Why I don’t take sales referral fees and neither (probably) should you.
Who doesn’t want more money?
People love the idea of referrals, and they particularly love the idea of getting (or paying) a commission. It’s win/win, right? If you pay a handsome commission on sales, you’ll get more referrals. If you’re paid a handsome commission, you’ll give more referrals (and be able to buy more cocktails!) – everyone’s happy.
Somehow, though, it doesn’t quite work, does it? If you’re reading this because you’re in sales and new business development, or because you’re a business owner you’ll have experienced the failure of this approach already. We meet people, and they promise to refer us. We promise a referral fee and we never hear from them again. We recommend people, take a fee, and then the client we’ve referred to isn’t thrilled with what they get, so we stop doing it.
I had a call recently from someone who’d been in the audience at one of my sessions. He’d enjoyed it, and was very complimentary and then he told me about his service because he thought it might also be useful to my clients.
He understood my kind of clients – I tend to present a lot to professional services firms, especially those in consulting, accounting and tech as well as marketing and digital agencies, and he was articulate and passionate about what he could offer some of them.
As it happened, it sounded like his service would be very useful to some of my clients, and so I mentioned that I’d be happy to connect him with any client as and when the need arose.
‘Great’ he said ‘And obviously, we pay a commission …’
‘Stop right there’ I said (well, I didn’t say it, but I thought it, and it makes me sound more forceful than I am to claim that I said it!). ‘I don’t take commissions for referrals’.
*Slightly uncomfortable silence*.
‘Oh. Don’t you?’
‘No. I don’t. Would you like me to tell you why?’
‘Yes’ he said, rubbing his hands with glee. (That didn’t happen either, but I’ve gone full Dickens now).
‘For me, it’s simple. I want to give my clients the best possible service that I can, and give them the best advice that I can. That means that I don’t take commissions, since the temptation to start recommending services to clients that benefit me more than they benefit the client is strong. Worse, it’s easy to remember services more when they pay a commission and that can unfairly influence my decision as to whom to recommend.
At the core of my business is trust (I think that it should be at the core of every business). How much can my clients trust me if they find out that I’ve recommended something to them because I’m getting a commission?
Here is a much better idea – if I recommend you to a client of mine, and they use your service, I’d like you to take the referral fee that you would have paid me, and give it to the client as a discount, and let them know. That way we all benefit. I’ve recommended a service which is genuinely useful, you’ve gained a new client, the client has got a new service at an unexpected discount, and we’ve all increased our trust with each other.’
He paused. ‘I like that idea. I like that a lot. Why haven’t I been doing the same? ’.
Do you like it? I think it’s great, and I love business (and personal) situations where everyone involved benefits in a way which is easy, ethical and long-term.
Give it a go and let me know what happens. Or do you do anything differently which is better? I’d love to know!
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