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Discussion Starter · #1 ·
So there is this hvac guy that said he would recommend my company to anyone that needs services in my particular field (which is chimneys). Now he wants to talk about what kind of cut he is going to get for being so generous. I have no problem with this and it is not illegal to pay other contractors a commission for referrals in my state.

So what would be a fair commission to pay him. The extent of his services would be when he goes out to a customers home and they are having a problem with their chimney he would say "a highly recommend this company" and then he would hand them one of my business cards. Also the avg job he would be throwing our way would be about 2,000 dollars and the margins are about 50%. I would want to be him a percent of the job price so if a job cost 2000 and the agreed upon rate was 5% for him he would get 100 bucks. What percent would everyone else do?
 

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How about a thank you, a bottle of good booze now & then or a gift certificate to a nice restaurant...:thumbsup:

Everything does not always involve percentages or money...
:thumbsup:

It works both ways you know. How about just telling him you will recommend HIM when someone needs an HVAC guy.

If the guy is already trying to take a cut of your work, that is a turn off to me.

With my sub hat on, I recommend my fellow trades all the time and they do the same. It comes out in the wash most times and nobody has to spend a lot of time figuring out who sent whom what, how much the job was, etc.
 

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It's just not my way, but also, customers can tell the difference between a good faith referral and a paid one.
Not only that, I feel good when I hook a homeowner up with just the right person for the task. It's a win-win for all involved. Exchanging money in the back room dirties it up.
 

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Maybe we should be asking ourselves this question. What does it cost on average to land a quality client? They say the average cost is about $50.00 - $100.00. I'd build it into your cost/ estimate, or at least half of it. Or maybe you should look at it as the BEST FORM OF ADVERTISEMENT on the planet! I'd gladly pay anyone bring my company, man, and family business. Pay them and pay them well, it's business!
 

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This seems very straight forward to me, it has always been 10% for a referral. You can add it into your pricing or take a little less. Someone is out there with a live prospect looking for your service, and they must trust the guy as they are talking to as they already hired him. Then he throws your name out there. Chances are you already have the job unless you totally screw up.
 

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Not only that, I feel good when I hook a homeowner up with just the right person for the task. It's a win-win for all involved. Exchanging money in the back room dirties it up.
I only ever refer people who are the right people for the job, never based upon money 10% just aint worth me possibly losing a customer. I doubt anyone here is refering people based solely on what they can get out of it. That being said if I have a customer, that my advertising or referal network or whatever has brought my way. Why would I give this customer to someone for free. In one way or another it cost me money to get every customer I have.
 

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Discussion Starter · #11 ·
Thanks for all the responses. The short of it is that since I own my own business and he works for a very large hvac company he doesn't really care if I refer business to his company since he won't see a dime from it so the only incentive he has for referrals is cash in his pocket.

And the only reason he knows about my company is because he went out to a customer and they got talking about chimney companies and the customer could not stop talking about how good a company mine was since we had done work for her. The short of it is that he is not just recommending for money. The vibe I got from him was that since we are a good company he is going to recommend us but if he can recommend a good company and get something out of it then he might as well.
 

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Why would I give this customer to someone for free.
For the same reason I get referrals from my plumber, HVAC contractor, drywall contractor, tile contractor (Angus), etc. I work with these guys nearly every day. Rob (TNT) and Mikeswoods are actually direct competitors of mine and I give their names out all the time when I am too busy to handle a job and they do the same for me. It's a GREAT system and no referral money ever changes hands and nobody keeps score officially.

However, if I sent somebody work over and over and I heard of them referring someone out of the network, it would end pretty quick. It's a matter of trust.
 

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His incentive may be cash in his pocket, but he is refering you because of what our customer said which is that you bid a great job. So it is not dirty or nasty. He just wants a little something for the money he is putting in your pocket. There is nothing wrong with that.
If he had heard you were a scum bag and wanted 10% to refer you that would be a different story.
Pay the guy he is a great source of qualified leads,
Do you guys have any idea what it would take to find a person that is in need of your services right now. Lots of $ in advertising. I am not talking about refering people back and forth like we all do. I refer my sparky, and plumber and they throw my name out there too.
However this guy is an employee that has no motivation to continue reffering the op except for some cash.
 

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A commission implies he met with the client, spec'd it, sold the job and serviced it... That equates to a percentage...

If he did not want to play reciprocity and was looking for money each time, a flat referral fee (assuming a sale) would be appropriate which is added to your cost basis.

Of course, this assumes he will also pay you the same referral fee when you send him business... he shouldn't balk at that because you are both charging it to the customer in our cost basis...
 

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I used to give a $100 referral on jobs where I sell a new heater to someone and the pool guy gave me the lead. However, I have since stopped doing it for new people. The reason is I gave a pool guy $100 for a heater I installed at his customers house and then about a month later I helped the pool guy land a big commercial account and I saw nothing in return. He is making some good cash from that customer. So if anyone new comes along, I do not offer a referral.

Hey maybe meet with him for lunch somewhere once in a while after you've gotten s few referrals.
 
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