I wouldn't be surprised if he's NEVER been paid 20%. He's trying it on. And there will be no reciprocity because you would never be referring someone like that to one of your hard earned customers I would think. You share work with people who are good, have a positive attitude, and will help you out in return. Getting involved in crap like this doesn't work out.
Referral commissions
- Thread starter rnt80
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Holzhacker
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I have known guys who strictly want/expect money for referrals. Referral money is part of their money budget. They pay for their kids private school tuition, the boat, the wife's mercedes etc. with the money. I don't have a problem with a guy wanting a commission. At 20% though its a joke. Unless the client is a complete idiot adding 20% will likely kill the job.
For the most part, there is rarely money exchanged between myself and most of the contractors I know. It's all about payback, what comes around goes around. Got a little electrical issue on a job, I call my Sparky and he'll take care of it for me. Need my bedroom floor sanded, call my Sander, he's got it covered. They get busted on a job, they call me to straighten it out, etc.
Obviously, more money would be nice. However, building relationships and having resources is far more valuable in the long run.
For the most part, there is rarely money exchanged between myself and most of the contractors I know. It's all about payback, what comes around goes around. Got a little electrical issue on a job, I call my Sparky and he'll take care of it for me. Need my bedroom floor sanded, call my Sander, he's got it covered. They get busted on a job, they call me to straighten it out, etc.
Obviously, more money would be nice. However, building relationships and having resources is far more valuable in the long run.
builderbob
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A great example of appreciation or gratitude is our realtor that we've used to buy both of our homes. We've referred her out to acquaintances and I don't expect a % of that, but she has sent us a gift card or target shopping card on each of the referrals that ended up purchasing a home through her. To me it's a nice way of saying "thank you" and it makes me realize she appreciates the business.
In the long run, if people are all just passing each others names about, doesn't all the $ in & out equal something close to zero?
Bob
In the long run, if people are all just passing each others names about, doesn't all the $ in & out equal something close to zero?
Bob
Sparktrician
Member
builderbob said:
If that's all you care about, OK. In my book, when we share work around among my colleagues, there's an unstated goodwill that means as much or more than just cold hard cash. That often helps in a big way when a bail-out is needed in unforeseen circumstances.
[smile]
Wonderwino
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Russell, keep in mind that the math of percentages changes as the amount changes. If he wants 20% of what you would charge without paying him a commission, then you only add 20%. If he want 20% of your final total bill to the client, you have to add 25% to your proposed 100% to net 100% after toking him the 20%.
Even "Wall Street" people don't get 20% commission on transactions. I would probably be willing to pay a few hundred dollars "finders fee" once a job is completed and paid for, but that large a percentage is ridiculous!
Even "Wall Street" people don't get 20% commission on transactions. I would probably be willing to pay a few hundred dollars "finders fee" once a job is completed and paid for, but that large a percentage is ridiculous!
rnt80
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I called him back yesterday and told him that I don't pad my estimates and I'm not going to start now. I enjoyed reading some of your posts. I have other professional relationships that operate along the same lines that many of you described. I can't imagine he gets anyone to pay him a 20% finders fee.
Wooden Lungs
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I looked into this referral commission (in the UK) and it seems the client legaly has to be aware of the percent paid. Because obviously the costs rise for the client bcause of the fee.
waynelang2001
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I would never pay a commision fee for a referal. I fell its just a common curtousy to help out my fellow tradesmen and i would expect the same from others.
I only just came across this conversation and i am running a little late. If i am repeating anyone else's solution, I appologize.
I have a certain group of contractors who i have worked with for years. a couple of them for over 30 years. i often give referrals but do not charge any commission for such. If i do refer one or two of them, i always call them to inform of the circumstances for the referral. I let them know, especially what i know of the person's pay habits.
If the contractor is going to be subbing under me, I tell them up front whether I will expect to charge my commission out of their charges or whether i am going to add my commission to their estimate and forward such charge to the customer. Either way, i tell my sub right up front which way i am going to do it. If i know the customer is going to be slow pay, i do not let my sub wait for his money and i add my commission to his charges. If i know a customer has a very bad reputation, i discuss with my sub about whether we really want the job.
Of course, I am slowly phasing back my biz so I am really not into work large enough to warrant sub contracting and any work i am accepting now is from long time tried and true customers. Within the last two weeks, I have actually "fired' the only customer who i have had any uneasiness about. From here on, any new sub work is for work i have been subbing to specific contractors for 100 years or so. All of my above explanation is not really appropriate for today, but that's how i have done in the past. The important thing for me is that i am upfront with my subs and we determine how any commissions are going to be arrived at before the sub presents his estimate to me.
Right now, i have to get on the "horn" to my very most reliable sub who has done my tree work since back in the '80's.
Tinker
I have a certain group of contractors who i have worked with for years. a couple of them for over 30 years. i often give referrals but do not charge any commission for such. If i do refer one or two of them, i always call them to inform of the circumstances for the referral. I let them know, especially what i know of the person's pay habits.
If the contractor is going to be subbing under me, I tell them up front whether I will expect to charge my commission out of their charges or whether i am going to add my commission to their estimate and forward such charge to the customer. Either way, i tell my sub right up front which way i am going to do it. If i know the customer is going to be slow pay, i do not let my sub wait for his money and i add my commission to his charges. If i know a customer has a very bad reputation, i discuss with my sub about whether we really want the job.
Of course, I am slowly phasing back my biz so I am really not into work large enough to warrant sub contracting and any work i am accepting now is from long time tried and true customers. Within the last two weeks, I have actually "fired' the only customer who i have had any uneasiness about. From here on, any new sub work is for work i have been subbing to specific contractors for 100 years or so. All of my above explanation is not really appropriate for today, but that's how i have done in the past. The important thing for me is that i am upfront with my subs and we determine how any commissions are going to be arrived at before the sub presents his estimate to me.
Right now, i have to get on the "horn" to my very most reliable sub who has done my tree work since back in the '80's.
Tinker
Kev
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If someone is providing you with a steady stream of work they are giving you value ... and that does deserve some form of compensation - particularly if they are introducing you on the back of their reputation.
One offs are rarely good grounds for a referral fee - most would do this to keep a "friendly" to a client to avoid a new unknown player that could potentially upset the entire opportunity.
20% may be acceptable if it's a percentage of the final profit and keeps a steady stream of referrals flowing ... but the example discussed hear just seems like greed.
One offs are rarely good grounds for a referral fee - most would do this to keep a "friendly" to a client to avoid a new unknown player that could potentially upset the entire opportunity.
20% may be acceptable if it's a percentage of the final profit and keeps a steady stream of referrals flowing ... but the example discussed hear just seems like greed.
