Business and friendship might not mix
March 19, 2010 3:39 PM   Subscribe

I'm a freelance graphic designer, and my friend -- who is starting a consulting business -- wants us to have a policy of mutual referral fees. This makes me uncomfortable. How should I handle it?

My friend emailed me today, saying that she'd passed my name on to one of her colleagues. Then she asked if I would be willing to have a mutual 15% referral fee arrangement.

She is just starting a consulting business after having been laid off, and I'd like to help her out as much as possible. I designed her business cards for free, and I'm developing a website for her at a steep discount. But the idea of a referral fee is giving me pause.

It seems there are two philosophies about referral fees: the "it's good karma" philosophy, and the "it's good business" philosophy. I am in the former camp.

I frequently refer people to others I think could help them, and it makes me happy in a matchmaker type of way when I learn my referrals have worked out. I don't want to introduce a monetary aspect to something I consider to be a natural gesture of goodwill. And I feel a bit squeamish about the idea that someone might be more likely to refer my services because they'll profit from it. I guess the world works this way, but I wish it didn't.

Part of my discomfort with my friend's proposal stems from the fact that pretty much all of my business comes from happy clients passing my name on. The idea of paying my friend to tell people about me when I don't pay anyone else just feels strange.

Also, my business has been strong enough lately that I don't really need my friend's referrals (though of course they are appreciated). And due to the specialized nature of her business, it's unlikely that I would be referring many people to her -- though I definitely would, if I found anyone who could use her help. If she finds another designer who will give her 15% for referring them instead, I completely don't care -- and I would still be happy to refer her services (for free!) when it makes sense. Maybe this is what I should tell her?

After writing this out, I feel pretty sure that I'm going to tell her I can't do it, though if you guys think I should, I could probably be convinced.

Assuming I tell her no, if I could offer some additional way to help her, that might be good. Perhaps I could give her the website for free, too? Do you have any other ideas? I'd like to handle this in the least awkward way possible.
posted by bethist to Work & Money (13 answers total) 1 user marked this as a favorite
The idea of paying my friend to tell people about me when I don't pay anyone else just feels strange.

This. Offer to send business their way if the opportunity presents, but monetizing goodwill (especially retroactively) is a bad idea.
posted by Pragmatica at 3:45 PM on March 19, 2010 [2 favorites]

Under no circumstances should you do her website for free because of this. She offered you a business deal. You decline the business deal. She does not get a free website because a business offer was not agreed to. That's silly.

Having said that, I understand the awkwardness, but it's not as awkward as you think. You just tell her that it doesn't make you comfortable to engage in a business relationship with friends, and you'll refer people to her any chance you get, for free. That's a perfectly reasonable response that shouldn't be taken the wrong way by her.
posted by kingjoeshmoe at 3:47 PM on March 19, 2010

You can also say that you don't want to do referral fees with her because if your customers caught wind, they might think you were referring them to her just for the money and not because you think her services are a good match.
posted by ishotjr at 4:04 PM on March 19, 2010

I understand wanting to help your colleague because I’ve been in the exact same situation, OP. When I just started as a freelancer last year, a few months later a colleague approached me and wanted me to give her have a start to freelancing, too, by having me share leads to my clients.

I also had another experience with this same colleague that surprised me a few months later, and I am sharing this experience as a warning as to why not to recommend this person (especially for money); I subcontracted a projected to this person and made a lot of assumptions (we were former work colleagues in the same field, we did similar projects at the workplace, she had a PhD in this field, etc.) - it was an absolute disaster in terms of the quality of the work, and moreover, I had to redo everything. In retrospect, I am really glad that I did not “recommend” my colleague or give her a referral, as much as I wanted to help her.

I am also suggesting you don’t refer your colleague at this point. Do you know her work ethic? Will she meet deadlines? What is the quality going to be like? If someone gets upset with the quality of her work or the experience working with her, will they view you differently in the future? For this reason, I would not do this.

What support have I offered my work colleague? I occasionally gave her the name of a contact or two (no referral at all – here is the name of the company, find someone there). These were clients that I knew were lower paying and I was weaning myself away from – one of these clients was a great person to work with, and I know he would worked with someone who needed a little more hand holding but was at least trying hard (this person did do that).

I’m going to suggest that rather than do a free webpage, you offer your friend to help her brainstorm, give occasional feedback, whatever. That sort of help is really, really valuable. I have a friend or two who do that for me and that has been 10X more valuable than leads.
posted by Wolfster at 4:08 PM on March 19, 2010

Absolutely say no - in the past I've declined many similar arrangements and never regretted it. It's very common among freelancers and I've seen too many instances where a referral fee clouds judgement - different vendors in the same space have very different strengths and weaknesses, and you want to be able to make the right referral without secondguessing.
posted by mozhet at 4:15 PM on March 19, 2010

Trust your instincts. Politely decline.

I had thought about doing this years ago when I first started freelancing, but I soon realized it presented too many problems. Such as:

-15% of what? Initial work? Every time the client has something done? I have clients I have worked with for years. I would get resentful if I had to write a referral check every time I got paid. And if the fee is just on the initial work, there might be suspicions of sandbagging and saving big projects for later so the referrals don't have to be paid.

-I didn't want to send work to a friend just to get a referral fee, when maybe they weren't the right person for the job. It's my reputation on the line as well when I refer someone. Same goes for them. I don't want to be referred just because I pay; I want the right kinds of jobs for my particular skills.

-What constitutes a "referral"? Giving my card to someone? What if they call me a year later, and don't remember where they got my name?

There was just too much potential for harm to the friendship, so I never did it.

So, I say politely decline. ("Hey, I'm happy to send work your way, and I don't expect anything out of it, so let's not do the referral fee. I think it will all even out in the end anyway."Plus, since you are busy anyway, it would be awkward to turn down the friend's clients because you are too busy, and have her think it had something to do with the referral fee.)

And I don't think you owe anything else in lieu of agreeing to the referral. It's up to you how much more you do for free, of course, but it sounds like you've done enough, and, if your situation is anything like mine, you will end up offering tons of free advice and encouragement over the years to help your friend.
posted by The Deej at 4:30 PM on March 19, 2010 [1 favorite]

You have done quite enough for your friend already. If anything, she owes you a whole bunch of referrals.

Just tell her that you're happy to refer people to her (although, quite honestly, it seems that you yourself have the more marketable skill between the two of you) free of charge.

>>I guess the world works this way, but I wish it didn't.

The world doesn't work that way - everything is based on trusting relationships

I've made networking and connecting the dots my core business competency. I've worked for two industry associations, as well at a government agency where part of my job was to connect the dots.

If I know someone who has a business need, and I know someone who can solve that need, I connect those people (but only if someone has expressed a need for something first).

I'm between jobs at the moment, but I would never hesitate to put people in touch free of charge.

Connecting people builds social capital and helps build community - sustainable small businesses are based on value of a product or service, as well as trusting relationships.

You can't build a trusting relationship on the base of a paid referral.

You want to refer someone because they will actually provide help and add value.
posted by KokuRyu at 4:35 PM on March 19, 2010 [1 favorite]

That's how some people roll, and I can't really say for sure that there's necessarily anything wrong with it. But it's not how you roll, so don't do it. Just say thanks, but no thanks. You don't owe anything beyond that.
posted by spilon at 4:42 PM on March 19, 2010

Maybe I'm a little bit mistrustful but I get the impression your friend is taking you for a ride. First she gets a free business card, then a large discount on a website design with the potential of you doing it for free, then she refers business to you and asks for a cut retroactively, then wants a cut on future business referrals. Really? Seems to be a lot of take here. Not sure she's a friend so much as someone who sees a situation to be taken advantage of. It sounds like she needs you much more than you need her. I've been in this situation before. I don't consider these people true friends, more business acquaintances.
posted by Jubey at 8:59 PM on March 19, 2010

Sounds like your friend is starting their consulting business by reading from the Black-Hat Marketing book. What's next? SEO consulting?

As others have said...Just say 'no' to this plan. It's a black hole just waiting to suck you down.
posted by Thorzdad at 6:34 AM on March 20, 2010

Best answer: You can tell her that you aren't really interested in that type of relationship. If she is actually doing some project management or is the client contact (so you're not dealing with the client), then she can mark up your hours to whatever she wants.

I've been in a similar situation and both parties agreed to drop the finder's fee because it felt icky. If she is looking to create a long-term business that will require graphic design, she should be happy that she has someone in her network that can make her look good to her clients.
posted by dripdripdrop at 8:29 AM on March 20, 2010

I wouldn't do this. I wouldn't necessarily think less of someone who suggested it -- it's not strictly speaking unethical, just kind of borderline. But I still wouldn't do it.

Especially with a friend. Money and friendships don't mix.

(Also, 15% is an awful lot of money for saying "hey my buddy can do that for you; here's her email address.")

Assuming I tell her no, if I could offer some additional way to help her, that might be good.

No. No no no no. This, right here, is why money and friendships don't mix. You don't have to pay her off for refusing her request. Just tell her you're happy to refer business to her when it makes sense, but that you're not comfortable turning it into a financial deal; that's all you need to do.
posted by ook at 8:42 AM on March 20, 2010

Response by poster: Thanks, everyone! I told her that I've never handled referrals this way before and would feel uneasy about starting to do it now. Then I proposed that she offer my services to potential clients and act as the project manager, marking up my fee as she sees fits (as dripdripdrop suggested). She seems to like the idea a lot. I think this is a good solution for everybody, with no hurt feelings, no resentment, and no free websites.
posted by bethist at 1:21 PM on March 22, 2010

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