Finder Fee Request

[magictolight.com]

We have a client that refers to us $400-$500 worth of business every year. He owns a handyman franchise and has decided that because he refers business to us that we should mark up our price to the customers he refers to us by 10% and send him a check. We have a referral program in place, movie tickets, restaurant gift card, etc. and I told him that I would have to think it over. Charging our client more than our normal rates without their knowledge so he can get a kick back seems like an issue of integrity. And on top of it this guy is acting like he is a huge part of our business because of his referrals. Of course those referrals might grow if we comply. I need some feed back. Is this normal? Is this right? Should I just comply?

 

[ivsenroute]

If he was a GC that sub contracted you after charging his rates then OK, that is standard practice.

For that amount of work I would tell him no thanks.

 

[480sparky]

He refers only $400 to $500 worth of business per year?

And how many jobs is that? One? Two? I sure hope it isn't three or more.

Cripes, cutting a check for forty bucks isn't worth the time and effort in order to keep such a small-time customer.

 

[ceb58]

If you want to give the guy movie tickets, restaurant gift cards or 10% of the cost of the job from your own pocket. Then fine. But to agree to mark up the price just for him. No. Just tell him you are not into stealing.

 

[brian john]

45-50 percent of my work is from others I tell them I can bill through them and they can mark it up or I will bill directly and NOT MARK it up. Most I bill through them.

While I see nothing wrong what he is suggesting, I would tell him when his yearly dollar value reaches a predetermined level like $25,000.00 or higher you would gladly forward him 5-10%. At $400.00 a year I would not laugh in his face, I would politely fall on the ground grab my stomach and violently shake with hilarity.

 

[growler]

We have a client that refers to us $400-$500 worth of business every year. He owns a handyman franchise and has decided that because he refers business to us that we should mark up our price to the customers he refers to us by 10% and send him a check.

If he wants 10% tell him to get a GC license and start to earn it. What I do for people that will refer me to customers is try to return the favor. I give them some of my cards and I keep some of theirs. If the situation comes up where certain repairs are needed I give out their cards.

This guy sounds like a crook so I wouldn't want to refer him to a customer and I'm not sure I would want him as a reference.

 

[goldstar]

Just pulling the ladder off my truck could cost you about $100.00. He's just looking for another form of revenue. Frankly, I like the Soupy Sales approach. Go on National TV, tell the kids to go into their parents' pockets, find a dollar and mail it in. Talk about a windfall !!!

 

[hardworkingstiff]

I look at this type of thing as what would it cost me to employ a salesman? Typically, I'm of the understanding a salesman runs about 4% of the project if he/she is working full time and all year (bringing in work on a steady basis). A company I used to work for (installing petroleum equipment, tanks, fuel piping, etc.) would pay the salesman 2% of the construction price.

Personally, I see nothing wrong in paying a sales fee. 10% is too high in my opinion. I am willing to pay 5% with a 1099 and have been known to pay 2.5% cash for sales efforts. Now, I also made top dollar on those projects and they were mostly 6-figure jobs.

Edit: My guy did much more than "find" the job, he also sold it behind the scene. A 10% finders fee is high.

 

[Cavie]

We have a client that refers to us $400-$500 worth of business every year. He owns a handyman franchise and has decided that because he refers business to us that we should mark up our price to the customers he refers to us by 10% and send him a check. We have a referral program in place, movie tickets, restaurant gift card, etc. and I told him that I would have to think it over. Charging our client more than our normal rates without their knowledge so he can get a kick back seems like an issue of integrity. And on top of it this guy is acting like he is a huge part of our business because of his referrals. Of course those referrals might grow if we comply. I need some feed back. Is this normal? Is this right? Should I just comply?

I would say no. Just let him know that you refer business to him as he does to you and leave it at that. Is he going to give you 10% of the resoprosity?

 

[rt66electric]

I have a similar customer

I have a similar customer

I have one or two small-time remodlers/contractor/handymen that call fom time to time. I generally hand them my invoice and get paid on the spot. What/how they bill the customer is up to them.

 

[satcom]

We have a client that refers to us $400-$500 worth of business every year. He owns a handyman franchise and has decided that because he refers business to us that we should mark up our price to the customers he refers to us by 10% and send him a check. We have a referral program in place, movie tickets, restaurant gift card, etc. and I told him that I would have to think it over. Charging our client more than our normal rates without their knowledge so he can get a kick back seems like an issue of integrity. And on top of it this guy is acting like he is a huge part of our business because of his referrals. Of course those referrals might grow if we comply. I need some feed back. Is this normal? Is this right? Should I just comply?

He does not seem to understand how business works, I would just ask him how he figured 10% when your entire profit an a small job is usually between 7 to 10% tell him sure 1/4 of 1% would be a good figure and even that is a little in excess. He is the one that is confused and most likely running his business from a cigar box.

 

[Besoeker]

We have a client that refers to us $400-$500 worth of business every year. He owns a handyman franchise and has decided that because he refers business to us that we should mark up our price to the customers he refers to us by 10% and send him a check. We have a referral program in place, movie tickets, restaurant gift card, etc. and I told him that I would have to think it over. Charging our client more than our normal rates without their knowledge so he can get a kick back seems like an issue of integrity. And on top of it this guy is acting like he is a huge part of our business because of his referrals. Of course those referrals might grow if we comply. I need some feed back. Is this normal? Is this right? Should I just comply?

My initial thought was don't sweat the small stuff. Even if you get all the business he refers to you, his cut is $50 a year. $10 a week.
That said, I think there are (at least) a couple of other things to consider.

1. Is it business that you would not otherwise have a chance of bidding?
2. Would the 10% price hike put you out of the running?

 

[480sparky]

My initial thought was don't sweat the small stuff. Even if you get all the business he refers to you, his cut is $50 a year. $10 a week.

That said, I think there are (at least) a couple of other things to consider.

1. Is it business that you would not otherwise have a chance of bidding?
2. Would the 10% price hike put you out of the running?

Maybe more like $1 a week?

 

[Power Tech]

We have a client that refers to us $400-$500 worth of business every year. He owns a handyman franchise and has decided that because he refers business to us that we should mark up our price to the customers he refers to us by 10% and send him a check. We have a referral program in place, movie tickets, restaurant gift card, etc. and I told him that I would have to think it over. Charging our client more than our normal rates without their knowledge so he can get a kick back seems like an issue of integrity. And on top of it this guy is acting like he is a huge part of our business because of his referrals. Of course those referrals might grow if we comply. I need some feed back. Is this normal? Is this right? Should I just comply?

You could be breaking the law. If a person does not have a license. Don't fall for it. You better be the prime directly with the customer. Contracting with and unlicensed person is against the law. What he is talking about is a kick back. In CA kickbacks are illegal. This is common. A guy calls himself an agent. Pulls permits on the customers behalf. As the previous post says, "let him get his GC and earn it".

 

[c2500]

I can tell you that if you were in South Carolina, and the guy was not a General Contractor or Residential Builder, he cannot legally bill for your work. That would mean he subbed work out to you, and that is a no-no for specialty licensed individuals unless it is in the same field they are licensed. (I doubt a licensed EC or residential EC would sub work out)

c2500

 

[hardworkingstiff]

You could be breaking the law. If a person does not have a license. Don't fall for it. You better be the prime directly with the customer.

I believe that is exactly what the OP was doing, contracting directly with the customer.

Contracting with and unlicensed person is against the law.

He wasn't doing that.

What he is talking about is a kick back. In CA kickbacks are illegal. This is common. A guy calls himself an agent. Pulls permits on the customers behalf. As the previous post says, "let him get his GC and earn it".

You and I read the OP differently.

Now we need to discuss the difference between a "kickback" and a sales fee. IMO, a kickback is when the money or favors are given to the person making the decision. Like you were negotiating a job with the city, and the contracting agent recieved money or favors from you to award you the project. In the OPs case, the agent is not in charge of the funds nor the decision of where to spend the funds. Yes, they are able to influence that decision, but that's what sales people do, they influence the decisions of the buyers. It's a fine line between sales fees and kickbacks but I believe it is discernable.

 

[brian john]

You could be breaking the law. If a person does not have a license. Don't fall for it. You better be the prime directly with the customer. Contracting with and unlicensed person is against the law. What he is talking about is a kick back. In CA kickbacks are illegal. This is common. A guy calls himself an agent. Pulls permits on the customers behalf. As the previous post says, "let him get his GC and earn it".

Most sales companies do not have contractor licenses. I get a good portion of my work from profession sales companies.

And contracting with unlicensed persons is called contracting. Are your customers contractors?

All this depends on the amount of money involved 500.00 EWWWW 5,000.00 and it starts to look different.

 

[LarryFine]

It's a fine line between sales fees and kickbacks but I believe it is discernable.

True enough, but, still, to ask him to pad the bill so the extra can be handed over isn't the right thing to do. I'd tell him, "From now on, I'll bill you, and you can do with it what you like."

If I have any reason to ask a higher price for my work, I'm the one who has to sell it, and I'm the one who should reap the rewards. If he wants the extra money, let him do the work for it.


How's that for a bottom line?

 

[mcclary's electrical]

I just quoted a job last week. The gentleman called me to his house to ask for a generator install. Once there he asked me if I would give his neighbor a quote also, But one catch, in return for him getting me that job, he wanted me to "pad" the neighbors bill for $100.00 bucks extra, and knock that off his bill for a finders fee!!
I looked at him and said "How would you feel if he asked me to do the same thing to you?" He realized it wasn't right and wasn't honest.

 

[hardworkingstiff]

My last comment

My last comment

I do my estimates in Excel and my proposal is on a worksheet by itself in the workbook. Once I sent (email) a customer the whole workbook instead of a copy of the worksheet (proposal) copied and pasted into a separate workbook. (I now print the proposal to a PDF and send that so I won't make the same mistake). Anyway, the 5% sales fee (about $6,000) was added to the bottom line of my estimate and he saw it. His response was

"I don't have a problem with that".

I got the job, did it well, was paid on time, and paid my sales guy 2.5% in cash. If I'm a crook, then so be it. I was happy, my sales guy was happy, and my customer was happy.

I guess some of you guys are the only ones not happy.