Do you expect to be paid for giving a referral?
I don’t. And even when other parties have offered to pay me a referral fee, I decline. All I want from my referrals is to ensure that my client enjoys a level of service and quality of delivery that matches Ruby Assembly’s standard. In today’s blog, I highlight why cash-conditional referrals can be problematic and lead to poor client outcomes and fraught business relationships.
Be Careful Who You Refer To (… aka that freaky BNI vibe)
Referrals are sacred; they should be given rarely and only to those who deserve them. Too often, I see both mature and startup businesses being wooed into rarely profitable referral relationships. They do not seem to understand that a recommendation to a client is a responsibility. If the referral partner does anything but a fabulous job – at least as fabulous as the job you’re doing – you risk client disappointment and a tainted relationship. That’s why referrals are the gold standard of recommendation. When we refer, we are a known and trusted quantity that is vouching for another person’s excellence. That’s a big deal. No amount of $50 or $1000 referral fees would make up for a breach in trust that resulted in a broken client relationship. In fact, those paying the fee may result in a lessened level of responsibility to the referred client. I much prefer obligation to excellence as the currency in referral relationships; it is high accountability and is the foundation of a ‘virtuous circle’. (More on that later!)
Check Your Motivation
One of the concerns I have with payment-for-referral relationships is motivation. Making money from services should be a founder’s principal focus. When you’re having to resort to paid referrals as a core part of your earnings it is possible that your business offering needs to be refined. Are you choosing to refer to one party over another because they’ll pay you for leads? And if so, how does this serve your client? I think referrals should be made with the client’s best outcome the priority. Being paid muddies this focus, and can distract us from what really matters: referring to the right collaborative partners who will respect our clients, and building a great business with superior offerings.
Business Is Best The Way To Say Thank You
When I say I’m not into paying for referrals or being paid for delivering them, it’s not because I am ungrateful for work or because I don’t like being treated by collaborative partners. There are many ways to say thank you for referrals that shouldn’t even be conditional on the business coming through. When I received referral from clients, I will often send flowers or a token of gratitude. Regardless of whether that business eventuates. What is more important to me is honoring their relationship to Ruby Assembly and acknowledging the trust they have put in me.
When it comes to business partners, referral is the kindest form of thank you. That’s where the real engine of business lies; not in the accrual of referral fees but in the trust and approval of fellow founders who want to recommend you to their clients. And I’m all about that.
Your Virtuous Circle
At Ruby Assembly we have a ‘virtuous circle’ of referral partners. We work almost exclusively with them; they are a known quantity that share our values and quality of delivery. They include a photographer, videographer, graphic designer, web designer and podcast editor. We also semi-regularly refer to lawyers and accountants. This makes us a pretty much full-service agency when it comes to client branding. We have deep relationships with all these parties, and we do not pay for their referrals – nor do we pay for referrals. It’s a virtuous circle, a social contract based on ‘runs on the board’, trust and the knowledge that the client referred will be treated like gold. A virtuous circle takes a much longer time to build than a relationship based on referral fees – but it is better for your client and for your business in the long run.
Ethics of Cash
If you are offering a referral partner payment, or are receiving referral payments – what is your practice for disclosing this information to clients? It is important that clients are made aware you enjoy a pecuniary benefit from the referral. If you are avoiding disclosing a financial relationship to a client for fear of seeming avaricious, it’s time to take a closer look at the arrangement. Does it really serve you? Does it engender additional trust for your client, or does it make them think twice about your motivation?
Of course, removing money from referral relationships doesn’t guarantee the transaction’s success – whether you’re the one referring or being referred to. But it does remove the icky question of cash from the equation, keeping your hands clean and your focus on excellence of delivery and deeper collaborative relationships.