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referral reimbursement

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6 posts
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Brian Maciej
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Another agency would like to refer potential clients to my firm. Our firms do not typically compete in our marketplace and have actually teamed up on a few projects over the years because our areas of expertise are different.  They would like a more formal policy including a reimbursement if their referral turns into work for us.  I don't anticipate having as much referral work going their way, but it is possible.  I consider their referral work valuable, but do not know how to value it in a percentage or flat fee.

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Mary Fisher
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We pay a 10% commission to a referring company, for the life of the work. Typically it is not another agency.

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lauriekay
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Hi Brian:

I think a percentage is fine; 5-10% of AGI would be preferable so you do not pay commission on outside purchases. If you're going into an agreement I'd make it reciprocal so you get the same percentage for business referred to them. Also, be sure you have the standard clauses in place like confidentiality, non-circumvention, etc. We have some sample wording in the contracts section of the website that you can use, https://www.secondwindonline.com/contracts-agreements

Give me a call if you want to chat further on the subject.

Laurie

610-374-9093

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Andy Jacobs
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Brian:

We also run 5-10% of AGI, typically for the life of the account.  The rub with working with another agency is normally they work with you because they either do not have the full capabilities or scope to handle the work.  So they may want to work the job or account to some extent, as an AE (its their relationship initially), or creatively (because it may be fun to them), etc.  That's where it gets dicey because of clashing representation, of the two companies which may not be comfortable for the account, clashing organizations/culture/workflow, and how the account is billed which can affect AGI if you put labor above the line as a cost of goods.

With situations like that in which we have a steady stream of business, we go for the acquisition of the agency to eliminate all of this stuff and create economies of scale.

Hope that helps.  Call me if you have questions.  516-680-1177

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John Penney
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For a referral where our agency manages all aspect of the account, we offer 5-10% of AGI for 12 months. We do not offer commission paid in perpetuity for referrers who are not actively contributing to the account. Life-of-account commission inevitably adds overhead that does not serve the client well.

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Brian Maciej
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Thank you for the ideas.  I especially like the term limits on the referral accounts because the referring agency provides little value after 6-12 months.  Ultimately, I am purchasing a large book of this business (Andy Jacobs was right-on) and we will see how it goes!

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