Klassen Communications Blog

I’ve put a referral fee plan in place for my business.

Doing this is not without some controversy and it’s something I’ve wrestled with over time.

But let’s start at the beginning…

I refer business to colleagues when I think there’s a good fit. I expect nothing in return, although a “Thank you” would be nice. I truly get a lot of joy out of connecting people who need each other.

Being able to send my clients to appropriate colleagues is also a “value-add” for my business. I run into lots of people who need other services but don’t know where to turn. Try a Google search on “copywriter” and see how thrilling it would be for someone who has never used a copywriter to figure out the right person to contact.

Smart businesses take advantage of their networks to find the right people fast.

Me being able to say, “I’ve worked with ________ in the past and know he/she is worth talking to for this project”, is priceless for a client that doesn’t know where to turn.

Of course, if I make referrals to people who are horrible to deal with or do rotten work, it’s my reputation that takes the biggest hit. So even if I was promised a referral fee from someone, I wouldn’t make any referral if I didn’t think there was a good fit.

But I must be naive in that belief because when I talk about this with others, some are stunned. How can you be completely ethical giving referrals that you’re paid for? That’s a tainted referral!!

Fine. If that’s your belief, you’re welcome to it. (Reminds of the pro- and anti-spec work argument where people get a little too aggressive about their opinion being accepted as fact.)

Some people probably would make a referral to people they don’t completely believe in simply to get a fee. Again, it’s their reputation that takes the biggest hit, so I’m not sure how often that really happens among smart and respected business people.

I have some colleagues who give referral fees, others that don’t. Or maybe they’ll give a gift certificate. Doesn’t matter to me whether or not I get paid for a referral to them since I only refer if I think there might be a good fit.

But I’ll be honest… I’ve always felt a little bit guilty over my ability to give referrals. In the general flow of a project, the copywriter is often hired first, then the designer. So while I have been able to give referrals for copywriters, it’s more likely that I’m getting a referral from a copywriter… often many times by the same copywriters.

I wanted to somehow return the favor, especially to people who were sending me lots of good clients. If I couldn’t send over a lot of actual business to the copywriters, I felt the next best thing was cash. I could have done a gift certificate, but cash is universal. I also could have done nothing beyond saying Thank You, but I wanted to do something more.

So, I recently put into place a referral fee plan. When someone refers a new client to me, they get a percentage of the price from the first project.

Where I think some controversy may come in is when a referral fee is added to the price of a project. I don’t do that as it can become a bit of an administrative nightmare.

When I quote a price to prospect that has been referred to me, it’s the price of the project, not the project price plus a referral fee.

So from the client’s point of view, I’m not sure why they’d care about a referral fee. The price is the same to them whether they came to me on their own or through a referral. I’m the one taking the financial hit giving up a percentage of the price to someone else.

If the price is fair and acceptable to the prospect, and it’s my regular price, what I do with the money shouldn’t concern them, whether I give part of it as a referral fee, pay bills, or take the family on a vacation.

I do understand a possible concern on the part of prospect wondering if a referral to someone is “tainted” by a referral fee.

But that’s where I stress to people who give me referrals what a referral should be. A referral should never be an iron-clad “You must work with this person only!” type of situation.

What a referral should always be is a recommendation to talk to someone specific that you personally know so both sides can determine if there’s a good fit. That’s a very, very important clarification.

Whenever anyone calls me for potential work, I don’t automatically accept them as clients unless I feel I can serve them properly. And there have been cases where I thought it might be a good fit, but the prospect didn’t and moved on.

To evaluate whether or not there’s a good fit, I offer a free phone consultation to discuss a prospect’s needs. In other words, I invest the time up front to see if there’s a potential relationship.

Between that call, samples of my work, and plenty of free resources, the decision whether to work with me or not should easily be based on more than just someone saying I’m the one to call.

The referral simply starts the conversation. And I’ve decided to reward a sale with money because I’m now working with someone I didn’t find on my own. Someone has saved me the time of finding a good client which can be very rewarding for my business if it turns into a long-term relationship.

But whether it goes beyond that initial conversation is based on whether the prospect and I feel it’s worthwhile to move forward. If we do move forward, everyone benefits. If not, there was no harm in having the conversation.

There is no referral fee for the conversation… only if it leads to a project.

Another point… I only mention specifics about my referral plan to people I know. It’s not like it’s a public page on my site where people I’ve never met can get the details.

So if I’m at the point where I’m talking about it with them, it means we’ve just had a conversation and have a good idea that we’re a good fit for each other in some capacity. We’ve taken the time to learn about each other and know what an ideal referral is.

For example, I don’t do logos. So someone referring a business to me for logo work is pointless. The colleagues I’ve talked to know that and wouldn’t bother making that type of referral.

That seems to be one of the big issues with the anti-referral fee crowd… they’re afraid of getting tons of useless referrals as people send them anyone with a pulse in the hopes of getting a fee in return.

If that’s the case they find themselves in, I’d have to say that’s really their own fault. As mentioned, a referral fee shouldn’t be something that’s out there for anyone to see. It should be discussed with people you know and who understand what a good referral is for you.

So, that’s the story. As a freelancer with flexibility, it’s nice to be able to try things out. And that’s what my referral plan is… an experiment to see for myself what works well and what doesn’t.

Like any plan for my business, if it works well, I’ll keep it in place. If it doesn’t, I’ll scrap it and move on.