Client referrals and commission

[Schoolies]

Just trying to get a general idea of what people think...

A company is offering my company a few clients. We would be doing all of the leg work from answering the calls, to service to billing. The current company is trying to get out of the 'computer service' arena and wants to focus more on their core services.

My question is, in your opinion, what is a reasonable "commission", "finder's fee" to pay a company that would be giving me clients.

The clients I would be getting are small-mid size businesses, not on retainers or a managed monthly service, just break-fix, computer repair and network management type of work. Also, this would be an ongoing relationship so we'd probably be getting more referrals throughout our relationship.

I want to be fair about this so I'd like to hear what everyone has to say.

 

[aigomorla]

I want to be fair about this so I'd like to hear what everyone has to say.

depends on how much work is needed on your end.

If you have to interview the person all over again, and redue a complete fact finding, then i feel 10% of the Profit is way more then enough.

If they gave you a long sheet of history, and a detailed report on the client your getting, it would be fair to give at least 33% of YOUR profit. (labor = 100% profit)

Meaning u know exactly whats wrong, you walk in and preform exactly what was written, and you walk out.

 

[Schoolies]

Thanks for the reply.

This would not be a one time service. We would actually be working with the client directly, here on out. They would basically be giving us the client.

 

[Sho'Nuff]

Depends on what industry you are in. In the legal industry, paid legal referrals (beyond a referral system run by a state bar association) are often banned by the professional rules of ethics.

 

[Schoolies]

Thanks. The client would be introduced to us and there would be an amicable change over. Basically, we focus on IT service and repair - the other company does not have the capacity or desire to handle this type of work any longer.

 

[Blackjack200]

I don't know, but if I was the company referring the clients, I'd probably be more worried about the quality of service they receive from you than how big the kickback is.

If they refer a client to you, and you provide exceptional service to their client, it reflects very well on them.

I wouldn't offer them anything, just stand on the quality of your work. If they continue to refer business to you buy them little gifts and take them out to lunch and things like that. These things are far more impactful than just giving cash. If they are insisting on a slice, ask them to suggest a price first.

Edit: What kind of shop are they? Are they technology consultants or something?

 

[kranky]

Are they asking for a commission?

 

[Schoolies]

Blackjack, they know we do good work because we have been helping them for the past year. They are moving to telecommunication services.

Kranky, they are looking for some kind of compensation. I was thinking of some kind of percentage but I had the feeling they wanted a commission for the lifetime of the client relationship. I think there should be some cut off date at least.

 

[Schoolies]

friendly bump to see if anyone else can share their thoughts or experience.

 

[yllus]

Try to work out a rough cost estimate for what attracting clients on your own costs, and give a multiple of that figure? Or take an estimated lifetime revenue per client figure and again multiply it.

 

[kranky]

There needs to be a limit. I would suggest 10% of the first year's gross revenue from a client they send you. I am assuming your business would be profitable even giving the commission. I would shy away from a deal based on a cut of the profits.

If they insist on a never-ending cut, then bail. It's not reasonable. Once you take over the clients, grow the business, and increase your revenue and profits on those clients over the years, why should they receive an ever-growing cut of the money which comes from your hard work?

Remember that if this is an ongoing relationship, you need to be comfortable with the deal even in the cases where someone calls them looking for computer services, they punt the client to you, and you have to pay them the established fee even if they never did any work for the client. If you don't think that's fair, then think about a two-level deal - you pay a percentage of gross for established clients they already service who they turn over to you, and you pay a flat fee for people they send your way who they never had a relationship with.

 

[BoomerD]

Are you one of the "decision makers" of the company?

If so, you need to do a bit more research than just asking ATOT.

If not...just suck up and live with it...or find a new job if the compensation isn't up to par.

 

[Schoolies]

I am the decision maker.

I am doing research. This is one of my many methods of research. Accessing the minds and experiences of thousands of users I believe is a great way to obtain research.

 

[Schoolies]

Kranky, thanks for the helpful info!

I agree with you. I think there definitely should be a limit. Before I posted on this forum, I was thinking of something along the lines of a 2 year deal - "x" percent the first year and "y" percent the second year. I thought that may have been too 'generous'...

I think I'd probably suggest a 1 year, at x percent, for all new clients who they never had a relationship with.

The company has a couple years on us, so they have a larger client base, more contacts and connections which can lead to great referrals for us. For example: they referred us to a company with 10 different sites, multiple servers, etc.

So I'm willing to go the extra mile to make everyone happy. Thanks again for the input.