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Discussion Forum

finders fees?

ad73 | Posted in Business on November 2, 2004 03:49am

I’m just getting started in my own business and have an interior desinger that will give me a lot of work. I started with doing some things for her at her house and now she is starting to refer me to some of her clients. She asked me if i had thought about a fee to compensate her for referals. Has anyone elses had any experience with this, if so how much? 

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Replies

  1. calvin | Nov 02, 2004 03:55am | #1

    Bloodsuckers.

    Remodeling Contractor just outside the Glass City.

    Quittin' Time

  2. joeh | Nov 02, 2004 04:21am | #2

    Ad, if you use the SEARCH function you can find all you need to know about copper plumbing and maybe a thread on finders fees that went around about a year ago.

    You say you are just starting out, do you have the slightest idea how much money you are really making? How much of you income is actually profit that you can afford to share with someone in exchange for a lead?

    Most of those folks are thinking of 10% of the total, can you afford that?

    Good luck, look through the business section and pay attention.

    Joe H

  3. User avater
    IMERC | Nov 02, 2004 04:30am | #3

    Call that leech history...

    Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming

    WOW!!!   What a Ride!

  4. blue_eyed_devil | Nov 02, 2004 04:33am | #4

    Ad, we occasionally pay referral fees. it all depends on how profitable the job is.

    If she refers you to a 200k job and you clear 75k...would that be something you're interested in?

    If you are paying attention...you might hear her telling you that she will be your "salesperson". Every other business in this world pay their salespeople well...and the system works. When you look at tradesmen, they are too independent to admit that they need salespeople. Of course, their business never grows.

    I'd be willing to create a sliding scale with her. Make sure you add it onto your costs...don't take it out of your profit.

    One other thing....ask her what she thinks a fair referral is. She might just be looking for lunch money. Without her naming the first number, you lose in the negotiations automatically!

    blue

    Warning! Be cautious when taking any advice from me. Although I have a lifetime of framing experience, some of it is viewed as boogerin and not consistent with views of those who prefer to overbuild everything...including their own egos

    Additionally, don't take any political advice from me. I'm just a parrot for the Republican talking points. I get all my news from Rush Limbaugh and Fox and Friends (they are funny...try them out)!

    1. Schelling | Nov 02, 2004 05:35am | #6

      I agree. This designer could be a great salesman for you. If you like the work she is sending your way. Once you become established  it will start to go the other way but I can't recall an architect or designer even thanking us for a referral. Finders fees are not the norm for our business but taking someone out to lunch or buying a round of drinks if you spot them in a restaurant is common.

      1. User avater
        CloudHidden | Nov 02, 2004 05:49am | #7

        >an architect or designer even thanking us for a referral

        I've thanked builders. One then tried to guilt me into a fee, after conveniently forgetting how I jumped in after another client of his lost 3 grand on a designer, and I took peanuts to do a full design so that he could get building a 3000 sf house and make whatever profit. He saw it one-sided. I also know a builder that demanded a referral fee from a different trade once, but never mentioned something when I gave him 3 referrals (sole builder on two of them) and he got those jobs.

        Much better are the relationships where the referrals cut both ways. I'm happiest with those. No one owes or feels owed. Really, it's not builders vs designers, though. It's just people and their ethics.

  5. FastEddie1 | Nov 02, 2004 04:35am | #5

    Zero.  Nada.  Zilch.

    Tell her that you really appreciate the referrals, and that you will do your best to give the customers a superior product at a very fair price, and that the customer will be happy that they are using both you and the designer as a team.  Tell her that you could raise your prices by 10% and then you could give her a kickback (not a referral fee) of 6-8% (gotta cover that overhead).  And then ask her how much of a kickback she will give you when you tell your other customers about her services and what a good job she does.

    Whenever you are asked if you can do a job, tell'em "Certainly, I can!"  Then get busy and find out how to do it.  T. Roosevelt

    1. User avater
      intrepidcat | Nov 02, 2004 06:32am | #9

      Definately the right idea about the reciprocity. A "kindler, gentler" approach might be better for him though.

      If she expects a finders fee then she should be willing to provide him one if the case arises.

      There is nothing wrong with it; as long as it works both ways. And, as long as it doesn't price him out of the market.

    2. xMikeSmith | Nov 02, 2004 11:39pm | #25

      ad... do you like her work ?

      then so do her customers...

       her referrals would seem to be pretty valuable to me..

       i'd give her a try... based on results... clients that use interior designers  usually have interior designer budgets...

      they are buying relationships and peace of mind..

      just make sure you are bidding her jobs with enough money so you can deliver the expectations..... and the referral fee, again.....based on resultsMike Smith   Rhode Island : Design / Build / Repair / Restore

  6. robzan | Nov 02, 2004 06:17am | #8

    Ad,

    I agree with Blue.  I have a designer that i have been working with for some time.  As my business has grown, she had given me more and more referrals.  She has never asked for any money, but i make it very clear how much i appreciate the leads.  Hearing what Blue said, i think i will ask her if she would like a "kick back". Referral jobs are always the best as the customer already has a reason to trust you and sometimes we are the only bidder.  I would be happy to give her a reasonable sales fee!  RZ 

    1. blue_eyed_devil | Nov 02, 2004 07:05am | #12

      Rob, if shes steadily sending you work, without a fee, just buy her some dinner...give her some gift certs for a nice restuarant. You'll be her star and it won't put you out too much. It's actually not the aamount that matters, Its just the appreciation. You'll separate yourself from the pack.

      I've given gift certificates to superintendents that take care of business in a competent manner. We do the same for lumber salesmen that refer us.

      Everyone likes to be appreciated...even me.!

      blueWarning! Be cautious when taking any advice from me. Although I have a lifetime of framing experience, some of it is viewed as boogerin and not consistent with views of those who prefer to overbuild everything...including their own egos

      Additionally, don't take any political advice from me. I'm just a parrot for the Republican talking points. I get all my news from Rush Limbaugh and Fox and Friends (they are funny...try them out)!

      1. robzan | Nov 02, 2004 07:16am | #15

        Blue,

         I appreciate your advice, and I also appreciate your super modified sidewinder saw!  I always have used a worm drive and i have always have pinned or removed my guard.  Out here in CA though, you can get in a lot of trouble for that ( Fine for the guy caught with the VIOLATION and a fine for the contractor too from Cal OSHA.)  Communists.  

        1. DanT | Nov 02, 2004 12:47pm | #16

          Again I agree with Jeff.  If I touch something in business I expect to profit from it, thats why it is called business.  And I expect other business people to feel the same way.

          So even if they ask for nothing I give gift cards for restraunts and such.  I have recieved a number of referals from folks I have never done work for but they know me and feel comfortable refering me.  I send them a gift card too if the job goes well and is profitable.

          It doesn't matter to me if someone wants a referal fee, I am just going to pass the expense along anyway.  DanT

  7. User avater
    jagwah | Nov 02, 2004 06:49am | #10

    Not a dime! I refer my clients back to the people that refer me, a kind of symbiotic relationship. My architect refers me to a lot of great clients and I've sent everyone my way that needs an architect to him. Same with my painter, plumber and so on.

    When someone  wants to put their hand in your pocket you need to ask if you were to refer someone to them what would they give you. First time you refer them to a job you'll see pretty fast if it's such a good idea. 

     

  8. User avater
    JeffBuck | Nov 02, 2004 07:05am | #11

    kick back's make the world go round ...

    any job worth doing ... is also worth getting paid for.

    the same people that are saying hell no would also be the same people with no problem dedicating a portion of the profits to advertising ....

    Jeff

    1. User avater
      jagwah | Nov 02, 2004 07:14am | #14

      kick back's make the world go round ...

      Rebates...man...Rebates! 

  9. RichardAIA | Nov 02, 2004 07:08am | #13

    Some thoughts from an architect-interior designer here.....

    In Calilfornia, it is a violation of the architect's license law to accept compensation from a third party. If I accepted a referral fee from a contractor for a job I was working on, it could put my architect's license in jeopardy. (Of course, if I were referring you to someone who wasn't my client, this wouldn't be a problem.)

    Similarly, if this interior designer were a member of the American Society of Interior Designers (ASID), undisclosed compensation on a project would be an ethical violation, although perhaps not a legal one. If she's not ASID, then she can probably do what she wants but the situation is still pretty slimy.

    If I were her client and somehow found out she was getting a referral fee from you, it would put BOTH of your reputations on the line, because I would suspect the only reason she referred you rather than someone else was because of the referral fee, which I could reasonably infer I was also paying for as the client. Likely, you'd both get fired.

    The basic issue here is the design professional is supposed to have a fiduciary responsibility to act in the client's best interests, not the designer's. This is not like a true salesperson, who would be working for YOU. If there's hidden compensation going on (secret profits), it's a situation to be avoided. I'm not a lawyer, but I suspect at some point it gets dangerously close to fraud. Your designer may not be thinking through these issues completely, and it might be worth discussing your concerns openly.

    1. FastEddie1 | Nov 02, 2004 03:30pm | #17

      Good explanation.

      After reading the other resposes, I agree that a gift certificate would be nice.  Do architects shop at HD?

      Whenever you are asked if you can do a job, tell'em "Certainly, I can!"  Then get busy and find out how to do it.  T. Roosevelt

      1. User avater
        bobl | Nov 02, 2004 03:47pm | #18

        you guys who give referal "compensation"

        do you do this with the other party in the business transaction? the one who the work was done for?

        they are part of this business transaction.

        when you use them aas a referal, or get a referal from them, do you compensate them too?

        just curious how it works?_____________________________

        bobl          Volo, non valeo

        1. User avater
          jagwah | Nov 02, 2004 04:50pm | #19

          I  send a gift certificate at the end of year with the business Christmas card. Either dinner out or to a local wine store if there inclined. I'll thank them for for the referrals and making it a good year for me and wish them a Merry Merry. 

          1. User avater
            bobl | Nov 02, 2004 04:57pm | #20

            classy_____________________________

            bobl          Volo, non valeo

          2. User avater
            IMERC | Nov 02, 2004 05:54pm | #22

            Where's ours...

            we're class.......

            Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming

            WOW!!!   What a Ride!

          3. User avater
            bobl | Nov 02, 2004 06:22pm | #23

            classy_____________________________

            bobl          Volo, non valeo

          4. User avater
            IMERC | Nov 02, 2004 06:59pm | #24

            In one all our own too...

            Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming

            WOW!!!   What a Ride!

          5. User avater
            jagwah | Nov 02, 2004 05:13pm | #21

            I certainly understand the view point of 'rebates' as it were. To further explain my reason not to rebate, but to only refer those who's work is great and who refer me is this:

            I don't want a client to find out I was referred to them based on the compensation I gave another. It can be misconstrued as a little mercenary and contradicts their assumption I was referred due to the quality of my work.

            I know that's not what's being done but it can be an issue and a misunderstanding you don't want to come up.

            I am fiercely protective of my clients and will only give them a referral of someone who has shown me to be their best in every way. When I am referred by another to a new client I take personal pride in that referral.

            My friends and I in this business live and die by our own hand. It's a reflection on me as much as my own work who I recommend to a client. Their trust in me is important.

            edited 'cause I caint spell. NOTE TO SELF... Don't post untill after you have morning coffee and constitutional. ah.. the stress...the pressure

            Edited 11/2/2004 10:15 am ET by JAGWAH

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