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If I have a client who needs some work done that I am either too busy to do or that I don't have specific expertise in, I'd like to refer the work over to another freelance software developer who can help them address their needs.

Is it customary/appropriate to ask for a "referral fee" when sending work to another freelancer? I had a freelancer who I wanted to send some work to get insulted when I asked for a 10% fee so I'd like to get some other perspectives.

I know lawyers do this and likely other professions, but is it "different" for software for some reason?

To clarify, this is a customer that I have a long term relationship with so it is in my best interest to only refer someone who is competent and also the fee would be disclosed to the client. I believe that would address any ethical concerns (again, using the guidelines that the ABA sets for lawyers to do referrals, which are probably more strict than what you'd normally see in software).

Canadian Luke
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David Archer
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  • You don't say what you actually provide for said fee. Are you sourcing the freelancer? Briefing them? Providing documentation? Acting as a guarantor? Supervising? –  Mar 17 '14 at 22:51
  • From the freelancer's perspective, I'm handing them a vetted customer who has a project that needs to be done and I'd be working to help facilitate the deal.

    From the client's perspective, I'm connecting them with a vetted freelancer who is competent and would ultimately be at least partially responsible for the performance of said freelancer.

     –  Mar 17 '14 at 23:00
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    In my limited experience, it's more usual to agree to pass work back & forth, 'returning the favor' as it were. If that's not in the cards, you are always busy, maybe it's time to branch out & earning that extra money by outsourcing & supervising it explicitly, making you his customer. –  Mar 17 '14 at 23:02

6 Answers6

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Sole-proprietor, web development LLC owner here.

When I have too much work or jobs that aren't quite in my expertise, I'll generally sub it out to a 3rd party. A bit different than straight out referring my client to the 3rd party because I still play point man and have control over the end result of the project - the 3rd party works for me, I work for the client. My "referral fee" is some small percent above the 3rd party's price, enough to pay for my time managing the project.

If it's a job that I have no interest in managing, I'll generally refer them to a 3rd party "in good faith" that the 3rd party will send some work my way when he/she can. Like you said, there's certain places that willingly offer a referral bonus to you (I know an excellent videographer that'll send me 15% of the project if I make an in-person introduction with the client), but if they don't offer a bonus, are reluctant when you mention it, and you can't find anyone else to refer the client to.. Feel at ease that you didn't have time to work on the client's project anyways.

Also, don't be afraid to tell clients that you're a couple weeks out at getting to their project (say it upfront, don't wait until after they agree to the project). Most people are fine waiting a little while, especially if the outcome happens to go a bit above and beyond the requirements in some way.

  • +1 I think it is far more equitable to charge a fee over and above whoever is doing the work. Enforcing some price on them and then grabbing 10% doesn't seem very fair. The 3rd party should ideally be able to set their own price. –  Mar 18 '14 at 10:29
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The simple answer is YOU are free to do what you want.

I work with a group of freelancers in Toronto and we generally refer business to each other without asking for anything back - when I refer a client to another freelancer, either they are a 'better fit for the job,' or I'm just too busy at the time - but I always make sure I'm putting the prospective client in good hands.

I have, in the past, requested and received referral fees - but I prefer the 'good faith,' 'karma,' 'what goes around comes around,' philosophy.

Here are some helpful ideas:

  1. If you are requesting or giving referral fees, make sure you have a discussion upfront, and agreement, with the freelancers you are working with. This will make sure everybody is working with a common understanding. Get a least a memo of understanding in writing that you can refer back too.

  2. If somebody refers business to you, make sure you thank and keep them in the loop. If you gain a profitable contract through a referral, you could offer to buy the person who referred you a couple of beers, or dinner - or even send them some cash as a thank you - this will keep people keen on referring clients to you (it shows appreciation and keeping good referrals coming is good for your business).

  3. ABOVE ALL: Keep your clients' and prospective clients' best-interests at heart. Never make a referral on the basis that you can make money from simply making the referral. Remember, every time you make a referral, your reputation is at stake too!

Canadian Luke
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NivF007
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In my experience (IT consulting, not developing) referral fees are common practice.

It all depends on the context of course, but from what I've seen this usually happens when an experienced freelancer with lots of work decides to tell his client "I can't do the project, but I know someone who can, he is good".

It's not so much, "give some, get some". People giving you leads do not expect something back in terms of projects, they have plenty.

I got a few projects this way from an experienced freelancer: he refers his customers to me. He worked for these clients, built a relation with them and basically handed me a project without having to do anything for it in terms of presales. The customer I got was also much larger than I usually get on my own and therefore prepared to pay higher fees: I used a good rate for myself, added the referral fee on top and the customer was still satisfied with the price.

Few remarks:

  • I agree to fixed fees per day I work for the client, not percentages
  • These referral fees are linked to a project, not a customer
  • It should be reasonable (obviously perhaps, but still), 10% does not seem unreasonable but it depends on the project.

For me it was simple: without the referral I would have never gotten this client so I was more than happy to pay it.

user3244085
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10%??? I hope you're not walking around dressed up in a cape, stacked heels, bell bottoms and oversized gaudy hat, because it seems you're trying to pimp your colleague!

To sub it out is one thing -- YOU have to do the work to analyze the requirements, make sure the client is qualified to pay the bills, and front money to your subs even if the end-customer isn't paying on time. There's some risk that you're assuming.

But if you're not subbing out the work, why not just ask for a flat referral fee? $100.00? Some FIXED fraction of the value of the job? Or "dinner's on you"? Most of us freelancers are doing what we do because we got tired of being pimped on a 9-to-5, and the mind game that goes on in the workplace is hell to get away from successfully for those of us who dare to try. I probably would have been insulted also. A percentage referral means that you are asking to be a thumbscrew in the other freelancer's side forever.

You can't really compare it with how lawyers work because the whole legal game is for the attorney, when opportunity opens itself up, to attach himself/herself to lots and lots of streams of income by way of their clients -- that's their BUSINESS that they spend all day trying to perfect. No freelancer wants to think that any time the end client calls on the telephone there has to be an added task of sending out another check to the person that referred the work -- the "work" is enough as-is.

Xavier J
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    Getting a project without any effort on presales, presentations, writing an offer etc., you don't think this is worth something? – user3244085 Mar 19 '14 at 19:27
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    I think it'd be more appropriate if the two freelancers already had an agreement to give each other percentage-based referrals. But if one of my colleagues called me out of the blue and told me that he/she had a potential gig for me but demanded a cut for me to hook up with the client, that'd be offputting. – Xavier J Mar 19 '14 at 21:38
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I have to disagree with @codenoire. I always charge such fee. I mean if 90% is not enough for your "friend" for the job that came out of nowhere without him having to negotiate terms, price, etc...and he still complaints! If someone does that to me I would never offer him anything ever again.

The same happens with me. When I am offered to do some job for someone else, I expect him to take his referral fee. As my thank to him for getting me a job without myself having to move a finger.

So you should do like this:

  1. if it's only for referral and you will never have to talk to the client, then 10% is ok

  2. if you will however put your name in front and be responsible for work, mistakes, payment delays, then you should take more percentage since you will actually work a lot in this project as a project manager. even in case the project gets into trouble, you will have to find another freelancer to finish the work.

Peter MV
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30% is pretty typical the industry norm for referrals on contracts. If you're going through a staffing agency, they typically will charge a 30-45% overhead on top of whatever you're getting paid.

30% is the fee Google charges for putting you in touch with an App. 30% is the fee Apple charges for putting you in touch with an App.

A recruiter may charge a flat fee for finding a highly qualified individual such as $50k.

Referral fees are appropriate. 10% is at the low end of referral fees.

mariusp
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