Question regarding Project Referals

[DesignVHL]

Did a search, couldn't find much on this....and I am not sure if this is against posting policy, but if so I apologize. I have the pricing and ethical guidelines book at home...but i'm at work and i'm not even sure if the info would be in there...

I've been doing design work for a steady client for a few years now....as HIS marketing biz expands, he's getting more and more clients wanting design work, which I do for him pretty regularly. I've never paid him referal fees in the past because he's always paid me through his clients. But now we want to start conducting business differently, since this isn't one of his clients, but a referral FROM one of his clients....he is bringing me a design job, and I'm sure more will come now in the future. I'm wondering what is an ethical and appropriate % that I should give him of what I earn? IS there a standard, or would it just be something based on what we would personally agree on? He mentioned 15%, which seems reasonable to me. But I'm not sure if he should get more, or less....

Thoughts...

Thanks!

[CkretAjint]

No person... I repeat, NO PERSON ever agrees with a number first given out. It's like buying a car, haggle him down! He will probably go lower then 15%...

Make sure you adjust your prices accordingly aswell. I am just assuming you never accounted for this before in your pricing, so now that you are paying referral fees you are loosing income. Make sure to accomodate for this or you will be short sheeting yourself big time!!!

[John G]

I'd try and get him down to at least 3-5% good grief he's just passing a phone number.

[DesignVHL]

The thing is this...He is not just a client of mine, but someone who has become a close friend - we have been working together for approx. 4 yrs. now...we DO work in a PROFESSIONAL manner, contracts and all that jazz, HOWEVER HE has already brought me many new clients in the past and will in the future...and 15% seemed very reasonable per project - if not a bit low for the work we do with one another...we BOTH help enhance our businesses...so maybe this is kind of a specialized client/friend/work relationship...THIS Client has SPECIFICALLY brought me into the music industry for design - and that is NOT easy! I DO want him to be fairly and properly compensated....so just wondering IF there WAS a STANDARD on a referral percentage. :)

[CkretAjint]

Friends don't take advantage of friends, especially the close ones. I can see 15% per project getting quite pricey rather quickly. If he is a friend they won't mind you adjustng your prices 15-20% to compensate for this new addition to your agreements. In the end you have bills to pay as well....

[DesignVHL]

I do not think that EITHER of us are looking to rip either of us off...just trying to figure out what would be fair and how we should work it....I think we can agree that it will be a one time referral fee on any first project of any referred client...but 3-5 % just seems so cheap - esp cuz its just a little E-card that will be under $500 bux!

* now I do know that referring a client is just a nice gesture and of course doesn't require me to give him anything...and I COULD just send him a thank you box of chocolates or something, lol....but as mentioned he has brought me a ton of work, and got me into the industry, so I thought a percentage would be a nice gesture...but perhaps a flat fee would be better? Ugh i'm confused now on what the best thing to do would be...

[CkretAjint]

a $500 job not much. But what if it was a $1,500 job and you paid out 15%? $5,000 job? $25,000 job? See how it can add up quick. He has to realize that low income jobs don't get much kick back... This also gives him insentive to find higher paying clients for you, for him to make an easy buck off of.

(removed prices, since were not supposed to talk them on the site)

[DesignVHL]

eh i think its more of a way for ME to thank HIM...I did the math, and I know what the percentages equal up to! :) Just trying to DECIDE what the best way to treat it is...and what is appropriate.....again he isn't trying to make a "buck" off me...I think it is more that we both thought it was customary to throw some $'s his way should he bring me any clients...this is the first time he's bringing me a client that wasn't HIS first...usually i work directly through him for design work on HIS clients...so because they are already HIS clients, HE bills them and pays me...or I just invoice HIM and he sends the invoice over to the client and they pay me directly....probably not the best way to do it but it works for us....and we've never had any problems....

I am thinking that because it's a small project, I'll probably just give him a 10% kickback....too bad he doesn't drink wine or I'd just send him a nice bottle! :)

[CkretAjint]

Why not just take him out for a nice business steak dinner for jobs under $1k. And then pay him on jobs over that? Plus the 'business' dinners are a good business tax write off for you! ;)

[DesignVHL]

That would be wonderful, except for the fact that my client is in LA, and I'm in Chicago! Too bad they don't have virtual dinners for this sort of thing :P

I suppose a nice gift certificate could work though from amazon.com - I'll come up w/ something...probably just end up throwin' a few bux his way - we recently worked on a project together w/ a really DUMB - I mean the DUMBEST OF THE DUMB-DUMBs client that was quite a PAIN for us both...so trust me he deserves this...

[CkretAjint]

is he married? what about a gift cert for him and the wifey to go out to eat to a fancy restaurant. I am sure she will appreciate it, and since she is happy about it, he will be too (not out of his pocket, and he might get some!) haha... Just google fancy restaurants out there and see what comes up.

gift basket of food / fun stuff?

[CkretAjint]

Sorry if it seems I am VERY against handing out freebie cash. I don't mean to be. There are just PLENTY of other ways to thank people for business aside from cash (unless they request it). I hope I don't sounds like a jerk about this, i really don't mean to be. Just trying to get you to think outside of the box on it.... (c; Money is money, you work for it so try your best to keep it. Unless you MUST hand it out or feel super charitable about giving it out...

Often online you can get coupons / discounts when buying gift certs. This saves you money, but allows you to hand out more to your clients without them knowing!

[DesignVHL]

No sweat CK - you shouldn't apologize for your views on this! :) I'm in agreement for the most part!

Anyways my client is not married but lives w/ his GF....again kinda a personal relationship too....and since this job is going to be under $500 I highly doubt I would want to spend enough to send him to a nice fancy dinner lol....that is probably gonna cost more than the kickback....and who even knows if this client will come back for more! I think I am going to stick to 10% of the final bill and call it a day....then for any future referrals - from ANY client I'm going to do an amazon.com (or some online company) gift certificate just to say thanks...depending on the client's interests.....but yep, all he did was pass on my contact info and said that HIS designer does a great job so give her a shot basically....we'll work it out, we usually do. :) Thanks for your insights though, they were very helpful.

*but i'm all ears if someone has anymore insight into this in respect to there being some type of an industry standard to this, or am curious as to how other designers handle new client referrals that work out....

[PrintDriver]

Did he ask for a percentage?
Perhaps a "Thank you" is enough?
When you get once removed from the source ie a referral from a referral, I think the point is moot.

Gawd, if I got back a percentage of the work I refer to people I wouldn't have to work. Now there's a conundrum for you.

[DesignVHL]

I hear ya...I was just personally under the impression that it was standard practice...and I am the one who put this into his mind, and ASKED HIM what percentage HE would like...so this is all my fault, lol...he's just referred me to now TWO clients today - just got another one...so perhaps an itunes gift cert. or some other online gift would be more appropriate as mentioned. :)

[CkretAjint]

lookie lookie:

$25 certificates are only $5; $50's are $10; and 50% off coupons are only $1.50. Simply enter discount code: LESSON at checkout and hit “recalculate total”.

http://www.restaurant.com/consumer-promotion/email-landing-page2.asp?rpid=

See what I mean about freebies (almost?) You can go to retaurants.com and find all the ones in his area and use it then!!!!!! :D

[DesignVHL]

WOW thanks, that is DEF. something to keep in mind! Pretty sure I'm going to be getting this ecard job...

[CkretAjint]

Best of luck on the job! Hope all works well with it, especially the client! haha :)

[DesignVHL]

thanks, i hope it goes well too because my last e card I designed through a referral similar to this became a nightmare - MOSTLY due to this guy who didn't know what he was doing in respect to sending out HTML e cards...lol I sent him the HTML file, I sent him the CODE to paste INTO the HTML email, and I even sent him an HTML EMAIL fwd with it all intact from OUTLOOK...still he didn't get it...NOT to mention, I offered to HOST it on MY personal web server! Some people, lol....if you could see the email trail, you would laugh your ass off! Gotta LOVE problem clients that are dumb as a box of rocks.....end rant.

[ArchVis]

You may have put yourself in a spot you can't back out of, but I can't see a percentage- especially that big a chunk- for every referral he gives you. One of the problems that can arise from the expectation of referral $$$ is that in the interest of improving his cashflow, your buddy starts "filling his pipeline" as they say in sales and sends you every remotely viable, crap lead he comes across. At what point in your day does qualifying leads become burdensome? 30 minutes a day? Two hours? We had a relationship with a company where we paid the owner and the sales reps EACH 5% of gross sales as a referral bonus. I spent probably 20-30 hours a week just chasing leads, plus 40-50 hours designing. Just be careful.

Dave