What referral fee is appropriate for another business
January 15, 2010 8:31 AM   Subscribe

How large a referral fee is appropriate to offer another business for sending me clients?

I am a freelance dog groomer, and sometimes groom at a shop. When the shop gets people interested in grooming, they have them call me directly to set up an appointment. The shop keeps odd hours, so often it is more convenient for me to see these clients at my home rather than at the shop, in which case I can just collect the entire fee rather than the 50% I make when I groom at the shop. I can also charge less when I work at home, which I like to do for my clients. The people at the shop would never know, but I'd like to offer them something in exchange for the referrals.

Is it dishonest or unprofessional to even see these clients at my home, or can I just give the business a smaller percentage of my earnings as a referral fee?
posted by vegsister to Work & Money (10 answers total)
"The people at the shop would never know..."

Well, there's the first clue that you're doing something wrong.

If they send you a customer, you owe them their cut. Simple as that.
posted by spilon at 8:41 AM on January 15, 2010

Er, I would talk this over with the shop and see what they think. Poaching clients from your employer for personal gain without their foreknowledge is a Very Bad Idea.
posted by craven_morhead at 8:58 AM on January 15, 2010

On the other hand, when she grooms dogs at home, vegsister is paying for water use, wear & tear on equipment (& driveway), dog waiting area & supplies, inconvenience to cohabitants, possibly extra time cleaning up wet dog hair and processing payments, overhead that she wouldn't have if she never groomed dogs at home (credit card machine, equipment).

She saves money that she'd otherwise spend on marketing materials, advertising, down time, and commuting, but I still think it would be OK to keep a little more money when working at home. It may also make sense to keep the fee exactly the same when working at home so you don't seem to be unfairly competing with the shop, who would have to charge more to cover their (probably higher) overhead.

What you want is a mutually beneficial arrangement with the shop, so talk with them. Their odd hours can be an inconvenience for their/your customers, so maybe your willingness to see people off-hours is a good thing for them, too.
posted by amtho at 8:59 AM on January 15, 2010

Also: thinking the people at the shop would never know is probably incorrect. They'd eventually hear about it. This sounds like a great arrangement for you, vegsister, so you're absolutely correct to be forthright about it.
posted by amtho at 9:01 AM on January 15, 2010

Even though you're freelance, the shop is acting almost as a booking agent, assigning you work.

They should receive a cut, 15% or more (but not the full 50%), worked out in advance.

Otherwise they may stop sending you work altogether.
posted by infinitefloatingbrains at 9:08 AM on January 15, 2010 [1 favorite]

You need some sort of agreement with the shop, not only so to be fair to all parties, but also to protect yourself in case you ever decide to separate yourself from the shop or if your relationship with the store owner ever deteriorates. On paper, it may appear that you willfully diverting business away from that business for your own benefit while serving as an employee of that business, and that may potentially be grounds for an action against you. (I am not a lawyer.)
posted by jameslavelle3 at 9:10 AM on January 15, 2010

Response by poster: Point of clarification: I am not an employee, and the agreement is very informal. I got into grooming bc I worked with the shop folk on the same animal rescue volunteer projects, and they said they could really use a groomer at the shop. Demand for grooming has not been high at the shop since then, so I started doing it on my own.

Anyway, very helpful advice so far--thx.
posted by vegsister at 9:17 AM on January 15, 2010

Regarding the statement that the shop will never know...

Next month, when Mrs DogOwner goes to the shop to get her dog groomed and they charge her $50, she is very likely to say "But vegsister only charged me $40 last time!".

The shop will know, so figure out how to make an agreement with them, even if it's just informal.
posted by CathyG at 10:39 AM on January 15, 2010

I was going to chime in with a recommendation for 15%, and I agree that it should be made explicit up front.
posted by megatherium at 3:41 PM on January 15, 2010

I'm with those who say you should talk to the shop owner about it. Negotiate a percentage that you're both happy with. Use all of the points in amtho's first post when you're negotiating (your at-home grooming expenses, the fact that you're supplementing the shop's limited hours, etc).
posted by whitelily at 11:06 PM on January 15, 2010

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