When someone gives you a referral, do you give them a cut?

[HoosierBuff]

I've had two good referrals this past month. I want to give the a little bit of a thank you for it. . . what do you typically share when you get a good referral?

I was thinking like 15% of month 1? 30%?

 

[Linda Buquet]

Great question!

For a single referral I would do 10 - 15% of 1st month.

But if it's an on-going referral source, like a web design company referring clients for local SEO, I would give them incentive to send more. I would not do this right upfront on the 1st referral in case that's all they send. But would tell them after 3 or 5 or whatever you'll work on a recurring monthly referral arrangement.

Those are my thoughts anyway.

What do the rest of you guys think???

 

[HoosierBuff]

Thanks Linda - were you thinking 10% of the overall contract, or 10% of month 1?

(ugh, did I give away too much recently - 50% of month 1) - there were other reasons, but still.

 

[Linda Buquet]

50% of month 1 in some cases would be OK. It's really hard to say and depends on the situation, the referral service and the price of the service.

I refer out to lots of companies and it varies all over the place.

 

[Dustybones]

@HoosierBuff: It varies all over the place. On a few referrals I sent out a $200 bottle of Scotch, while others were in the 15-30% range. It's always a good idea to discuss these things immediately so there are no hard feelings. For the most part, someone that plans on sending you regular referrals will want to discuss details. If these just came out of the blue than I would send them a thank you letter along with a small amount of money or a bottle of Scotch if you have that kind of relationship with them. Toss them the idea of you paying a percentage for future leads.

 

[Laustin1878]

I have been having this discussion for several months now with some folks and there is a varying degree of what they feel they should get.

For a web design company sending you referrals, it should be a percentage, up to 20% IMO, of the first month. If they become a solid pipeline, consider offering a higher percentage or cash up front. Or, you could work out an agreement with the design company and yourself, charge the design company XXX(X) dollars per month and let them re-sell your services. I feel it's important to establish the agreement with the design company so they are paying you every month, not the client. This covers you so you make sure you get your money despite the client not paying.

On the same note with a web design company, I had someone tell me they wanted 20% each month if they referred a client. I asked them what they were doing and/or would be doing monthly that they felt they were entitled to a monthly cut? Their answer was, giving you business you wouldn't have had. I didn't agree. I posed the same scenario to the same person, who I've given web design jobs to, and they felt it was fair to only give a % of the first month. They had a monthly agreement with this client I referred to. The discussion was a little bitter and heated at times but if it wasn't discussed at all, it would have led to quite a few problems.

For other SEO's, I think it's fair to give them up to 30% of the first month or a modest percentage of the one-time fee, 10%-15%? Perhaps something of equal value like a bottle of wine or booze or a night out on the town. Give them a reason to keep sending leads to you.

I firmly agree with dusty about discussing and having something in place before money changes hands. Everyone is clear about the details of your agreement and less chance of hurt feelings. I do personally think 50% is on the higher side of what I would be comfortable with but as Linda said, it really depends on the situation.

 

[jonkeel]

Since much of our business is based on referrals (which we proactively market with clients, btw) our standard is 20% initial, 10% ongoing as long as it lasts. For my speaking gigs,where a seminar is promoting to get people there, standard rates are 50% max with no continuity. But then, I've worked out arrangements with seminar promoters of our standard 20/10.

We review with clients that they're an important part of our business growth, and we want to reward them for referring (that's a warm lead) for sharing their "reputation" with us.