When Should You Charge a Referral Fee? (And How to Do It)Apr 05, 2021
Especially as you build your business, it’s challenging to navigate what types of fees to charge (and when to charge them!). Factor in knowing how to go about charging a referral fee and the whole process becomes pretty overwhelming.
I’ve been running a successful PR agency for over 16 years, so I have experience on both sides of the referral fee coin.
With a bit of guidance, you don’t have to feel overwhelmed by determining whether you should charge a referral fee or not.
Should You Charge A Referral Fee?
When you’re deciding whether to charge a referral fee or not, it kind of depends on which side you’re on. Are you the one giving the referral, or are you receiving the referral?
Let’s dive a little deeper into charging a referral fee when you’re the referring party or the recipient.
What To Do When Referring Clients To Others
On my end, I never ask for a referral fee when I refer clients to other PR providers. I never ask for a fee because I want to help out my community and the prospective client, especially if it’s not a fit for me. Everyone wins if you don’t charge a referral fee!
It brings me so much joy connecting a client (who isn’t the right fit for me) with another PR professional. In fact, in The Agency Accelerator Plus program, we find, vet, and refer clients to agency owners in our community.
For 16 years, I’ve been giving referrals… and I’ve never asked for a referral fee.
I’ve built a network of people I call my “bench.” I can always refer clients to these experts who have similar niches, agencies, and expertise.
But not everyone has my same attitude.
Sometimes, PR pros charge a flat referral fee of 10% for the first year. The fee should never extend past one year of service. One year is reasonable, but if a client renews at that point, it’s due to your results (not the initial referral).
What To Do If You Receive A Referral
If I’m the recipient, I will buy a gift for the referrer (and I’ve received gifts, too). This is a really simple way to say thank you.
If you receive a referral, I personally don’t think you should pay a referral fee… honestly, it’s an awful experience!
When I first started my agency, I ended up paying out a referral fee to someone who referred a client to me. It was awful knowing that someone profited thousands of dollars off of my work.
On the other hand, sending a gift helps you build relationships and show gratitude. And even better, you won’t be giving away money long-term!
The Bottom Line On Charging a Referral Fee
The most important thing to remember is that we get from the world what we put out. When it comes to charging a referral fee, you should think from the perspective of how you’d want to be treated! Personally, I don’t believe in charging referral fees. When I receive referrals, I’ll always send a gift—but I don’t believe in paying referral fees either.
As you build your business, remember to give from your heart.
I’ve spent years building my agency. But I share all of my strategies and advice openly in an incredible community of PR pros. As entrepreneurs, we are here to build each other up as we build our businesses.
And one of the best ways to do that is to share the love!
Keep that good karma and belief system in mind when thinking about referral fees.
Why Are Referrals Important, Anyway?
In the end, client referrals are something that shouldn’t be expected but are always appreciated. Referrals from current or past clients are the most effective way to grow your business and generate leads.
Referrals make a huge difference. But when you’re asked to pay huge referral fees, you aren’t building the reputation (or the business!) you really want.
Just remember, everyone benefits when you give from your heart.
A referral fee might sound desirable if you’re giving referrals, but is it worth it? Does it serve the type of business you truly want to grow?
Charging a referral fee is something that’s weird to navigate, especially as you start working to grow your business. As I’ve built my agency from the ground up, I’ve never charged a referral fee. But I love giving referrals to those in my community!
I come from a belief system that there’s enough business for all of us—and that when we support each other, we all win. That’s why I’ve worked so hard to build a community of supportive PR pros who share advice, tips, and encouragement.
Stay away from charging a referral fee… you’ll see how much good comes back around when you give without expectation!