Percentage for referrals

Reading another chapter from The Normal Freelancer’s Book. In it, I talk about my experience of paying and receiving percentages for referrals. For me, this is a very delicate topic, so I write about it a little and avoid it in my work.

At the beginning I want to make an important remark. The article you will read below is a chapter from a book whose readers are already immersed in context. The context is that the author is an information systems designer who provides a complex, expensive, and time-consuming service. Not everyone is suited to this way of doing things. And now let’s go:

Do not recommend partners, it is harmful and dangerous:
They will take your customers away and not thank you.
Well, if they mess up, then customers, of course,
Remembering who the recommender is, they will blame you for everything!

I first encountered this phenomenon at the beginning of 2015. One of the clients offered to share the contact of a potential customer with me for a percentage of the project. I have long been interested to know how such transactions occur, and I agreed.

The conditions were very simple, and we stipulated them verbally. I get the contact of a potential client and offer him my services. In case of a successful transaction, he must share a percentage of its value. I also have to share a percentage (I don’t remember exactly how much, but definitely less than twenty) from any work for this client within a year from the date of the agreement.

I received contacts, talked with a new customer, sold my services and got to work. During the year I completed two projects for him and paid a percentage of them to the person who provided the contact.

The aftertaste was unpleasant. First, I didn’t like that I was paying a percentage of transactions for something as simple as “share a contact.” Secondly, I ran into something that I did not discuss in advance: it will be a percentage of the amount before or after taxes. Thirdly, I paid the percentage “in black”, we did not draw up an agreement on paper. And I’m already used to working with customers and contractors officially.

After that incident, I shared the percentage only once. My friend “fitted” a customer to me (in fact, he transferred a client ready for a deal to work). I did the work and shared with a friend part of what I earned. The difference from the first case was that he did not ask me about it. I was just thanking for the “fit” in this way.

There was another case in reverse. I once arranged a paid startup consultation for one of my clients. On the part of the customer, I came to the consultation with two representatives of the client, and on the part of the consultant, my old friend and his assistant. A friend held a paid consultation (unfortunately, the client was dissatisfied with the result), and we fled. And a few days later he gave me a small amount for organizing this consultation, although I did not ask him about it. It was nice. By the way, it was this gesture that prompted me to share the percentage with a friend, whom I wrote about a little higher.

There was also a period in my work when several novice specialists began to work under my brand. I didn’t officially hire them, and this was my first attempt at outsourcing projects. The conditions were simple: I provide them with orders, help them cope with work, teach them the wisdom of the profession and pay half of the transaction amount.

It took me exactly one year. During this time, I found three specialists in the team and managed to attract enough orders for all of us. However, I did not stop working with my own clients. We all had a good relationship and a good atmosphere. Worked remotely from different regions. But, after calculating my expenses for the year, I realized that I was spending more time and effort to get the same amount of money as when I worked alone. I was tired, disappointed and gave up. The team felt this and slowly disbanded itself. And I concluded that working alone is more profitable than with a team. Most likely, this conclusion was premature.

Now it seems to me that it was worth a month to rest and continue to work in the same mode with renewed vigor. Then, after some time, the amount of my resources needed to support employees would decrease so much that it would bring much more profit than when working alone. I came to this understanding after many years, working on my own project and forming a team. This story taught me not to jump to conclusions in cases that take a long time before the first results.

There were several cases when I took small commissions (up to five percent) for conducting a transaction through my IP, helping friends whose clients were not ready to enter into an agreement with an individual. I didn’t like this experience either, because I had to formally be responsible to strangers for work that I didn’t control, and I stopped agreeing to such adventures.

In the end, I settled on this: I try not to take or give interest on recommendations, but I am ready to make exceptions by concluding a formal agreement that will specify all the necessary conditions: how much, when, %% of the amount before or after taxes, and so on . But even now, when I write these lines, this has never happened before in my practice.

When recommending clients to friends and colleagues, I noticed that I was unpleasant when, after the recommendation, they did not tell how their communication with potential customers ended. Usually in such cases, I call the customers themselves and ask how everything went, and then I try to recommend such “silent ones” less often. And, on the other hand, I am pleased when, after some time, I receive a first-hand story and gratitude for the “adjustment”. I myself always inform the people who recommended me how it went. This information is important in order to understand whether the need of the person who applied for the recommendation is closed, or whether you need to continue to help him in his search.

Each personal recommendation is a responsibility for a person. And if you often recommend someone who does a bad job, or someone who pays badly for it, you can damage your own reputation. Especially if you take money for it.


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