How can I collect a referral fee when recommending a potential client to another in my field?
I cannot take on any new students (clients) for my music studio right now. How do I make an income from all the referrals I'm giving away???
You cannot take new clients right now but you may be able to take new clients down the road.
I think the best way to go about it, will be to get to meet and personally get to know the owners of the other music studios within a five mile radius from your studio. Develop a mutually rewarding professional relationship first and then come into an understanding that you will be referring business to each another. Then refer the people you cannot take directly to the owners of those studios. Give out more than one name/studio, this way the client will make their own selection and there will be no hard feelings towards you in case the studio is not to the liking of the person you referred.
Trying to make money out of referrals? When will you be getting the referral fee? What if the student started and you got your referral fee but then the student dropped out a month later?
What if they do not give your name when they go into the other studio? How will you know if the person went to the place or registered?
Food for thought!
There was a time that I engaged in referral fees; it was short-lived for a variety of reasons. It sounds as if your practice is very full; I'd say you are not giving anything away (that is, you cannot service these folks anyway). By making a referral you are building good will. How important is that extra income? There will come a time when you seek referrals as well- good will is quite likely to keep that pipeline full.
Hi Dina, I think you should consider making a "channel agreement" with other (selected) providers so that, should they do some work for you, there is an agreement between the two entities that makes collaboration rewarding while free from risk and regret. The main risk in these cases is that you refer someone who doesn't deliver to the expectation of your potential client and therefore damages your credibility.
My channel agreement has the "skeleton" of what should be in an agreement which will enable you to govern the relationship. Obviously not perfect for your need as it is written for a coaching environment, but maybe it gives you some ideas.
Once you have an agreement in place, then a simple referral logbook can keep track of the referrals that go back and forth.
Find a studio that you feel comfortable referring your clients to. Go talk with them and understand what they do, how they do it, so you can confirm that they will treat your clients the same way you would. Then think about negotiating a mutual referral fee. That is, when you're at full open you refer clients to them and vice versa. Plus, it provide opportunities for potential future collaboration. Never hurts to have competitors as partners. Keeps you both informed and "on your toes.".
You'd have to negotiate that in advance with the recipients of those referrals. Maybe they'll agree, maybe they won't. But you should have no expectation of getting paid without prior agreement.
Consider working on agreement between those in your field that you know and are sending referrals. Start with a basic agreement that works both ways and then build on that agreement as you expand your circle of influence. A morning coffee and snack on the way to work that includes conversation with people you may consider entering into such an agreement is a good way to create the discussion.
Hi Dina, I have found for me I ask the people and businesses your are referring to if they are interested in referrals (I bet they yes) and then you could ask what ti is worth to them if a referral makes a purchase. Then let them know who you are and what you do and why might refer business to them.
Inform the other studio you would like to send clients their way. Then negotiate a referral fee, and have it in writing. Once you guys agree, draft a contract and have it in place.
Though I have never dealt with such a situation, if I were to put myself in your position, I'd negotiate with other studios on a small fee for diverting traffic to them.
Work with a Partner you can TRUST very important and set out the guidelines and expectations so there are no surprises......
What a wonderful problem to have, Dina. You've gotten great advice about setting a fee and having a contract. I want to help you build your relationship with your referral partners.
Most of these arrangement fail because the expectations and responsibilities haven't been discussed in advance. Before you approach your potential partners get clear on these questions:
1. What is the most critical thing you give your music students?
2. Can your partner offer that or something similar?
3. How do you want your students to feel working with another studio?
4, What will you do if a student is dissatisfied with the referral
5. How do you want to be paid and on what frequency?
6. How will you publicly talk about each other?
7. What happens if there. Is a dispute?
8. What happens if the partner fails to pay?
Referral arrangements demand a lot of trust between partners because you are essentially vouching for your partners quality experience. Make sure the person feels good to you.
As for getting paid, well, I'd track the referrals sent over the month, then send an invoice for the amount. Your partner can adjust the number for those who didn't join the studio and pay it via PayPal or Dwolla.
My question for you is, have you considered adding more staff instead of farming the work out?
I would google company who take on clients for the over flow and scroll to the but tom of the page and become a affiliate if they have one and if they dont then find another company.
Some industries prohibit this, usually licensed professionals. That said, if you are good and develop good business offering to do it for those who need more should be easy. Develop arrangements in advance and formalize them.
Are you referring locally or long distances? This makes a difference.
In general, determine your structure of referral fee. Is it one time payment? Is it as long as the instructor has the student? What happens if the student does not hire the instructor?
If long term referral agreements, the most important factor is determine if the other party is honest, trustworthy, ethical, not starving.... In long term, you're looking for a very good person. My opinion is that most people, in the long term referral contracts, will weasel something in the agreement. My opinion is also a high percentage will simply breach referral fee agreements.
For example, you can write the contract that referral pays first 2 student sessions in full to you. Here, the honesty is less important.
Or you can write the contract that the referral pays 10% of first year of lessons. Here, the honesty and bookkeeping are very important.
How to check-- when you refer, you have the students information? Then, just contact the student. Or, write in contract the referral send you monthly report and check, as part of the agreement. Contractually force them do the bookkeeping.