I had an interesting conversation in my business last week. I would like you opinions. A person called me up with a referral and told me that she now charges for referrals. I would expect something like 1% of the transaction – and I might think that strange. She wanted a flat fee of $200.00. My average customer pays between $600.00 – $1200.00.
I thought back to the Toilet Paper Entrepreneur (a book I am reading) that states to only do business with people that fit into your moral standards for business. This referral fee is waaaay outside of my business standards – I never charge people I give referrals too – they are always pre-qualified and free to the recipient.
After thinking about it I told her no thanks. I would like your opinion – would you pay for a referal and if you would then what is a resonable fee?
Hi Dorothy,
Great work on the blog. I need to check it out more often.
I think you made a wise choice. I would not accept patients from a referral source that expected some kind of payment from me in return. This would create a conflict of interest and is bad news.
In my field there are actually clinics set up exactly for this purpose. They are PT clinics owned by physicians, usually orthopedic surgeons. This way the surgeons are paying themselves each time they refer to PT. It also ensures over-utilization of PT services and is full of ethical dilemnas.
Hi Dotty,
Nice blog you have here. No…I wouldn’t pay a flat $200 for a referral if your average client pays between $600 and $1200.
Although for other business models it works.
I know a lawyer who pays $90 for every referral he gets because the average return is between 5K and 7K. It makes more sense.
Thank you,
Eric Walker