Paying For Referals

 
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Old 11-02-2017, 10:37 PM   #1
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Paying For Referals


I have been working on moving in the direction of windows as a major focus of my business. I have increased the amount I sell a lot but still spend a lot of my time doing other things. As soon as I sell enough windows to fill the schedule I will pass on everything else.

I make a lot more money on windows. I have considered some advertising to help make the switch. Recently I have considered mentioning to a handful of key people that I will happily pay 5% of any sold window job for their referral.

Has anyone tried anything like this and if so was there any major downside?

Last edited by FrankSmith; 11-02-2017 at 10:40 PM.
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Old 11-03-2017, 03:14 PM   #2
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Re: Paying For Referals


I was just about to post a question about this. Have a friend that recommended me for a large job. It seems I am getting the job and am trying to figure out how to balance compensating him, and offending him. Kind of interesting because we have never discussed the actual percentage, just that he will be taken care of....wasnt an employee or actual salesman.

My first thoughts were 5% of my profit. If I made a 100k profit, he would receive 5k. Payments would be staggered over job to ensure if client bails, I am not SOL.

Downside is that you are losing 5% of your profit, but if you are looking/need more work, I dont see a downside unless your margins are razor thin.

Interested in others thoughts....

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Old 11-03-2017, 03:18 PM   #3
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Re: Paying For Referals


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Originally Posted by LPG View Post
I was just about to post a question about this. Have a friend that recommended me for a large job. It seems I am getting the job and am trying to figure out how to balance compensating him, and offending him. Kind of interesting because we have never discussed the actual percentage, just that he will be taken care of....wasnt an employee or actual salesman.

My first thoughts were 5% of my profit. If I made a 100k profit, he would receive 5k. Payments would be staggered over job to ensure if client bails, I am not SOL.

Downside is that you are losing 5% of your profit, but if you are looking/need more work, I dont see a downside unless your margins are razor thin.

Interested in others thoughts....

Thatís nice but would be illegal in my state if the guy is not licensed.
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Old 11-03-2017, 03:59 PM   #4
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Re: Paying For Referals


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Thatís nice but would be illegal in my state if the guy is not licensed.
What state do you live in? Hard to fathom how getting a referral from someone and giving them some money would constitute a violation of the law. As long as the guy referring was not representing himself as a roofer, window installer or something like that I would think it would be perfectly legal.

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Old 11-03-2017, 04:07 PM   #5
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Re: Paying For Referals


Bringing potential clients in is actually YOUR job as founder. You should be creating and nurturing outside relationships, establishing your reputation as an expert, and building a sales and installation team under you.

Instead of paying money OUT to get more business, a better strategy would be to pay yourself, - your business - by investing in things that will help attract and keep new clients. Maybe thatís hiring a commissioned salesperson.

In my opinion, profits should belong to you, not being paid out in finderís fees to people who arenít really invested in your business or your clients.
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Old 11-03-2017, 04:12 PM   #6
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Re: Paying For Referals


Set up a funnel and run some traffic to it with Facebook ads. You'll never have to worry about getting new business again. Windows is one of the main things i sell also.
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Old 11-03-2017, 06:23 PM   #7
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Re: Paying For Referals


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In my opinion, profits should belong to you, not being paid out in finderís fees to people who arenít really invested in your business or your clients.
You have misunderstood my intention if you think I would do this to build jobs at a loss. By no means would I consider this if it meant no profits.
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Old 11-03-2017, 06:24 PM   #8
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Re: Paying For Referals


I should also add that if I did that it would be by talking to other guys in the trades who would have a little incentive to keep in mind my goal to sell more window jobs. Not for customers to refer me to friends/neighbors/family.
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Old 11-03-2017, 06:25 PM   #9
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Re: Paying For Referals


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You have misunderstood my intention if you think I would do this to build jobs at a loss. By no means would I consider this if it meant no profits.
I didn't think you would build jobs at a loss but you will use some of your profit as a referral fee.
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Old 11-03-2017, 06:25 PM   #10
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Re: Paying For Referals


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I should also add that if I did that it would be by talking to other guys in the trades who would have a little incentive to keep in mind my goal to sell more window jobs. Not for customers to refer me to friends/neighbors/family.
You should just hire a commissioned salesperson then.
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Old 11-03-2017, 06:49 PM   #11
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Re: Paying For Referals


Sheesh, I went through this same argument in the medical equipment business.

I still haven't figured the ethical difference between referral fees (can we call them marketing fees, maybe?) or paying for some kind of more formalized marketing services.

Heck, even the pharmaceutical industry finds ways to pay docs those k__b---s....er uh...pay those docs for their lectures and professional services.
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Old 11-03-2017, 09:31 PM   #12
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believe the original question before the edit was what should he pay a friend who referred business, as a finders fee.

I did not interpret his question as basing an entire sales strategy around it?
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Old 11-03-2017, 09:54 PM   #13
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Re: Paying For Referals


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believe the original question before the edit was what should he pay a friend who referred business, as a finders fee.

I did not interpret his question as basing an entire sales strategy around it?
My only edited to add one word because I realized I only actually mentioned referral in the title. No substantial revision on my end.
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Old 11-03-2017, 09:59 PM   #14
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Re: Paying For Referals


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You should just hire a commissioned salesperson then.
I have no desire to do that. I have been thinking of doing some advertising. I thought the money might be better used as I have proposed here. I will stick with the advertising before hiring a salesperson.

As things stand I am always booked out 4-8 months. 25% of that is windows. I would like that to increase until it is 60% or more but it's not worth it if I have to reinvent my business model. I would be better off to leave things as they are now.
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Old 11-03-2017, 10:25 PM   #15
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Re: Paying For Referals


I get several referrals a year, regardless of who it is,friend, previous customer, etc. I always send a referral fee once the job is completed. This is work I wouldn’t of had without the referral. They love getting the checks, I had one previous client refer three jobs to me in the last year.
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Old 11-04-2017, 08:07 AM   #16
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Re: Paying For Referals


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I have no desire to do that. I have been thinking of doing some advertising. I thought the money might be better used as I have proposed here. I will stick with the advertising before hiring a salesperson.

As things stand I am always booked out 4-8 months. 25% of that is windows. I would like that to increase until it is 60% or more but it's not worth it if I have to reinvent my business model. I would be better off to leave things as they are now.
How about rebranding your business to be a window specialist. Then you could advertise that business and focus on what you enjoy most and it doesn't mean you have to turn down other paying work if you don't want to.
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Old 11-04-2017, 09:25 AM   #17
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Re: Paying For Referals


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I get several referrals a year, regardless of who it is,friend, previous customer, etc. I always send a referral fee once the job is completed. This is work I wouldnít of had without the referral. They love getting the checks, I had one previous client refer three jobs to me in the last year.
The most important aspect of this comment is you are doing something nice after the referral became a customer, and after you were able to judge your profit too. Personally I think you deserve the referral for doing a great job and technically should not have to give up any money. But your attitude as a Thank You gesture after the fact is nice, regardless of what the money or gift is.

Too many seem to want to put the value on the price of a lead (kind of like some lead gen folk we all know), but I much rather put the value of a Quality Sale that was Profitable as part of the equation.

In my line of work I tend to be more focused on guiding my clients and prospects to the right answer without worrying about the money side since commissions can easily cloud one's judgement. The last thing you want is to get terrible leads just because the other person wants to make money passing along someone's name and number without any regards to what the customer needs.
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Old 11-04-2017, 09:55 AM   #18
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Re: Paying For Referals


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How about rebranding your business to be a window specialist. Then you could advertise that business and focus on what you enjoy most and it doesn't mean you have to turn down other paying work if you don't want to.
I have considered that. I don't want to rename the business but might do some advertising as Windows by my Smith Construction.
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Old 11-04-2017, 09:58 AM   #19
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The most important aspect of this comment is you are doing something nice after the referral became a customer, and after you were able to judge your profit too. Personally I think you deserve the referral for doing a great job and technically should not have to give up any money. But your attitude as a Thank You gesture after the fact is nice, regardless of what the money or gift is.

Too many seem to want to put the value on the price of a lead (kind of like some lead gen folk we all know), but I much rather put the value of a Quality Sale that was Profitable as part of the equation.

In my line of work I tend to be more focused on guiding my clients and prospects to the right answer without worrying about the money side since commissions can easily cloud one's judgement. The last thing you want is to get terrible leads just because the other person wants to make money passing along someone's name and number without any regards to what the customer needs.
I think you are right. I have a few sources that send me the best leads possible. In return I send work there way. It all works because we take care of each others customers and make each other look good. I would hate to muddy those good relationships.

I will go the rout of some normal advertising that works in conjunction with my good reputation.

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