What's a reasonable referral fee and structure for commercial?

Commercial
1

I’ve been getting some calls to my business, that I don’t provide, or am not foucsed on at the moment.

For example, right now, since my business is young, I’m exclusively focused on buidling my commercial route, so calls that I get for residential, I subcontract or refer to a local competitor. We have an arrangement in place, where depending on my level of interaction with the customer, I receive a piece of the action. He pays me a referral fee, or I bill the customer directly and he writes me an invoice.

Anyway,

Commercial is a different story. I’m not setup to do high rise work, and have little desire to do it.

But just today, I got a call for a potential juicy job with a high rise for a prestigeous hospital. I was invited to submit a proposal.

I can’t subcontract it, because I don’t have the necessary overhead in place, also I don’t want to take responsibility if things go wrong. I’d rather pass it along to a company well suited to do a good job, work safely and manage the risk.

I want to pass it on to a competitor, but get a little benefit for my marketing efforts, yielding such a valuable prospect.

I would want to refer it to the person, but in turn receive a referral fee.

What structure should that fee be placed in, and what should the percentage of the job be?

Sort of a wide open question. If you have any similar arrangement to pass on work you can’t do, but obviously want to be rewarded for getting such valuable leads, please share.

2

How much did it cost you in marketing to get this lead? I would want at least this much back if not more if the job was a sure thing. If it’s not a sure thing then it is hard to put value on that.

Wish I had a better answer for you but at least it’s an answer!

3

This is a tough one Mike. I recently had a property manager ask me to bid on a 6 story condo building. I told them I only do up to 3 stories but would have a trusted high rise company contact them. (I referred a company that had subbed out some work to me last June) Heard nothing back.

I think it would be better in your case to get hooked up with a larger company and find out if they have any leads/referral agreements. Simply giving them a name really isn’t worth much. Any company can get names of property managers just by looking in the phone book. Larger companies also have access to projects in the city so they hear about jobs that they can bid on.

Like I said, the best bet is to get in touch with a few bigger companies and see “what’s the deal?” If I get any more calls like this I won’t just pass it on, I’ll definitely ask “what’s in it for me?”

4

I think you should sub it out.

Make sure they have all the proper insurance and have them sign Non-disclosure and Insurance/Liability forms. They get paid in 30 days, and you get paid within the 30 days…so as soon as your check comes in (example, the 22nd day, write a check the 23rd day to the other company)

I think using creative ideas will make you many. You got the BIG job, so what you can’t handle this YET…but doesn’t mean you can’t get paid BIG yet :slight_smile:

I’ve subbed a couple of large things before, and I was afraid that something would go wrong. Nothing did, but I had it set up like this: If the other company messed something up, I get billed then they get billed from my bill…they signed the insurance waiver so they can clean up their mess.

SOOO there is no reason you can’t Sub it out. Check their insurance coverage and have them sign the proper paper work, and it’s on!

Good luck!
Tell me how it goes

5

Couple things I’ve learned that may help:

  1. Only deal in referrals with people you know/trust. Otherwise theres no point.

  2. Realize that whoever you’ve referred will likely already have been contacted by this same prospect if they are advertising properly. (this has happened a bazillion times to me personally, when guys like yourself sent me referrals to jobs I was already invited to bid on)

  3. Do NOT assume contractual obligations without the proper insurance and liability in place. If you are under contract to complete a high-rise job, but have only basic low-rise insurance and a claim is filed (your high-rise subcontractor drops his squeegee and any one of a million bad things happen), then you are toast. Sure, you can turn around and try and sue the subcontractor that you hired, but your client could care less about the risks you took, and the entanglements of legal nightmares that you now go to sleep with. All they know is that you said one thing, and did another. Tread very carefully on the high-rise liability thing.

That’s why this is not really a viable option, referring high-rise work. Especially in our market (Toronto area), there is very little $ in this particular kind of work anymore.

I know that sounds doomdayish and naive, but this has been my experience over the past 2.5 years or so.

6

That happened to me a lot also. I also referred some commercial to some ungrateful a-hole companies.

I now refer no one… until I find one I like. Too bad some of us are not in your neck of the world Mike, then we would have a solution since some of us are strictly or almost strictly residential.

7

It was someone I trust.

  1. Realize that whoever you’ve referred will likely already have been contacted by this same prospect if they are advertising properly. (this has happened a bazillion times to me personally, when guys like yourself sent me referrals to jobs I was already invited to bid on)

That has happened to me.

  1. Do NOT assume contractual obligations without the proper insurance and liability in place. If you are under contract to complete a high-rise job, but have only basic low-rise insurance and a claim is filed (your high-rise subcontractor drops his squeegee and any one of a million bad things happen), then you are toast. Sure, you can turn around and try and sue the subcontractor that you hired, but your client could care less about the risks you took, and the entanglements of legal nightmares that you now go to sleep with. All they know is that you said one thing, and did another. Tread very carefully on the high-rise liability thing.

That’s why this is not really a viable option, referring high-rise work. Especially in our market (Toronto area), there is very little $ in this particular kind of work anymore.

I was not willing to accept contractual obligations, just to pass on the referral. I’m not setup to do highrise, since I know it’s very serious stuff, you need to have the liability, workers comp, ontario ministry of labour and probably some other stuff, that I’m not even aware of.

I just want to pass on a high level valuable contact, of someone who actually wants a proposal, and is ready to consider bids.

I know that sounds doomdayish and naive, but this has been my experience over the past 2.5 years or so.

I appreciate your experience. It has taught me to not to look at highrise as I once did. You made the “mistake” for the rest of us GTA guys.

8

Np mike.

In the mid-80’s in Toronto, you could make an absolute fortune in high-rise window cleaning, but not now, not today.

9

Since I have no clue, what is the competition like for you high rise guys?

All risk and no reward, that is a tough business.