I'm an independent software consultant who is looking for referrals.
I've paid for referrals before and have noticed that sometimes I was happy with the price and sometimes I was not. For example, if I get a $20k project, paying 10% ($2k) seemed somewhat fair and the the referrer made a significant amount of money for making an introduction. But when the price goes into the higher 5 or even 6 figures, I kind of feel that I'm overpaying.
Here's my take on it; with a referral, you've basically split the sales role into 2 parts, the lead and post introduction (meetings, presentations, contracts, etc...)
So if the total sales role would earn say 15% (or even 20%), then giving the 10% for the referral seems ok when the remainder of the sale is simple, but when the project goes into the 6 figures, suddenly you're talking about a lot more post introduction work.
So having a flat percentage commision just seems wrong. But at the same time, I don't think it's appropriate for me to cap it, since I want to encourage 6 figure projects.
I came up with a sliding scale where the referral percentage would start at 10% and as the total increased, it would gradually slide to 1% for anything over $100k.
Up To $20k yeilds 10% Commission From $20k To $30k yeilds 9% Commission From $30k To $40k yeilds 8% Commission From $40k To $50k yeilds 7% Commission From $50k To $60k yeilds 6% Commission From $60k To $70k yeilds 5% Commission From $70k To $80k yeilds 4% Commission From $80k To $90k yeilds 3% Commission From $90k To $100k yeilds 2% Commission From $100k Plus yeilds 1% Commission
So a $12k project would pay $1,200
A $37k project would pay $3,460 ($2k for the 1st $20k, $900 for $20k-$30k, $560 for the remaining $700)
And a $130k project would pay $6,700 ($2k for the 1st $20k, $900 for $20k-$30k, $800 for $30k-$40k, $700 for $40k-$50k, $600 for $50k-$60k, $500 for $60k-$70k, $400 for $70k-$80k, $300 for $80k-$90k, $200 for $90k-$100k, and $300 for the remaining $30k)
After writing that, I have to wonder if going to 1% is too low. Maybe I should stop at 4% or 5%.
I've bounced this idea off one person (not a sales person) who wasn't crazy about the idea.
What do you think?
How much is a fair amount to pay?
2 more things:
- I want to be fair.
- I do cap the time period to 1 year.