Do you guys routinely pay referral fees when other customers refer friends and acquaintances to you? I'm seriously considering paying 10% referrals all the time. I have paid few already.

It seems like a great way to build up business, but damn, even 10% is a lot of money lately.

Not only is paying a referral fee the right thing to do, it's a nice thing to do as well. An excellent business strategy and one that pays off in the long run.

Yo Bruce...

As you know I'm not a copywriter for hire ... but regularly refer work to copywriters for my clients. And, yes -- I generally get a referral fee.

In a few cases, I've handled the work directly as part of a larger project, then paid the copywriter myself (less my "piece" which had been agreed on in advance). It's my preference to stay out of the middle though -- and yes, it's nice to get a "thanks" for the gesture.

Guys, I "get" the concept. I know it's a good thing. I guess what I'm wondering is, about the amount or percentage.

Let's talk percentages then. I'm paying 10% on $2k-4k. Do you think a "$10k a letter" guy pays $1,000 referral?

I'm considering capping it around $250. That's a fair chunk of change for anyone, right?

For the views of my Marketing Minute subscribers on referral fees a few years ago, take a look here:

http://www.yudkin.com/refpoll.htm

Some selections:

Except where it violates the law, accepting or rejecting referral fees is a personal choice. Be aware, however, that it does have implications beyond the money involved.

Marcia Yudkin

Well... 10% is 10%.

If you looked at that as "marketing expense" the scale isn't relevant is it?

It's up to you.

If I send you a $50,000 client and you pay me $250 bucks ... that hardly seems balanced.

Your call bro.

I would personally just calculate at 10% of sales for referral marketing -- and just "go with it" until you reach a point you don't need it as badly and decide to lower/cap, etc.

Does that make sense?

That sounds like the same thing a Realtor says to justify getting $60k commission on a million dollar home when it takes as much effort to sell the $100k home and get $6k.

I agree, it doesn't seem balanced, but neither does $5,000 for making a phone call. I could see a grand or two for a deal like that. Since I've never done a $50k deal, I'll have to cross that bridge when I come to it.

To me it's not about the referral, it's about me giving you access to my network. It's taken me time and money to build my network and giving you access will cost you a fee. Plus, I had to work hard to earn their trust, I don't want anyone screwing it up.

I tell people (clients, friends, etc) that I don't 'refer' - I'll setup the deal and I get a commission to make the deal. I'm not getting $5k to make a phone call - I'm getting $5k to know who to call and set it up and you get you the business you can't get on your own.

I learned my lesson about referrals quick. I referred someone to a tech consulting company and that company has build well over $250k on that referral, and all I got was a thanks.

I've discovered by stopping this madness of free referrals, I've been able to lessen that number of people who ask for them and attract a small number of people who understand this concept and want to work with me. And it works both ways.

There are three businesses/consultants that I have a standing agreement, any 'referrals' that turn into clients of theirs, result in me getting 12% of any gross they get from the referral (for life). These 3 businesses and I all provide complementary services to each other.

Harsh? Maybe, but we all help each other grow our businesses via our own little network.

Bruce,

Someone referred a client to me a few months ago with the stipulation I pay 10% as a referral fee. I was glad to do it. I think it's the right thing to do.

Deb

Bruce look at it this way (Knowing how you are are great thinker, I'm sure you already have ).

It's money you didn't already have, a new client you never had, and to top it off, think about the recurring jobs you might (and probably will) get in the future from having these new clients in your rolodex.

So what if you spend a grand to make 10K.

Next month the new client might ask you to do a 20K job...

No one ever said you had to pay finder fees more than once.