Referral commissions

[rnt80]

On the last kitchen I did I used a granite guy that a friend of mine had used in the past.  Since that job the granite guy has tried to steer some work my way, however, all of those jobs have been lowballing dead ends.  Yesterday he gave me a lead on a job with more potential.  He's doing the granite for an island that the customer either wants redone or built new.  There is additional work they want done that has nothing to do with his services.  He told me yesterday that he usually takes a 20% commission.  What is the industry standard for something like this?  Should his rate apply to everything the customer wants done or just the island portion of the job?

 

[builderbob]

This one is wide open to subjective opinion!  If I'm managing (GC'ing) a project, I charge a % of each contractor or just a flat dollar amount that basically covers my time involved to discuss and be involved with each subcontractor. If I refer a contractor, I don't expect anything in return as they don't work for me alone & I have ZERO involvement in that referral.  You should give him a high five and a gift card to target or dinner.  A small referral amount is fair in my mind, but not a percentage of a project that requires no involvement on his part.

However, if he's involved with the decision making & design process, he should be compensated...either by you or the client.

It also depends on how bad you need the work, but once you determine a basis of compensation, that will always be expected from you to him.

I do work for a few designers and one of them has me put in 10% on my bill to be paid to her at the end of the project. She calls the shots so I don't argue...we do get most of the work since its usually upscale clientele that do not shop around. I do 1099 her at the end of the year, so if you want to approach this granite guy with whatever agreement you make, tell him you first need his insurance papers and tax id so you can send him a 1099 at the years end!

Keep us up to speed!

Bob

 

[Brice Burrell]

This is a tough one.  There is no standard but 20% would add to overall cost of the job or take all your profit.  Basically he wants some incentive to throw some work your way and that's fine.  Put it this way, if you recommended him on your next kitchen job and he puts five grand of granite in do you think it would fair to get thousand bucks out of it?  As Bob said if you are GCing the job then mark up is the industry standard.   

 

[rnt80]

I'm not gcing and I didn't expect or ask for anything on the kitchen job from this summer.  Twenty percent sounded really high to me, ten percent sounds more doable.  He's not involved in the project beyond supplying the granite.

 

[stvrowe]

You have got to be kidding - 20% commission for just providing a referral. [eek]  I wonder if he would be willing to pay you 20% commission for you steering work his way? 

 

[Alan m]

20% is a joke. ask him to do the same . i doubt he will give you that.
5 %is doable.

 

[Wooden Lungs]

I dont see why tradesmen cant just recommend each other out of friendliness and good faith.

I often recommend tradesmen I know to other people just to help them out, not for a percentage!

The main thing for me is that the tradesman gets more work and the client gets a good job.

 

[WarnerConstCo.]

Tell him to pound sand. 

If that does not work, use coarser language.

I give out my fellow tradesman's names and numbers all the time, all I expect is them to take care of the people like I do.

Most salesman will only get 10% commission, tops.

 

[jmbfestool]

I wouldn't give him a penny.   You refer people if they are good and what goes around comes around that's how i work and that's how all my mates work.  

I have often given an entire job which I do not work on my self to my work mates but because I was initially recommended to the job I still get a good name for my self as long as my mate does a good job which I know they do.

20% is way way way way to high man for doing sweet F A  is plain greedy.

If he wants 20% he should be getting you jobs you would have no way of getting with out him and they bring you in a lot of money but for standard jobs he's having a laugh.

How I think it should work if he wants 20% is ask you to price the job for him give him your price and he adds his 20% and goes to the client and does all the talking and organises it all.

Jmb

 

[GPowers]

Seams very high  [scared]

 

[peter halle]

In the original scenario - Zero, notta, zilch.

With risk comes reward, the marble contractor has no risk.

Scenario A:  The marble contractor tells me he can get a job for me.  My contract is with the homeowner.  He wants a percentage for the referral.  ZERO.

Scenario B:  The marble contractor tells me that he can get a job for me.  My contract is with the marble contractor.  His contractor is with the homeowner and includes the scope of my work.  He marks up my price by 20% and that price is in his contractor with the homeowner.  Good for him, I don't care what he makes on my work.  If for some reason there is an issue with my work the homeowner has to go to the marble contractor and he has to come to me.  If i fail to perform he has the risk and will have to perform.  He has risk so he should be rewarded.

Scenario C:  The marble contractor get a 20% finders fee from me.  My contract is with the homeowner.  The marble contractor damages my cabinets and hard feelings develop.  In the end to get even with the marble contractor I tell the homeowner that in the future I can give better pricing because I will not be paying a finders fee.  OOPS for the marble contractor.  

Scenario D:  Contractors who have paid the fee end up doing lousy jobs and somehow it makes it to the internet and two and two is put together.  The verdict - the marble contractor doesn't care about his customers and will sell influence in order to make a buck.  OOPS. OOPS  

Don't pay it.

Peter

 

[tiralie]

He told me yesterday that he usually takes a 20% commission. 

If he usually takes a 20% commission why didn't he tell you when he started recommending you? I would state both I written and verbally that you have not agreed to this arrangement and was not notified of it prior to the homeowner engaging you.

What is the industry standard for something like this? 

It depends on what is agreed to between parties. Have you been given the project by the client? Has the client given you a down payment?

Should to his rate apply to everything the customer wants done or just the island portion of the job?

Since you have no formal agreement with him  the rate should not apply to anything. Again I would make it clear that you are not in agreement with this commission, and were not aware of it when you accepted the project from the client if that is the case.

 

[Scott B.]

Zero. Maybe a bottle of wine or a 6 pack. If you are good, he is actually providing his customer more value and enhancing his own reputation enough by working with you. If you are not that good, give him whatever you need to in order to procure work.  [big grin] Kidding

 

[Sparktrician]

Given the premise that you're only as good as your last job, I only recommend craftsmen that I KNOW without a shadow of doubt will do a superb job based on past performance and feedback I get from the customer, or at least be sufficiently honest to state that the job is outside the range of their skills.  There's no commission involved, nor will there ever be.  We (my circle of craftsmen) all know each other and recommend each other, depending on area of competence.  20% is a ripoff in any case, and especially so when there's no written agreement or contract stipulating that amount up front. 

 

[Jaybolishes]

If I get work from a general contractor and he wants to add a percentage to my bill to the customer, always he's paying me so I dont know or care what he adds.  But if he asked me to add 20% and then fork it over I'd say that's not how I do things man.  Like others I get referred and I refer, that's the deal, that's how we make our livings.   It makes you seem more expensive than you are and that's not good if your clientele think you are 20% higher.  If a client hires a GC, it's known the cutomer should expect the GC is adding a percentage.    My goodness if I got 20% from work I've given to  other contractors I wouldn't have to work half as much, but I think I'd get a bad name quickly because all my clients are by word of mouth, not advertising, and word gets around.  I wonder how busy this guy stays.  Sounds a little shady to me, but I live in a very small community and this is the norms I've seen.

 

[Kevin D.]

I'd run.

The fact he was giving you the dreg leads, but now he's got someone he's eyeballed as being not too caring on price and wants to milk that client thru getting 20% from your work for them.....one word....sleazebag!  

Not somebody I would want to do business with, nor would I risk my reputation being tied to other shenanigans he may be apt to down the road that could potentially ruin perfectly good relationships I may have otherwise.  

I am not in your industry, but I am self employed, and have worked with other professionals on a referral basis.  Rarely are there finders fees negotiated up front, but somehow something gets exchanged, whether it is a flat amount, a percentage, or more commonly, a continued relationship of one pro referring another pro knowing that neither of us will do anything to damage a mutual client.

While as I mentioned I am not in your Industry, 20% for a name and phone number seems high regardless.  I don't think the Mafia gives that much on leads to its victims.

 

[Kevin D.]

In the original scenario - Zero, notta, zilch.

With risk comes reward, the marble contractor has no risk.

Scenario A:  The marble contractor tells me he can get a job for me.  My contract is with the homeowner.  He wants a percentage for the referral.  ZERO.

Scenario B:  The marble contractor tells me that he can get a job for me.  My contract is with the marble contractor.  His contractor is with the homeowner and includes the scope of my work.  He marks up my price by 20% and that price is in his contractor with the homeowner.  Good for him, I don't care what he makes on my work.  If for some reason there is an issue with my work the homeowner has to go to the marble contractor and he has to come to me.  If i fail to perform he has the risk and will have to perform.  He has risk so he should be rewarded.

Scenario C:  The marble contractor get a 20% finders fee from me.  My contract is with the homeowner.  The marble contractor damages my cabinets and hard feelings develop.  In the end to get even with the marble contractor I tell the homeowner that in the future I can give better pricing because I will not be paying a finders fee.  OOPS for the marble contractor.  

Scenario D:  Contractors who have paid the fee end up doing lousy jobs and somehow it makes it to the internet and two and two is put together.  The verdict - the marble contractor doesn't care about his customers and will sell influence in order to make a buck.  OOPS. OOPS  

Don't pay it.

Peter

Great answer(s) Peter.  That's right on imo.

 

[pugilato]

and wants to milk that client thru getting 20% from your work for them.....

Exactly... this kind of thing is like a professional courtesy, and you return the favor when the opportunity presents itself.

 

[Jonhilgen]

Tell him to go to hell.  I work with a tight group of guys, and we refer each other to clients because we know they will take care of them.  Because  after all, if things to awry, the client will blame you for the reference.  20% is part of your profit.  Unless you like working for free.

Jon

 

[honeydoman]

dinner gift card would be nice.. but no way 20 %  i never pay referral fees except for dinners... remember what goes around comes around  tell him you will be referring him work also