Refer Madness

I’ve been thinking a lot about referrals lately.

I shared a story about that topic on LinkedIn last week and will include it here in full to save you a click (skip further below if you caught it already though; there’s more):

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A short while back, a friend referred a consulting opportunity my way. When I get this kind of referral, 95% of the time, I help find someone else for it either directly or by sharing it with Serial Marketers. This was in the 5% — a perfect fit for me. I closed the deal.

The client paid on time (thanks, client) with the required share delivered upfront.

I have a referral policy I don’t talk about much here which I sometimes refer to as tithing. When someone refers business and I get paid, I send 10% to the referrer.

While I have referral agreements and sometimes will sign those either mutually or one-way, it doesn’t matter. If business closes, I ask them how they want it sent – PayPal, Venmo, etc.

In this case, there was a twist. My friend said he was working with the client and couldn’t accept payment since it felt like double-dipping. It didn’t seem right to him. He said I could buy him drinks when that is possible again. The guy didn’t even say dinner.

We are both so much more likely to send each business now. [He actually referred another lead to me since I posted this.]

The moral here is simple: Giving a referral fee isn’t about what you do for that one deal. It’s about all the potential for what comes after.

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That’s a more straightforward example, but I want to probe further to see how this can work in communities.
Another way I’m thinking about referrals is to add a layer within the Serial Marketers community that is based on the honor system.

It’d still have an agreement, but a non-binding one. It’s not a contract. It spells out that everyone in this opt-in subgroup, which would function as a private channel within Slack, would be able to refer deals to each other with the same expectations of referral compensation. That includes Net 30 payment on fees for services rendered by prospects referred. A small fee would also be requested to go back to ‘the house,’ aka ‘the community,’ aka ‘me.’ The vast majority would go to the referrer.

It wouldn’t work for everyone. It’s best for services businesses that are independently run. If someone can’t spare the margins, they could try to build that margin into the deal by pricing their services slightly higher. For others, like me, some margins are built in as the cost of generating business.

If this concept is interesting and you want to check out the draft of the agreement, let me know. If you’ve ever done or seen anything remotely like this, I will be eager to learn from you. I’ve been making up a lot of this as I go along, albeit with feedback from some thoughtful community members. Please reach out.

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I’ll also be more transparent and transactional than I usually am here, in case this is helpful to you — and perhaps anyone you’re working with.

Along with the 10% that I offer for referrals for consulting work, I’ll offer 20% of referrals for sponsorship of the community and newsletter. Deal size for sponsorship is typically lower, but margins are higher, so it makes sense to have two tiers.

If you want that in writing, great. I’ll send over a contract. But I’ll add that almost every referral fee I’ve paid so far has happened even without a contract, and the best such fee I received came without one either. I pay PandaDoc to manage my contracts and am happy to get more use out of it.
Is this something you’re exploring at all? How do you operate? What can I do better? And what are you making of yourself?

David
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PS 1: The First Wednesday happy hour is tonight at 6pm EST. Get details on Meetup.

PS 2: Upstream is this week too. Also wild.

PS 3: Joe Jaffe was kind enough to have me back on his show, and I had to rant about 3 of my most loathed words in business: “Hope all’s well.” It is much more raw and personal than I usually get, and maybe the only clip of me using the f-word in an interview or panel. You can watch the short segment here. My rant on LinkedIn followed.

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I’m trying a new experiment here, curating news automatically via my friends at Vestorly. Let me know what you think.