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Discussion Starter · #1 ·
So I've been just pushing an idea around the office about the possibility of offering anyone who refers us a job a small percentage (1-2%) of that job's value in cash upon that job's completion (after the last check has cleared), up to a certain value (probably $300 or so).

1. I figure it's a great way to make those small handyman jobs work for us by motivating those people to hand out our business cards to their friends. It's cash in their pocket just for mentioning us.

2. It also further motivates people to refer us to bigger jobs. Let's say that someone even "scammed" us by having his friend call us with the referral beforehand just to get the money. I would be happy to pay that small amount to get the work. (Would you pay $300 to get a $30,000 job?)

I wanted to run this by everyone here and see what they thought.:D
 

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Cash

I have done the same thing. I would have to say a cash price works better. People already know what they would buy if they had a number in thier head. I have my best luck just paying a person to go door to door and to bussiness. they can almost get a job a day. Plus they get the commission.
 

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I didn't even think this could be illegal. It certainly seems like an ethical business practice to me.

Interesting point.

Let's suppose you do a job for Mr A, and at the end you give him some cards and tell him about him getting paid if he refers you to someone else and that person hires you to do a job.

You get a call from Mrs B and she tells you Mr A reccommended you. At the end of that job you give Mrs B same speech and then suddenly Mrs B knows that the reason Mr A told her about you was that he was getting paid to do so.

That would bother the hell out of me, whether I was you, or Mr A, or Mrs B
 
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MyOnlineToolbox cofounder
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The idea is not dumb, not trying is dumb

It is very smart to try different things and I would like to offer another suggestion. Perhaps you do something like a gift certificate to a popular restaurant or a coupon for a service like Pressure Cleaning or something else that gives work to another contractor. Keep in mind that you should be looking for referral leads and repeat business. Thinking out of the box in a classy way will give you great leverage as a smart business person.
Brian
 

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So I've been just pushing an idea around the office about the possibility of offering anyone who refers us a job a small percentage (1-2%) of that job's value in cash upon that job's completion (after the last check has cleared), up to a certain value (probably $300 or so).

1. I figure it's a great way to make those small handyman jobs work for us by motivating those people to hand out our business cards to their friends. It's cash in their pocket just for mentioning us.

2. It also further motivates people to refer us to bigger jobs. Let's say that someone even "scammed" us by having his friend call us with the referral beforehand just to get the money. I would be happy to pay that small amount to get the work. (Would you pay $300 to get a $30,000 job?)

I wanted to run this by everyone here and see what they thought.:D
Why would you get scammed by somebody having a friend call you? You aren't going to pay the referral money until you actually sign a contract or take a deposit are you?:bangin:

What is your customer aquisition cost? Do you know it? Whatever it is, then your referral reward should be less then that number. Why would you pay out $300 for referrals if you are aquiring customers for lets say on average $100.00 ??

You need to start thinking like a business person. Paying out cash??? Do you know what that means? $300 cash means you're actually paying out over $400.00.
 

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Interesting point.

Let's suppose you do a job for Mr A, and at the end you give him some cards and tell him about him getting paid if he refers you to someone else and that person hires you to do a job.

You get a call from Mrs B and she tells you Mr A recommended you. At the end of that job you give Mrs B same speech and then suddenly Mrs B knows that the reason Mr A told her about you was that he was getting paid to do so.

That would bother the hell out of me, whether I was you, or Mr A, or Mrs B
most of these systems work that you not only give Mr A a referral gift but you also give Mrs B one too, that could be a cash gift a voucher for a popular store or a day out voucher(beauty parlour etc) or you could give Mrs B a discount % off her price

Mr A then feels good that he got his gift, helped Mrs B and helped you

Everyone'sa winner:clap:
 

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Discussion Starter · #11 ·
You aren't going to pay the referral money until you actually sign a contract or take a deposit are you?:bangin:
That was what the whole "(after the last check has cleared)" was referring to...

What is your customer aquisition cost? Do you know it? Whatever it is, then your referral reward should be less then that number. Why would you pay out $300 for referrals if you are aquiring customers for lets say on average $100.00 ??

You need to start thinking like a business person. Paying out cash??? Do you know what that means? $300 cash means you're actually paying out over $400.00.
That was an up to $300 hypothetical, and on a smaller job the cost would be much less that that. We are just restarting our business, and we don't have the data to calculate our customer acquisition cost at this time. We will by the end of the year for certain, however we are in the early stages of reestablishing our business. Honestly, if someone was responsible for a $30,000 job, at least $2600 of which would be pure profit after all parties are paid (including owners salaries, all expenses such as upkeep, etc) with our markup, I would be happy to give up $300 of that job rather than never gotten the lead.

Perhaps a gift card to Home Depot or something is more appropriate, but cash just seemed more original.
 

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Discussion Starter · #12 ·
Interesting point.

Let's suppose you do a job for Mr A, and at the end you give him some cards and tell him about him getting paid if he refers you to someone else and that person hires you to do a job.

You get a call from Mrs B and she tells you Mr A reccommended you. At the end of that job you give Mrs B same speech and then suddenly Mrs B knows that the reason Mr A told her about you was that he was getting paid to do so.

That would bother the hell out of me, whether I was you, or Mr A, or Mrs B
Excellent points, however if I were Mrs. B, all I would care about would be the following:

1. Was the contractor professional overall?
2. Does everything look good?
3. Did they meet all their deadlines?
4. Perhaps I could get some cash back by referring someone I know!

In my mind, referring someone isn't forcing them upon someone else, it's simply putting in a good word. Perhaps other people would feel otherwise, but you can't please everyone ;)
 

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most of these systems work that you not only give Mr A a referral gift but you also give Mrs B one too, that could be a cash gift a voucher for a popular store or a day out voucher(beauty parlour etc) or you could give Mrs B a discount % off her price

Mr A then feels good that he got his gift, helped Mrs B and helped you

Everyone'sa winner:clap:
Doesn't answer my point, though. My point being that when Mrs B's job is finished she is going to know why Mr A referred you, for reward (of whatever kind) so the third party endorsement thing goes out the window, as Mr A is shown not be disinterested.

Mr A will anticipate this, possibly. If I was Mr A, I certainly wouldn't refer you to any of my friends because I wouldn't want them thinking that I had told them about you in order to receive a reward.
 

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Why pay for the referrals.Just do a good job and ask the customer for any referrals. Most customers if they like you and your work want to talk to people about you to show how smart they were to go with you in the first place.Keep the $ in your jeans.There is alot more cost paying people then you think not just in $ but also credibility
 

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Honestly, if someone was responsible for a $30,000 job, at least $2600 of which would be pure profit after all parties are paid (including owners salaries, all expenses such as upkeep, etc) with our markup, I would be happy to give up $300 of that job rather than never gotten the lead.
I would not give somebody 11% of net profit for a referral. What's 11% of your annual net profit? If it's 100,000.00, would you give up $11,000.00 of it just like that?

You have a good basic idea, however you are way to caught up in percentages of the job. Keep it simple and manageable. Lots of us here have referral rewards, but what the smart ones are doing is keeping it simple. We always reward referrals, however we do it smart and keep it sensible and keep it easy to maintain and manage.

As I said - figure out your customer aquisition cost and then design your referral program around those numbers. It makes zero sense financially to be paying out referrals that are higher than your average customer aquisition costs. Again, why would you pay somebody more than your aquisition costs when spending that money on your aquisition methods would yield a higher return?

When you say you'd be happy to give somebody X amount for recieving Y amount of job because you never would have had the job in the first place you are thinking like a contractor and not a business owner. A business owner would be happy to give somebody a $ amount based on a number that has been calculated and thought out, not on what you wouldn't miss out of your pocket based on how you are feeling that day.

That type of thinking that you are using is the same crap that sales people try to use to justify advertising with them... "If you landed just one job it would pay for itself...." blah, blah, blah... a savvy business owner knows that's horse sh*t and sends them packing.

Your advertising dollars have to have an average rate of return. You must spend $X to recieve back X*Y in gross sales.
 

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By-the-way, cash is not king when it comes to referrals. A $20.00 gas card where a customer goes to the gas station and gets to put gas in their tank without reaching into their wallet means a whole lot more than a $20.00 bill given to the customer, which then just gets put into their wallet along with the other $20.00s already in there and gets spent along with the rest for whatever is needed like the next trip to the grocery store.

A gift card to dinner means a whole lot more than the comprebile cost of dinner given in cash. The cash may or may not be spent on a dinner, the gift card almost assures they will go to dinner on you and you will get all the warm and fuzzies as a result. When they are planning on going to that dinner, driving to that dinner, setting at the table and eating that dinner, it is all on you in their mind.
 

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I hate to be negative, but I don't like referrals, seems like the money should go toward the job. I know when I buy something, I look to cut out the games and go for the service. Our customers are our number one source of jobs, and as a rule we don't do coupons, discounts, specials, referrals, etc. We put the marketing money into really nice paint jobs with phone numbers, logos and website on our trucks, and then try to give our customers a quality product.
 

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Discussion Starter · #18 ·
Thank you all for the feedback. These are all very good points, and even if I play devil's advocate with some of your opinions, it doesn't mean I don't respect or even disagree with them. In the past we'd never advertised, and we did just fine through word of mouth, however since we've been out of the market for some time we have to find a way of generating new leads. We've gone months without a repeat or referring client, and we've had one client personally responsible for starting us down a path of over a million dollars worth of work through chain referrals. We have no desire to be a huge company, and prefer to stay small and personable, however we want to stay busy as well :rolleyes:.
 

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we've had one client personally responsible for starting us down a path of over a million dollars worth of work through chain referrals.
Have you heard of Malcom Gladwell?

That woman is called a connector according to Gladwell. If you want to get some real insight into how word of mouth works (and more importantly - doesn't work), how to begin understanding how to and how not to harness it for your business you should spend $5.00 on his book called The Tipping Point. It's a fast and easy read and will open your eyes to things you never thought about or even knew you should be thinking about. Reading it is like being given a secret tour to some of the secrets of the universe and understanding how things really work.
 
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