“Shaun, I run a small contracting business and I am looking to put together a referral program to help me get me into more deals. If they get me in front of the right contacts, the rest is up to me. I reached out to an industry contact to see if he was interested and said yes, if he could get 6% to 7%. I can’t afford to pay him that much for just getting me an appointment. I would appreciate your advice and recommendations.” Anonymous.
Anonymous, your simple question has many complex answers. Referral programs come in many version and the versions will determine the recommend referral fee. As usual, I am going to ask you a set of qualifying questions that will help you determine your strategy, then I will give my recommendations.
What is the lead? An introduction, a recommendation, part of partnership, or included in a strategic bundle of product and services? The more of a commitment the higher the fee.
What are you selling? Product, Services, One-time, annual fees, reseller? What are your margins? You need to still make money on your deal. The higher you margins the more you can afford to pay a fee and vice versa.
Who are you paying the fee to a company, an employee at the company, or an individual? Are you going to have an official contract? A company is more formal and an individual is less formal.
What is the level of effort and commitment? Is this simply a name to call, setting up an appointment, making a recommendation, doing a presentation or meeting with you, a referral call?
Do they get business if you win? If they get business, this will reduce the fee.
Ethics, is there a conflict of interest in recommending you? Either with your prospect of if individuals with their current employer. If they can’t refer you the client directly be wary and understand their conflicts.
When do you pay the fee? When you get the lead, when pass a certain point in the sales process? When you sign the deal? When you get paid? In addition to the size of the payment, the timing of the payment will affect the enthusiasm of the person giving the referral. If you have an 18 months sales cycle, they may lose their enthusiasm if it takes 18 months for them to get a check for helping you out.
The fee, in addition to a percentage of your business, can be a one time bonus or SPIF (Sales Performance Incentive Fund). You can have sliding scales or pay a fee for group of leads.
Based on your short question, it sounds like you will be paying individuals, so I would recommend a SPIF for example, $250 for a lead, another $250 if they become a qualified lead, and another $500 if they become a client. If it is a company, referral fees typically range from 5% to 20%, based on their effort and your margins.
‘Good Referring’. Reader Feedback, please click the comments below to give ‘Anoynmous' additional recommendations and I want your feedback on my response. Shaun Priest at shaun@closerq.com.
Anonymous, your simple question has many complex answers. Referral programs come in many version and the versions will determine the recommend referral fee. As usual, I am going to ask you a set of qualifying questions that will help you determine your strategy, then I will give my recommendations.
What is the lead? An introduction, a recommendation, part of partnership, or included in a strategic bundle of product and services? The more of a commitment the higher the fee.
What are you selling? Product, Services, One-time, annual fees, reseller? What are your margins? You need to still make money on your deal. The higher you margins the more you can afford to pay a fee and vice versa.
Who are you paying the fee to a company, an employee at the company, or an individual? Are you going to have an official contract? A company is more formal and an individual is less formal.
What is the level of effort and commitment? Is this simply a name to call, setting up an appointment, making a recommendation, doing a presentation or meeting with you, a referral call?
Do they get business if you win? If they get business, this will reduce the fee.
Ethics, is there a conflict of interest in recommending you? Either with your prospect of if individuals with their current employer. If they can’t refer you the client directly be wary and understand their conflicts.
When do you pay the fee? When you get the lead, when pass a certain point in the sales process? When you sign the deal? When you get paid? In addition to the size of the payment, the timing of the payment will affect the enthusiasm of the person giving the referral. If you have an 18 months sales cycle, they may lose their enthusiasm if it takes 18 months for them to get a check for helping you out.
The fee, in addition to a percentage of your business, can be a one time bonus or SPIF (Sales Performance Incentive Fund). You can have sliding scales or pay a fee for group of leads.
Based on your short question, it sounds like you will be paying individuals, so I would recommend a SPIF for example, $250 for a lead, another $250 if they become a qualified lead, and another $500 if they become a client. If it is a company, referral fees typically range from 5% to 20%, based on their effort and your margins.
‘Good Referring’. Reader Feedback, please click the comments below to give ‘Anoynmous' additional recommendations and I want your feedback on my response. Shaun Priest at shaun@closerq.com.
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