8 replies to this topic

[buck25]

Hi, I am interested in everyone's thoughts on referral fees.

What percentage of profits are you giving to someone who consistantly feeds you business. Also, are there any royalty fees paid or just the first time "finder's fee" when they refer the client.

For instance:
15% of profits and then 5% of profits for each of the clients future orders? (would there be a time limit to this?)
or
25% of the first order profits and 0% of future orders.

(above numbers are arbitrary)

Any thoughts on this topic would be very helpful! Thank's in advance.

[ScottH]

I don't pay referral fees. If I did, I would have to pay on almost every order and /or every new client. Almost 100% of my new business comes from referrals. I don't cold call or market to new clients. The most important 'thank you' you could ever give a referrer (is that a word?) is to take care of the referral and have them go back and rave about you to the referrer.

However, I often give gifts for referrals. Not every one, but occasionally. Normally something with my logo or a clothing article with the clients' logo on it. Occasionally a premium product that I know the client likes (like if they buy Swiss Army knives, maybe a higher model). We sell incentives - why promote using cash by doing it yourself?

[buck25]

Good point(s).
This particular situation is that we have someone who would normally work with us as an employee or contract employee but will not have the time to start doing so for some time. This person has great contacts and will most likely be reffering a steady stream of clients. So, we are trying to figure out a fair level of compensation for feeding us clients from this new (untapped by us) market and location.

Thanks!

[happens]

buck25 said:

15% of profits and then 5% of profits for each of the clients future orders? (would there be a time limit to this?)
.

In the situation you outline, I would do as in above. Normally I send a thank you note for a referral and often follow up with some of my nicer self promo items. But this sounds as though it is a serious prelude to a commission relationship.

I hope it all works out well for you! BTW I would limit the commission to 2 years unless the salesman joins your organization.

[joeatcam]

We do not pay for referrals from outside of our company. Thank you gifts have worked well in addition to referring that person's business to others. However we do pay referrals to our non-commissioned staff. The staff member receives the first $500 of gross profit from the sales to the client they referred. Our commission paid sales reps must agree to accept the client on that basis. This has been fairly successful since so many of our staff have kids involved with sports and school programs where the parents often get to know each other.

[daslong]

I have often thought how to handle this type of situation. If you are getting consistent referrals to good clients, that person is really doing your cold calling for you and deserves compensation. I have thought that 10% on all orders from the referral in the first year is appropriate.
It provides an incentive to refer good, high quality customers that do repeat business, but you aren't stuck paying out forever for your hard work supporting that business.

[beamadd]

I have a few people who don't actually work for me, but do refer my services to their client base. I usually pay 15% on initial order and 10% on any furhter orders within the first 12 months. One of my clients has been exceptionally great as a referral lead, so I often give them next qty. pricing on their orders.

[Tom Aufman]

buck25 said:

Hi, I am interested in everyone's thoughts on referral fees.

What percentage of profits are you giving to someone who consistantly feeds you business. Also, are there any royalty fees paid or just the first time "finder's fee" when they refer the client.

For instance:
15% of profits and then 5% of profits for each of the clients future orders? (would there be a time limit to this?)
or
25% of the first order profits and 0% of future orders.

(above numbers are arbitrary)

Any thoughts on this topic would be very helpful! Thank's in advance.

I Have never paid a referral fee. I send them a nice gift. No money.

If they want money, Sign them up as a Rep. A referral is given to you on merit by a happy client.

Auto deaders pay "Bird Dog" fees.

[LOGO emPower]

When I was a Distributor, I thanked the person for the referral by taking them and their spouse away for a night or weekend. It served two purposes, rewarding and bonding a friendship.

And yes sometimes the trip away cost more than the profit earned on the order. But I feel like I always came out far ahead.