Referral Fees?

[jobercian]

Good day all-

Was wondering how/if you work referral fees from contractors/designers. If someone refers you or brings you in (not as a sub) do you pay them a percentage? If so, percentage of total?Profit? Labor? Would you even bother with fees on small jobs? Maybe Flat fee? (although that sounds too much like service magic)

Any help would be gratefully accepted.

[LIHR50]

Morning Josh,

All my years in the business I've rarely exchanged the so called "referral fee".

I rather take the approach of passing on qualified clients to my trade relationships with no strings attached which builds a tight trusting relationship without the "what am I getting out of it". It's more about do a quality job for the client, make me look good and keep me on the top of your call list when you come across a client that needs my services.

Many that deal with me in that respect do not deal with others in the trades the same way. Again it's about trust and doing right by each others.
There are many in this industry that are very dollar conscience and think of nothing else, gimme gimme up front now, it's what the industry does and it's business, I want my cut!.

I look at the long term relationship and turn my trade relationships into close friends. I've been working with some for two decades. Relationships like that are needed to be successful in this business.

Now with that said I do have a designer that I'm very close with that does get paid for "Design Services" on occasion.

I also do not want to be tied to a project that I am not part of. In my mind if I get a fee I become part of the project and at the very least feel morally tied to it if something goes wrong.

[m beezo]

I have done as suggested and pass possible clients on to those I work with. I have a couple of subs that I have worked with for close to 15 years and they are great at passing my name around and I do the same for them. On occassion I will be the guy who springs for lunch or something like that. Have shown up at their business with pizza for the staff but most of the guys I work with are small enough that they are working out of their basement office like I do. So that only work with one or two guys and truthfully it has been years since that has happened.
Never really been asked for a referral fee by anyone, it has usually been approached by me. When I get a referral and the job comes thru I often call the guy and tell him thanks and will sometimes ask if some of the work I have sent his way has panned out. I often know because I hear back from the client. But if he has sent me 5 jobs that worked out and none of mine that I sent him did I may ask if he wants something for the referrals. They usually tell me no, just keep passing my name out.

This does not really answer if you should give a percentage or not but at the most I would think I am giving by way of lunches or pizza a very small percentage. Maybe 1% or so. I mean if you get a $10 lunch at the pizza buffet on me, maybe up to $50 if you bring in the guys who did the work plus the boss it is more but not much. Maybe I am just too cheap.....

[jobercian]

Thanks so far-

LIHR50- I am completely on the same wavelength as you- I am asking because someone (designer) is asking me for money on a small project we did together, yet I have (naively) given much advice and input while she sends a bill in 15 minute increments for things like talking on the phone with me. Feels too much like "double-dipping" to me.

Most folks I work with or refer are aware that it makes them look good to refer someone qualified. I love the feeling of knowing I referred someone solid- it makes me look better, which in turn helps me get referrals and to charge more. A rising tide lifts all boats sort of approach.

Also agree with showing up with coffee, pizza, etc. I gave one fellow a Lie-Nielsen block plane.

Cheers

[Roger P]

In Michigan, paying a referral fee is illegal unless that individual is licensed as a salesperson under the builder. A salesperson may only be licensed under one builder at a time.

[Lavrans]

Never. My referral fee exchange is that I will refer work in their direction, and I will do a good enough job that they will get credit from the client for sending me their way.

I haven't ever been offered a job that included a request for a referral fee that was worth taking, on any level.

[dlhunter]

Josh,
It's been my experience that the people who want referral fees are not people you want to be working with anyway. I have a few guys that I trade referrals with. At most we will buy each other a beer. Doesn't matter how big the job is. If someone refers a big job to me maybe ill buy him lunch.
On the other hand if I was getting a steady amount of work from one designer which made up a decent percentage of my workload I might not be opposed to paying out some money their way. However that hasn't happened yet.
I think my position is one whereas I consider those designers to want to make the money off of the subcontractors without carrying the responsibility of a GC. They want the best of both worlds.

[JAlvis]

I don't offer any payment in the form of a fee. Although I will give a gift card to a local restaurant for dinner to whomever refers a paying client. It's a small way to say thank you and remind people you value there opinion.