Would you pay someone if they could introduce you to a new client?

[mrsdoc]

I've been contacted by someone who is interested in some of my products. He also supplies to a large mutiple. He wouldn't be buying my products to supply to them, more to his local retail contacts. But he could introduce me to the multiple. Would this be something that you can put a price on? If the multiple doesn't order then it's not really worth anything. Would you say that if the multiple ordered then you'd be happy to pay an introduction fee?

 

[NickGrogan]

Yes pay commissions to people who introduce us to clients, people who bring us clients who are looking to save money, and people who sell for us.

Why wouldn't you?

 

[mrsdoc]

It's not that I wouldn't, I just don't know what the amount would be - a flat fee or a %
If the multiple ordered from me I'd be over the moon. Just don't know what figure you'd put on this or if it was based on year 1 sales or what.
Also, the person in question hasn't suggested a figure and I don't think that they are sure of what to ask for. Want to be fair to both of us.

 

[NickGrogan]

We pay a % of the order value, for the life of the customer - not just year 1.

Your % will depend on your margins, and how strong the introduction is. I.e. is it just a contact name and number or will he attend the meeting and close the deal, etc.

Happy to discuss by PM if you prefer.

 

[Excel Expert]

One thing to consider when negotiating a fee or a percentage with him is how likely he is to refer even more business to you afterwards. If you don't pay him enough he may look to share his leads elsewhere, if you pay him enough he may actively start to find clients for you.

If he is employed by another company you have to spell out that you can not accept responsibility if his employers end up sacking him for effectively moonlighting.

I've paid people for leads in the past at around 10% - but that is tailored for me business. I calculated how much to pay based on what it costs me to acquire clients.

 

[AllUpHere]

My advice to clients on this subject always depends on the type of business. In a scalable business (most often product based ones) paying a fee can work very well as your income is not limited. However, in contrast, I would rarely recommend paying for leads for a small service based business, as they will effectively reduce their income by doing so.

 

[mrsdoc]

Well, he is self employed so no fears re his employer.
Are you paying 10% for the lifetime of the customer? Or just the first year.
Also, if I get an introduction and the multiple starts buying my papers and then further down the line they take other lines off me, do I pay the commission on everything.....I'm guessing yes.

 

[NickGrogan]

Yes, pay we commissions on all sales from that customer, for ever. Works in energy, construction, fashion and recruitment.

 

[Excel Expert]

@mrsdoc - My service is very bespoke and is mainly made up of one-off jobs, so it is normally just for the one job. Where a job has been expanded and become more valuable I have increased the payment accordingly.

When a client comes back for more work it is normally a year or two down the road and I don't pay anything to the referrer.

If I thought someone was going to be able to bring in lots of work, I would probably consider 10% for the first year, 5% for the second year and then nothing for the 3rd year onwards. I think if you kept it at 10% for the life of the client they would get to the point where they don't need to pass you any more leads, they can just cruise on the commissions being already paid.

I have to be honest their wasn't a lot of science in picking that 10% figure. When I agreed to it I knew that my sales normally cost me roughly 8-10% to produce. It seemed logical to pass that saving on