My business is a service business. And often my clients and contacts look to me for recommendations for other services that are related to mine but that I do not provide. If I know a good resource or two for my clients, I am happy to introduce them to each other. And since I started my own business over 20 years ago, my policy is that I do not accept nor give referral fees.
There are plenty of opportunities to ask for referral fees and they are often offered to me. But I always refuse. I believe in putting the best resource in front of my clients, not the resource that pays me the most money. The hardest part of my business, and most businesses, is getting the business. But my clients pay my fee and I’m happy with that. I’m not greedy and I don’t try to make even more money because of my relationship with my clients.
And I truly believe that what comes around goes around. And I count on incremental, referral business finding its way back to me. And it has. It’s a long-term approach to doing business, and I think it’s the right way to do business. It’s the business equivalent of the golden rule; it’s how I would want to be treated if I were the client. As the client, I am trusting my vendor to put their choice of the best vendor they know in front of me, not the one that’s going to kick-back the most money.
And almost without exception, the best resources I know of, and the people I refer in, feel the same way. These are very nice, comfortable relationships. We know, like and respect each other for who we are and the services we provide, not for the money we funnel back to each other.
Sales commissions are different. Someone selling my services to their client means that I get a call asking me if I am available on a certain date to provide training for their client – in other words they sold my services and all I have to do is show up – then I will typically offer them the sales commission that’s built into my fee structure. It rarely happens that a completely finished sale is put at my doorstep. I usually have to put in some time and effort to complete the deal. But I still offer the commission and about half the time is my offer of commission accepted. For the other half, as it is for me, this too falls into the “what comes around goes around” category.
Just this week a friend of mine did an email introduction between me and his client. To my friend he made a referral very early in the sales cycle. But when I got on the phone with his client, it was a done deal. The client was ready to go. But my friend refused my offer of a sales commission. Why? Because his intent was not to sell my services. Clearly without him it never would have happened but, to him, he simply made a referral.
My friend didn’t try to close the business for me. And I don’t try to close the business for other businesses. Like my friend, I make a point to make the referral early on in the sales cycle. Counting on selling other people’s services is not part of my revenue model. But having a well-earned reputation and loyal clients is part of my revenue model. By not accepting nor giving referral fees keeps every deal very clean and honorable.
Tags: Referral Fee Policy