Finder's Fees

 
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Old 06-20-2012, 11:50 AM   #1
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Finder's Fees


I have just a few quick question re finder's fees.

Background to the issue:
A client approached a friend of mine (friend#2), and an Architect (friend#3) to recommend a GC for a commercial project.
I in turn helped a loosely affiliated business partner/friend procure the said 580K commercial project. (We are both GCs, I do residential he does commercial & residential, and we give each other overflow work and help with subs, and sometimes even help with permitting and even physically help one another. Our children share the same school and even teachers, and we mingle socially as well).
And by the way, by 'procure' I mean, he was one of the only two bidders. I had an inside connection to the client via said friend #2. and the client's Architect, with whom Friend #1 worked very closely to prepare the bid.
At the start of the bidding process I relayed to my friend (#1), info I was privy to. Basically that the job is his if can deliver the project within a certain deadline, and budget (see the figure amount above). The other bidder was higher in cost and someone the Client did not care for. Armed with this vital info my friend (#1) was able to procure the job.
At that time (before he started the bidding process) I expressed my desire to get a 3-5% of the total in referral/finder's fees. I attended a few of the initial meetings to introduce friend #1 to the Architect, as well as the Initial meeting (w/ the Client, the Architect & Friend#1, to recommend personally Friend #1 to the client as a partner who'd help them accomplish their goals/desires. Which he did, on time.
Now that it's time for me to collect my share, friend #1 is saying that the agreement is that I get 3-5% of His Profits!
I'm of course stunned, because I have no clue as to his profit margins and or markup strategies. So there's no way I would have agreed to something like that!

So the questions I have are:
1). What is a typical/normal/standard rate or commission or referral fee or finder's fee for a scenario such as this?
2). Is it usually collected on the total job or only on profit?
3). Does anyone have any previous experience with such a scenario?
4). And lastly what should I do in your expert advise?
Thank you in advance for your time and advise!
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Old 06-20-2012, 12:26 PM   #2
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Re: Finder's Fees


2% of profit margin as far as Im concerned. Never percentage of job cost if so dont refer me.
Already being asked to be the cheaper to land the job and good lead or not doesnt ensure the other bidder bid it correctly to begin with.

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Old 06-20-2012, 06:19 PM   #3
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Re: Finder's Fees


On a much smaller scale ( say $30,000.00) I'm happy to pay a comission to designers or whoever recremended me for a project. I shoot for 3% of sale price but it is directly tied to the gross profit margin of the project. I pay half to the designer after contract closing and remainder after closing the books on that project. The difference could cost you alot of money which is why you need to clear these types of matters up before you funnel the lead.
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Old 06-21-2012, 06:37 AM   #4
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Re: Finder's Fees


Quote:
Originally Posted by Tom M View Post
2% of profit margin as far as Im concerned. Never percentage of job cost if so dont refer me.
Already being asked to be the cheaper to land the job and good lead or not doesnt ensure the other bidder bid it correctly to begin with.
I agree....upon final completion
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Old 06-21-2012, 11:16 AM   #5
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Re: Finder's Fees


I'm glad we are not friends. You don't do this work because your business doesn't do it. So it's a friendship thing.

Now you want money from a friend because you helped him?

Two people agreed to do business, not because of you but because of the price and conditions. If he didn't get it would you be responsible for that? Of course not! You would say "Sorry it didn't work out friend, I tried to help you"

Money is a powerful force, it makes men do and act in undesirable ways. Greed they call it.

You said you have no idea of what the profit will be. That tells me you have no value in the deal that was made. If you did know you would be a major force in the deal. You are not yet you are worried about payment from a friend?

I help friends every week by connecting them to others. That's what friends do.

This is pathetic. Let me clue you in on how to be wealthy. The very first rule is to do acts of kindness in a business environment without any expectations in return except a strengthened relationship. It will come back to you 10 fold. People who don't trust in this theory lose. It's just that simple.

Learn to see beyond today.
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Old 06-22-2012, 12:29 PM   #6
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Re: Finder's Fees


Oconomowoc makes some good points and I think the pass it forward idea is why most people are on this site.

With that said the OP stated they talked about some kind of compensation in the beginning and everyone's time is valuable.
Making a couple of calls is different than sitting in meetings.

The problem I have with the share of the profit is you have no control of the true profit on any job. Bad management, weather delays, incompetent workers, poor planning, creative accounting and including the cost of a pallet of floor tile that fell of the truck can kill that profit.

I ask for a % of the total contract price due at signing.
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Old 06-22-2012, 02:45 PM   #7
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Re: Finder's Fees


I ill pay a finders fee, but never have taken one. I refer people I trust and like to work I know they will do well.

My plumber and electrician will not except a referal fee from me, they just want to be reciprocated as well.

Realtors, designers, archys, ect... expect a finders fee. I pay what its worth. If they want more, they need to tell me upfront, they know that.

Funny I've never had a realtor, designer ect... offer a finders fee...

I refer work to other GCs I know do good work, we reciprocate. Never discussed finders fees. Might give a gift card to dinner at a nice restaurant or a bottle of good liquor will change hands.

I like doing business with people I like, and want them to make money. I'm sure the feeling is mutual.

Last edited by Jaws; 07-09-2012 at 10:39 PM.
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Old 06-22-2012, 02:51 PM   #8
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Re: Finder's Fees


Quote:
Originally Posted by Jaws
I ill pay a finders fee, but never have taken one. I refer people I trust and like to work I know they will do well.

My plumber, electrician and cabinet guy will not except a referal fee from me, they just want to be reciprocated as well.

Realtors, designers, archys, ect... expect a finders fee. I pay what its worth. If they want more, they need to tell me upfront, they know that.

Funny I've never had a realtor, designer ect... offer a finders fee...

I refer work to other GCs, we reciprocate. Never discussed finders fees. Might give a gift card or a bottle, and have had the smart given to me for a good lead.

I like doing business with people I like, and want them to make money. I'm sure the feeling is mutual.
Put it this way, if you moved to Wisconsin (you wouldn't want to) I would plug you into all the contractors I know and everybody in between. Why wouldn't I? It helps everybody in the end.
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Old 06-22-2012, 05:22 PM   #9
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Re: Finder's Fees


I posted this in another thread a while back....

Quote:
Fellow contractors "hand" me projects all the time, and I do the same.

I have referred Masons, Framers, Roofers, heck over the years I've probably referred all the trades, architects, engineers and builders.

I have never asked for a "cut".
I give them job leads, they return the favor and send me leads.

That's how we roll.
The entire thread is here...
http://www.contractortalk.com/f16/ap...ut-job-109909/

On a side note a friend of mine recently asked how it is that I stay fairly busy,,,where and how do I advertise?

Almost every job I do is from a referral.

Treat people the way you would like to be treated, don't hand anyone an invoice that has a big surprise wrapped up in it.

You want to charge your "friend #1" $17,000 - $29,000 for attending a couple meetings? Glad you are not my friend.

If he lost his shirt on the job would you kick in and help him pay his mortgage?
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Old 06-22-2012, 06:06 PM   #10
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Re: Finder's Fees


Quote:
Originally Posted by tgeb
I posted this in another thread a while back....

The entire thread is here...
http://www.contractortalk.com/f16/ap...ut-job-109909/

On a side note a friend of mine recently asked how it is that I stay fairly busy,,,where and how do I advertise?

Almost every job I do is from a referral.

Treat people the way you would like to be treated, don't hand anyone an invoice that has a big surprise wrapped up in it.

You want to charge your "friend #1" $17,000 - $29,000 for attending a couple meetings? Glad you are not my friend.

If he lost his shirt on the job would you kick in and help him pay his mortgage?
That's exactly what I'm saying. People seem to tell me on this forum that WOM and referrals are fine for a small shop but bigger shops need advertising. That's absolutely foolish, as you know. It's just that many shops don't get referrals so they don't know.

A friend of mine owns a plumbing shop with 13 plumbers all in vans. No lettering, no flyers.....none of that. Totally built in relationships. You tarnish a relationship one after the next when "money" becomes the central purpose. Money comes after.
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Old 06-22-2012, 06:15 PM   #11
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Re: Finder's Fees


Greed will be your downfall, those who I see looking for kickbacks never last very long.

I am on a project and one of the suppliers was acting up, I told the PM to use the guy we had on the last job, which he did by convincing the owners to switch suppliers. About a month later I received an envelop for the referral, the PM gave it to me...I returned the unopened envelop to the salesman and said I don't do business that way.

My business works on you recommend me, I recommend you. Pretty simple
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Old 06-22-2012, 07:17 PM   #12
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Re: Finder's Fees


I would take whatever money he gives you. Take him, his wife and family out to dinner with it. Plus promise him to do the same should the opportunity come your way. The once that is settled, I would quit doing the kickback, finder's fee, or whatever it is that you want to call it. It's more trouble than what it is worth........unless you like losing friends.

I get referrals from several contractors. With one firm, I give them my wholesale rate and he tacks on whatever he wants for his share, fee or whatever. For another contractor, he just adds $200 to every estimate I give him.........plus he gets my wholesale rate. Both of these contractors shoot me jobs weekly and monthly, plus, with their consent I get to do more work for their clients.....both commercial and resi. Everyone comes out ahead and we all get along just fine.
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Old 06-22-2012, 08:13 PM   #13
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Re: Finder's Fees


heck I couldn't follow that whole chain of command and who is who and what

I'm not even drinking or anything

bottom line......... what's been said, always refer people, you'll go futher, people will give out your good name, and it goes round and round, and it makes you feel warm and fuzzy inside.

then again there isn't anything wrong with a kickback of sorts, I'm always happy to give a very small gift to someone with a nice hallmark card to boot for the reference or "hook" up with a job
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Old 06-27-2012, 09:05 AM   #14
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Re: Finder's Fees


Who starts off with friend #2? I mean come on...that's kind of confusing....
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Old 06-27-2012, 11:15 PM   #15
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Re: Finder's Fees


just wondering what have the finders fee % been in the past, with this loosely affiliated business partner/friend?. can you give a example of the last monies you gave him?
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Old 06-30-2012, 08:08 AM   #16
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Re: Finder's Fees


Quote:
Originally Posted by Oconomowoc View Post
That's exactly what I'm saying. People seem to tell me on this forum that WOM and referrals are fine for a small shop but bigger shops need advertising. That's absolutely foolish, as you know. It's just that many shops don't get referrals so they don't know.

A friend of mine owns a plumbing shop with 13 plumbers all in vans. No lettering, no flyers.....none of that. Totally built in relationships. You tarnish a relationship one after the next when "money" becomes the central purpose. Money comes after.
i agree with OCONOMOWOC .

we all refer each other just so we can stay busy
on alot of small jobs ,i`ll bring a sub in , and let the client pay them directly , so to keep the cost down , and we both get work.



i don`t make as much as i use to
but it keeps the larger machine going so to speak.
if they`re busy , theres a good chance you`ll get work from their referals

if you get caught up with a finders fee mentallity it clouds the water.

do you refer the guy who is good , and reliable ?
or do you refer the guy whos going to line your pocket.?

i`d rather send my client a sound individual who will make me look good.
that`s a great finders fee alone

maybe thats not good business in some eyes , i won`t make the bigger money that some make .
but as i get older i want to work with good guys .
i want to know my clients feel good about us .
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Old 06-30-2012, 08:12 AM   #17
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Re: Finder's Fees


The girl who cuts my hair charges me a finder's fee.
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Old 06-30-2012, 08:40 AM   #18
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Re: Finder's Fees


Since you two obviously didn't have a mutual understanding before all this happened, chalk it up and get over it. Tell him "it was a misunderstand, and lets forget the whole thing". Right now he has to think you're trying to hold him up (I would).
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Old 06-30-2012, 09:03 AM   #19
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Re: Finder's Fees


Quote:
Originally Posted by txgencon View Post
The girl who cuts my hair charges me a finder's fee.
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Old 06-30-2012, 10:41 AM   #20
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Re: Finder's Fees


Quote:
Originally Posted by txgencon
The girl who cuts my hair charges me a finder's fee.
It took me an hour to figure our what you meant. I get it now. Lol

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