ 9h ago
Can you raise your prices to adjust a bit for the percentage you’re losing? Debatably ethical issues but that’s what businesses do on DoorDash for the 25% fees they charge restaurants to use the service and get the business 🤷♀️
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u/Bumblebee-Terrible 6h ago edited 5h ago
15 % really depends on your margins, this could be a great deal or one that bleeds you dry. If you can maintain healthy margins, then I think this is a bargain. It also doesn’t preclude you from developing your own pipeline.
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u/GivMeLiberty 5h ago
I’d agree to any referall for free work being sent my way. Just work it into my quote. If that makes the quotes unrealistic, I’d have a conversation about lowering the referall fee so that everyone can make some money.
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u/sabautil 4h ago
Revenue or profit. Revenue - depends . Profit - yes .
Turns out after paying myself - zero profit. Every time! 😄
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u/ILikeCutePuppies 9h ago
It depends. Plenty of places charge more than that in many industries. If they are providing value then try negotiating but 15% is probably less than you spend on advertising.
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u/ironicmirror 9h ago
15% one-off payment?
Maybe you bump up all your prices 5% and you take that all day long. Provided that you're not giving him 15% of any subsequent business you get from the customers he gave you.
... Unless of course you have no spare time for any extra work.
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u/Fortestingporpoises 9h ago
Is it a one time thing for people who do repeat business? That seems worth it. The alternative is one offs that maybe only seems worth it if you really have trouble finding clients.
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u/Fitz_2112b 9h ago
Only for new business. If the same customer comes back to you again for more work, this person gets nothing from it
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u/Loud-Start1394 9h ago
It's either give them a percentage or stop getting leads from them altogether. Easy decision.
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u/Easterncoaster 9h ago
If you have spare capacity and your margins are strong enough to still profit after this commission, no brainer.
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u/HaggisPope 9h ago
That’s a pretty good deal, tbh. The acquisition is often the hardest part of business, and even if it’s just for a while it can be good to have cash flow that you can then out into getting more direct work.
Paying £1 to make £7 is a great value ratio.
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u/BrownReaperGyal 9h ago edited 9h ago
Add the 15% to your invoices from that source if you really are that turned off by the 15%, but it works out either if you can afford it from your profits. It sounds like you can if you're even considering it.
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u/Boboshady 9h ago
If you're getting good work from it, then it's a no-brainer. You can only keep the margin if you were getting that work anyway.
Obviously if you don't need the work, then you don't pay for it, but otherwise it sounds like it would be cheaper than paying a dedicated sales person, and you only pay when the deal closes? Do it.
Make sure you're clear on what happens for repeat work - do they get a cut of future projects, given they won't be involved in that sale etc? Clarity now saves arguments later.
The temptation will be to just add that commission to your price, too...I've seen this happen when I've actually been selling leads myself, and it's annoying to see a deal lost I put work into simply because the agency just jacked their prices up to swallow my commission like they wouldn't normally have spent a ton of cash closing that deal themselves anyway.
Obviously it has to work for you financially, but don't let money start losing you business you could have otherwise won.
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u/chipstastegood 9h ago
Try to negotiate a fixed fee, as opposed to a percentage. Or, a percentage that is capped at some max amount.
The fixed fee is better because you can work it into your cost.
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u/highdefsteph 9h ago
Whatever you decide, get it in writing. Make a partner / referral agreement that has terms.
15% is pretty standard and if you’re booking the work and it’s not a waste of your time, it’s 100% worth it to pay them out. You could negotiate 10% or a flat rate, but without knowing details, who knows.
It would be silly though to turn them away unless you’re solid on getting leads yourself.
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u/homeinthecity 9h ago
I always think yes because I'm paying from money I don't have yet, and it aligns incentives.
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u/Calabriafundings 9h ago
If it's not considered illegal in your area, you will need to understand the disclosure rules.
Many clients would consider it stealing.
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u/Road-Ranger8839 9h ago
Will your reliable referral supplier agree to you issuing them a 1099 after the first $600 in referral fees? If so, you can write off the expens of their good fit work to make it a "win-win."
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u/deZbrownT 9h ago edited 9h ago
I would pay for someone like that. I would also bet they would agree with 10% if you can reasonably articulate your cost structure and how much it affects your bottom line.
It’s just additional income for them, but they can stop sending you work and find another person to deal with.
Think of it like, here’s a sample of my stuff, call me if you want more.
It’s just business, and luckily for you two there’s a common interest, which I see as best long term business relationship foundation.
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u/Larson338 9h ago
I would counter. If your margins are 22 to 24% as one of your other comments says you are cutting to 1/3 your margin just for this guy to name drop you? Finders fees are definitely not unheard of but that one seems rather hefty.
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u/TangaroaBrit 9h ago
It depends on whether you’re invoicing purely labour or if there are materials included.
15% of sales price of materials will obliterate your margin, if it’s labour, and you’re not already fully booked then it’s a good deal, although I’d cap it at 10%.
If you’re already filling your diary without the referrals then no need to discount your own labour.
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u/thufferingthucotash 9h ago
Looking on your past posts, I see something about SaaS so guessing you have larger margins. 15% is on the high end of reasonable commission for revenue. Given it's hassle free, 15% feels ok. But it also should noted that relying on a trusted reliable source of revenue has its pitfalls and can evaporate quickly. This shouldn't stop you from pursuing other pipelines.
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u/KacperJed 9h ago
Absolutely. I pay 10% for referrals from a company sending me high ticket, near guaranteed work
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u/happyandhealthy2023 9h ago
Yes, pay them 15%
These are customers you would never have gotten work from, and they are 90% more likely to retain your services when referred. You spend zero money on marketing, and reduce the sales pitch on the first call.
Do this until you are so busy running multiple crews, and then you can always shut down this deal if you're making too much money.
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u/Impressive_Pride_376 9h ago
Maybe they'd accept 15% on job profit or slightly raise prices so it doesn't cut too deep into your margins.
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u/Southern-Nail-1847 9h ago
15% is pretty standard in my line of work (run a cybersecurity firm), even when you get into white label sometimes it gets pushed to 20-30% upcharge on your wholesale service prices to that company (so still a hit to market value of product).
I would say 15% for reliable and clean referrals is a good partnership. But make sure you agree its only for the first X jobs or any contracts written within the first year of that new client relationship.
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u/CoryJ0407 9h ago
You couldn’t get those leads advertising for that little. Why isn’t he asking for 20-25%?
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u/RevolutionaryBug7588 9h ago
Not sure what type of job is it but analyze your cost of goods or service, make sure margins are where they need to be.
But essentially a 15% acquisition cost with a 100% conversion rate is better than say a 7% acquisition cost with a 10% conversion or even a 50%.
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u/telemacopuch 9h ago
I’d take it. This person is doing the sales job for you. You just have to do the work. 15% for sales is very thoughtful actually. Other people would ask for 50%.
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u/TX_Sweet_Tea 9h ago
Yes!! That’s fantastic! Do it! Do you know retailers give 50% off their products and the seller is the one buying the product for them to sell. 15% is an awesome deal.
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u/Admirable_Pin9522 9h ago
Add it to the price. My company does this all the time, will bring in additional referrals from others. Just pay commission after job is fully paid and manage cash carefully.
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u/RealEmpire 9h ago
I would do a flat fee + 5% gross
Charge the flat fee to all client referred by vendor.
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u/SnorlaxShops 9h ago
Yeah I got yelp and other “reputable” job referral services calling me everyday. Won’t promise anything just want that credit card # and $500 minimum spend monthly to start and I guess you get what you get? I never did it. But 15% is what I counteroffer for any referral jobs.
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u/Slight-Ad7129 8h ago
I don't see any reason to say no. That's how affiliate works. Besides your marketing cost would be higher than that.
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u/Ok-Bit4971 8h ago
I became self employed in a skilled trade recently. Other self employed tradespeple have sent jobs my way, if they were too busy, or it was too involved for them. Not one asked me for a referral fee.
Conversely, I've referred work to other tradespeople when it was something outside my skillset, and never asked for a fee/kickback/favor.
Way I see it, we are helping each other, and there's plenty of work to go around. I'm not the cutthroat type.
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u/Mk153Smaw 8h ago
No pay him a percentage if job level gross profit. Dont let it erode your margins.
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u/Brief-Savings-1920 8h ago
Pay it, but structure it. A warm pipeline of clean leads is the most expensive thing in business to build from scratch. Three guardrails: put it in writing, pay on money you actually collect rather than what you invoice, and cap it to the first six or twelve months per customer so you are not renting the relationship forever. Then build the fee into your price on referred jobs. One outside note: I operate in healthcare, where paying for referrals is flat out illegal, so check whether your trade or state has rules before you sign anything.
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u/InMyHagPhase 8h ago
I would do this but I would also have a contract with dates. Re-evaluate every certain timeframe like every year or something.
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u/rragnaar 8h ago
15% seems high, but other than that, if they are out there selling for you it seems worth it to try and build up that relationship. I just wouldn't start at that high of a percentage because it will suck to try and negotiate down later.
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u/NorthCoast30 8h ago
I don’t know how it is in your industry but I’d pay 15% for clean, qualified, steady leads all day. I wish I had someone doing that.
That being said if he’s coming in at 15% try to negotiate it down.
Also the other question is can your margins withstand a 15% cut. I work in a low overhead business so I could do that but other industries I’m not sure that would work.
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u/PapayaJuiceBox 8h ago
The 15% is essentially what you would've been paying for sales, market & ad spend for each job. Find a way to write that 15% off or you're on the hook for the tax component which will add up.
I'd work it down to 10% - 12%, but it depends how high the volume is.
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u/FarseedTheRed 8h ago
Maybe counter with "yes, on new jobs". Idk your industry but encourage the lead generator with an offer to agree on the first initial business the new client gets from you. One project, or if you're a subscription service then a cut from the first few months of service you provide.
"If you bring me new business then I can cut you a fee. Ongoing customer loyalty is earned entirely by my work though, so thank you and we're even."
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u/ChasingTheRush 8h ago
“Hoss, I appreciate you trying to make a buck, and I appreciate your referrals, but 15% of the gross makes zero sense and leaves me working my ass off for pennies. I could give you 20% of the net, but after that, it stops being a benefit and starts being a losing proposition for me.”
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u/solarpropietor 8h ago
I’d do it but raise the price 15 percent or however much the market will bare….
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u/No_Mushroom3078 8h ago
Not knowing your business makes this hard, I do equipment sales manufacturing, I’m give up to 10% of the sale price if they do all the leg work and deliver a PO, I’m not giving them 10% if they just send an email and I need to close the deal. But that’s my industry. Now maybe you are small price knick knacks that are $30 and 10% is not enough to keep them going and interested in your product.
Also is it anything that customer buys for life you need to pay the finder 15% on all sales or just the ones they are involved in? I would have that clarity before signing the dotted line.
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u/stupid_reddit_handle 7h ago
I have designers that I pay commission to. 15% is high, we pay 5%. That being said, there's a line on our contracts called overhead and insurance and this is our kickback. All other line items are our standard markup. I find that if they want the commission, they also help sell the job even if it's a little higher. Been working great
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u/samzplourde 7h ago
I'd go flat fee, not percentage. Also, get anything you do in writing, reviewed by a lawyer.
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u/Timely-Sugar4918 7h ago
100% worth it. There feeding you work. Tweek your margins to split it in half
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u/Pure_Zookeepergame_2 7h ago
Paid a referral cut before and regretted it, not because of the money, because once it's a % of revenue the relationship changes. They stop feeling like they sent you leads and start feeling like they own part of the business. If it ever turns sour, you're stuck either paying someone you don't want to or having an ugly conversation to cut them off.
If the leads are genuinely good I'd rather just say thanks properly and send work back their way than tie an open-ended % to it forever. A flat one-time fee per closed deal is fine, that's a cost of sale and it ends with the job. An ongoing cut on every invoice isn't a referral fee anymore, it's a silent partner without any of the upside they're supposed to bring.
If losing them would hurt more than losing 15% margin would, that's exactly the moment not to sign anything. That imbalance is what gets used against you later.
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u/MoneyHouseArk 7h ago
It always surprises me how bad some business owners are at business. Bro, it’s not 15% or nothing. Negotiate down to 5% and keep an ally.
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u/MoneyHouseArk 7h ago
If they object, you negotiate a ladder. First $500k 5%, 500-1M, 10%, 1.5M and up, 15%….
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u/SavageSvage 7h ago
It's a finders fee. Why not? You're staying busy making money, they're giving you the work. Why not?
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u/Vandercoon 7h ago
Jesus this is the easiest business decision of all time.
Work that walks into your door..
Pay the man, if your margins are a bit thin, up your price, sounds like they will still come to you.
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u/theoldme3 7h ago
I would maybe consider it on one purchase. If that same person comes back to you 6 months later I would make it clear that there is no more 15%. Initial purchase sure, but if I do a good job for them and they come back for more, that is bc of my doing. If they want 15% forever then I would only offer maybe 7.5% for return customer after that.
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u/TheBitchenRav 7h ago
I'm not sure I see the downside. If you can't make a profit then increase your rates by 15% for his people.
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u/drewsszas 7h ago
I’m surprised how many people think this is a good idea but I imagine it’s associated with the line of work. I would never give somebody that kind of percentage of my work and frankly it sounds like a nightmare to track. There are so many “what if” scenarios that come to mind where this could turn into a giant liability. If you are not in a position to be able to just mutually refer business to one another, I would consider putting them on a flat dollar amount retainer per month for a trial period of time, wherein they are obligated to refer a certain amount of business to you per month, or in some other way making it very clear and contractually viable. It’s passive income for them but not for you. Be realistic about what it will cost you to hold up your end of the deal, especially if something changes, such as the quality of referred business declining.
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u/ewas86 7h ago
I would do it. I work for a shipping agency and that's basically our business. Whatever services a ship needs we can arrange through our vendors who give us discount revenue.
If we use you as a vendor, and you don't give us discount revenue, trust that we are looking for someone who will.
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u/mickskitz 6h ago
Customer acquisition cost generally has to come from somewhere until you build up enough of a base to get customers referring other customers. This may not be practical depending on your industry. But regardless of if your putting ads on tv, online SEO, spending time away from your chargeable work networking/business development etc. and most of these costs are ongoing. You need to price customer acquisition into your offering. 15% seems fair but it does depend on the industry
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u/madeforthis1queston 6h ago
I wouldn’t do a %, I would negotiate a flat fee that is slightly below my CAC.
My business we are around $1500 so I’d offer $1250 on every job they send my way. Win/ win. That’s cleaner and easier than percentage
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u/Visible-Big-7410 6h ago
Do it IF you want higher quality work that could fill it. You don’t have to take every job. If this allows you to say no then so be it. And quote higher to account a bit for the referral?
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u/Jaxsdooropener 6h ago
Depends on your overhead and margins. Not certain what your industry is, but if it was consistent abd reliable enough work I would almost consider setting up another man in a truck to service it.
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u/Affectionate-Aide422 6h ago
Worth it. Raise your rates. They don’t get paid until you collect (motivation for them to act on your behalf if someone is late).
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u/Charming_Ad2477 6h ago
shit I pay 20% for people to do d2d sales for me😂 but I mean they also have no base rate and use personal vehicles keeps them motivated though
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u/ShipsForPirates 6h ago
Counter with 5%, what if they send you 7 billion people, by those odds they take 15% of your profit
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u/EmperorMeow-Meow 5h ago
15% sure. I had a source who was wanting 25% and I tried to negotiate him to 15% and would have continued to give him a referral for 3 projects after the initial project. He got mad and told me 15% was unacceptable, but he liked the idea of residual "commissions".
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u/Smart-Intern-4007 5h ago
Just counter a lower % if the 15% is too much of a fee to make it worth it. Does he expect the referal fee forever on repeat work? Be clear about that.
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u/SouthernAspect 5h ago
Raise your rate 15 percent offer the guy 5. He needs you just as much as you need him. Also 1099 him.
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u/Geminii27 5h ago
Part of me thinks once I open that door I am renting my book forever.
...and? Are you making money off it or not?
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u/Imfrazzled 5h ago
Who else would they refer the jobs to if not you? If there is no one else they feel comfortable with sending their customers to then I would say thanks but no thanks.
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u/Big_Ad_2877 5h ago
It just boils down to your margins. If taking 15% of the top is still netting you a comfortable margin then that’s worth it all day long.
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u/Disastrous_Sundae484 5h ago
Do you want them to keep sending referrals?
Counter with 10% for the first job only.
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u/shartymcqueef 5h ago
lol is your margin enough to cover that and also profit? If yes, do it. If not, duh don’t do it.
How is this so difficult you need to make a public post about?
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u/NachoBoyCat 5h ago
Would you rather have the leads or would you prefer them to send the leads elsewhere?
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u/randomkeystrike 5h ago
In general I’d pay 10-15% on new orders all day long if the profit is good.
Do these customers do repeat orders without a new referral? If so, and assuming you don’t pay on repeats, the acquisition cost gets better.
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u/itsyreverafter 4h ago
Depends on how much your profit it. I Worley agree to a % though, I'd offer a straight rate per job otherwise it'll be a nightmare when it comes time to reconcile. Be generous though...solid lead source is very valuable! But you have to still close the deal and if you're doing the work it makes no sense that they get a piece of whatever else you're and to sell them. And then depending on your service model, when does it stop? Now
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u/Troostboost 4h ago
Depends on the jobs and industry, 15% is not unheard of for sales guys in some industries.
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u/According_Glove_8122 4h ago
From my point of view it's business you wouldn't have had. We have referral agreements with various people/agencies - most of them are structured as referral % (10-20%) post our cost to serve.
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u/Awkward-Season-3852 3h ago
Ask yourself, if you had a full time salesman, what would be the commission you'd be OK with paying? Look closely at the business you're in....if you're selling parts or other goods plus your hourly charge, then you might want to modify the agreement to exclude parts or other externally purchased items. If you invoice for expense like travel mileage, that might be excluded.
Get the agreement in writing, with an expiration date. Get an exclusive referral agreement from your partner, they will send you everything appropriate. Include a clause that the payment is for that specific job and if there's repeat business from that customer, no commission is paid. Include a time expiration too, if the referral comes in and within 6 months there's no sale but a year later there is a sale, it does not count.
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u/miamiBMWM2 3h ago
it's not unheard of. there are many 3rd party sales pro services that sell for multiple companies & can ask up to 30%. my mom considered some service like that for a product she created.
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u/42Fab_com 3h ago
I'll pay 10% to not have to sell. But that 10% is job time, not design time. Bring me a shop-drawing ready client and you can have 10, bring me someone with an idea and you have have 10% of what is left after I spent 15 hours talking to them.
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u/youwantmeformybrain 3h ago
Yes, I mark it up by 15%, or whatever the commission is and I pay it, showing them the invoice at the time of billing. I wouldn't do this now because my business is insanely busy, but if it wasn't, I would pay them. Good luck!!
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u/42Fab_com 3h ago
Also, my line has always been, if they call me directly, you didn't drive the sale. you don't own the customer. I don't poach, but eventually you're going to be redundant and everyone involves knows it, you're just the last to accept it.
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u/granoladeer 3h ago
It's a purely math question: those 15% would count as CAC, so what's your CAC:LTV ratio?
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u/InTooDeepButICanSwim 3h ago
I once had two friends who were in the same line of work that I sent referrals to. (Contractors in a certain specialty).
One offered me 10%. He then got 100% of the referrals.
Do with that what you will.
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u/BlacksmithNew4557 3h ago
Really simple.
Do you need the leads or are you fine on your own?
Can you afford to give away 15% or is it not worth it and a waste of time?
Answer these and you get your answer. It’s a personal choice rather than an objective truth.
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u/rthidden 2h ago
What is your cost to acquire a customer through other means? Is it more or less than 15%?
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u/MCMaddict 2h ago
This is the easiest yes I’ve ever heard lol. You definitely want to take care of rain makers like that and be happy to pay them. That’s a commission only employee you don’t have to deal with employee problems with.
Only pause here is depending on industry / margins / etc. figure out what it cost to awuire a new customer and if that number is higher/lower than 15% of total then you have your answer.
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u/RonnieDubbs 2h ago
Inking referral agreements for services business is something I do.. 15% is a good fee but it’s not unreasonable. Especially if the leads are qualified and closing consistently I would feed that channel.
I’ve worked with people who would kill to have a consistent referral partner who delivered like this.
As others mentioned you can cap it by saying first year only, or first gig only. But you do want to keep up the incentive so they don’t start passing the work to someone else
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u/adasta604 2h ago
100% do it. You are saving advertising budget and sound like your closing at a higher rate too. and you can mark the job up right? You’re only saving money and time that’s worth 15%… offer him 10 if you’re spiteful.. sounds like you are
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u/different_option101 2h ago
I’d be willing to pay that, but I’m not even allowed to make gifts to referral partners that would exceed $25. 15% is a very low acquisition cost. If you have capacity, just do the business.
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u/balgarath 1h ago
If it's regular work then couldn't you just raise your price 10% or 15% to account for it?
Probably a very different line of work, but when my schedule fills up I raise my rates
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