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Referral Fees
Thread poster: Claire Sjaarda

Claire Sjaarda  Identity Verified
New Zealand
Local time: 08:04
Member (2014)
English to French
Nov 21, 2013

Hello there,

I have been approached by an ex-colleague who I used to work with a while back, before I became a translator. He now has his own business (not translation) and receives many translation requests and contacted me to ask whether I would be interested in being referred to providing I pay him a referral fee. I have arranged to meet him next week to discuss his proposal but in the meantime would like to find out about what is acceptable and whether this is something that is done in the translation world. How much should the referral fee be? Should it be a one off fee or a percentage of every project?

If you have any information on the subject I would be very grateful...

Many thanks,
Claire


 

ATIL KAYHAN  Identity Verified
Turkey
Local time: 23:04
Member (2007)
Turkish to English
+ ...
Referral Fee Nov 21, 2013

In my opinion, it is rather selfish of him to ask that you pay him a referral fee. I would not agree to pay him as an old friend of mine. Come on. This is what friends are for. Are you competing with somebody else that he knows as a translator? I would ask him that question. He is a businessman, and you are a businesswoman. You are equal on that respect. Since when people have been charging each other for referrals? Referring somebody is an easy business.

 

Sheila Wilson  Identity Verified
Spain
Local time: 21:04
Member (2007)
English
+ ...
What would you be paying for? Nov 21, 2013

It's an interesting question, and not one I know the answer to. But my personal view is that you can only pay for something that has tangible value to you. If this person is adding value to your freelance translation business by providing you with the majority of your clients, then I suppose you could pay something for the introductions. After all, you'll be able to spend less time/money on marketing. But I would be reluctant to enter into any sort of contractual agreement right from the start. Surely, if you're friends, he can do it for free a few times. If it becomes clear that you stand to make serious money from regular introductions, then that would be the time to start talking about fees.

Surely it could only ever be a one-time payment, a flat fee or a percentage of the value of the first translation, couldn't it? If he isn't a translator, how could he possibly add value to the process of translation? How could he become involved in every job, which he would have to be to know how much money he was owed? He would end up becoming an unwanted overhead - costing more in time and effort than the business was worth. If the client has to send him the work, for him to send to you, then you can forget about any urgent jobs! And regular monthly payments wouldn't work - why pay him when you're working for clients he's never met?

I should also remind him that if he's going to be getting a share in the profits, he also has to accept a share of any losses. If any of "his" clients fail to pay, then that should be his problem, too.

It'll be interesting to hear what others have to say. And it'll be interesting to hear how the discussions with this person go, Claire. Do keep us informed.


 

Preston Decker  Identity Verified
United States
Local time: 16:04
Chinese to English
Re: Nov 21, 2013

Sounds like he's more of an acquaintance than friend? For a friend I would provide referrals for free, but if you're not as close I don't think there's anything wrong with him wanting to make some money off the arrangement.

If I were him I wouldn't take a flat introduction fee, but rather would work as an 'agent' for you, taking a percentage off each project. Assuming that the clients are satisfied with your work, he could do pretty well long term with this arrangement.

So, if the clients are good and will have steady work, I'd aim for the opposite, a flat introduction fee. If you think clients are only going to provide occasional work, then a percentage off each project would probably work best for both of you (since he's not adding anything to the process, I think .005 per word for him would be a great deal for you, and .01 would be acceptable, or you could just tell him your standard rate, and let him take anything above that)

One question for him, and one for you. For him, you need to find out how large the clients' translation needs are. For you, are you a good enough translator to keep the clients at your rates?

If the clients will give a lot of translations, and if he is willing to offer some sort of guarantee (aka installment payments for each of the first 5 projects you receive), AND if you're confident you can translate the material well and keep the clients as long term clients, then I can see paying in the hundreds of dollars for a good contact. If he gives you a client that will pay you 2-3 thousand dollars a year for the next 5 years, 300 dollars is a pretty good investment. Perhaps you could first pay him for one client at a reduced price, see how things go, and if well, pay for more?

Another way to think about this is to compare the potential of the clients he introduces with other possible uses for the money. A membership to Proz costs 120 (?) for a year. Would you be better off spending your money on these introductions, or on memberships, training, etc.? I seem to remember reading on Corinne McCay's blog a recommendation that translators should spend at least 5% of annual translation income on developing their business, and this seems like a reasonable number to me.

Obviously there's risk involved the higher the payment goes, and a lot of this will depend on your own finances. Finally, be very careful about any pledges or statements you make in writing, just in case there is a disagreement in the future.

[Edited at 2013-11-21 16:06 GMT]

[Edited at 2013-11-21 16:08 GMT]


 

Philippe Etienne  Identity Verified
Spain
Local time: 22:04
Member
English to French
Weird request Nov 21, 2013

Claire Sjaarda wrote:
...Should it be a one off fee or a percentage of every project?

Putting customers and providers in contact is certainly a service that holds value, but usually middle men (estate agents, brokers...) play an active part in finding customers or providers. Here, the service you would pay him doesn't cost him any money or effort.

I wouldn't even think of requesting payment for referring my accountant or hairdresser, and I have no experience with such arrangements. but a percentage on every project is how I would handle the situation, with maybe 10% of the job value. At least you would have expenses proportionate to the amount earned, therefore a "shared" risk.

As a minimum, the referrer would be paid only when your own invoice is paid in full.
And I would try to limit the commission to the first job only and/or to cap it to a max. amount per month/year. All possibilities need to be covered in order not to leave a sour taste: rogue customers, disputes on amounts, etc. When money is involved, a relationship can deteriorate quickly.

Your "partner" would also have to be nosy and ask the customer how much you charged them in order not to be cheated. If s/he and you are not bothered with that, then fine.

At the end of the day, it could end up being an easy way to get direct clients and increase exposure (and an even easier way for your counterpart to earn money for nothing). There is no risk in trying if you took protective measures such as above.

You can also tell him that many of your customers have requests in his line of work, and you would be prepared to refer them to him FOR FREE in exchange for the same favour from him.

Philippe


 

Preston Decker  Identity Verified
United States
Local time: 16:04
Chinese to English
Probably would just forward emails Nov 21, 2013

Philippe Etienne wrote:



Your "partner" would also have to be nosy and ask the customer how much you charged them in order not to be cheated. If s/he and you are not bothered with that, then fine.





If this 'ex-colleague' was smart and wanted to take a percentage off each project, he wouldn't even have to be 'nosy'. He could just receive the clients emails, forward it to the translator, and then forward the translator's translations back to the client. The client would pay the ex-colleague, who would then transfer money to the translator. Basically the ex-colleague would just forward emails.

[Edited at 2013-11-21 16:49 GMT]


 

Philippe Etienne  Identity Verified
Spain
Local time: 22:04
Member
English to French
Different perspective Nov 21, 2013

Preston Decker wrote:
...The client would pay the ex-colleague, who would then transfer money to the translator. Basically the ex-colleague would just forward emails.

And basically the ex-colleague would be yet another no-value-added translation broker. In that case there is more work involved from the broker, including monitoring leadtimes, dealing with claims from the customer and chasing payment. I understood referrals as something else, but I may be wrong.

Philippe


 

Claire Sjaarda  Identity Verified
New Zealand
Local time: 08:04
Member (2014)
English to French
TOPIC STARTER
although reluctant at first, it mght be a good way to kickstart my career Nov 21, 2013

Thank you very much for your replies. This person is not a friend, only someone I worked with. He actually contacted me a few months ago and my first reaction was not to give it a second thought as I thought asking for a referral fee was a bit cheeky. Plus I was too busy at the time. He contacted me again this week. I have recently graduated with an MA in Translation and I am only just starting to set myself up, hence why I thought it might be a good way to kickstart my freelancing career. However, I do not want to agree blindly to his proposal

 

Lincoln Hui  Identity Verified
Hong Kong
Local time: 04:04
Member
Chinese to English
+ ...
Sure you don't have to pay - if you don't want him to refer Nov 21, 2013

ATIL KAYHAN wrote:

In my opinion, it is rather selfish of him to ask that you pay him a referral fee. I would not agree to pay him as an old friend of mine. Come on. This is what friends are for. Are you competing with somebody else that he knows as a translator? I would ask him that question. He is a businessman, and you are a businesswoman. You are equal on that respect. Since when people have been charging each other for referrals? Referring somebody is an easy business.

Have you ever heard that the free things in life are the most expensive? The fact that the person is a friend makes it all the more important that things like this are done properly. There is no quicker way to destroy a friendship than to have someone feel that you owe him a favor.


 

Samuel Murray  Identity Verified
Netherlands
Local time: 22:04
Member (2006)
English to Afrikaans
+ ...
Some options Nov 21, 2013

Claire Sjaarda wrote:
He receives many translation requests and contacted me to ask whether I would be interested in being referred to providing I pay him a referral fee.
...
How much should the referral fee be? Should it be a one off fee or a percentage of every project?


Whatever you do, you have to make sure that it is easy to do the administration of it.

My suggestion is as follows: let him refer people to you, and let him tell you whenever he refers someone, so that you and he can keep a record of which of your clients were referred by him. Then, once a month or once every six months or so, you can take a look at which of those referrals actually turned into clients. I suggest you pay him a percentage (say, 20%) of the total amount of money that you made via such a referral for the first six months after he referred the person.

This means that if a referral turned into a non-job or a non-paying job, then he gets nothing, and you lose nothing, but if a referral turns into a very lucrative client, then he gets a sizeable amount of money, for the first six months, but nothing after that.

Some people will not like the idea of paying a referral fee, but you should think about it as a type of advertising expense in which the returns are more certain and carry less risk than with general advertising. Some people will say that your friend should not ask any money, and that his ability to refer people to you will benefit his business in the long run because people will remember that he was helpful to them, but there is nothing dishonest about expecting more immediate returns.

If you're going to share copies of your invoices with him to prove the expenses, make sure it is okay with your clients to share that information (e.g. in your terms of service), or alternatively make sure that he agrees to the clients' NDA or to a generic NDA which would protect your clients.


 

Phil Hand  Identity Verified
China
Local time: 04:04
Chinese to English
It's not standard. Negotiate hard. Nov 22, 2013

I have never been on either end of paid referrals. I much prefer to do it for free.

But there's room for all sorts in this world, so if it works for you, then go for it. But make sure you get something of value. First, work out what he wants and why he's doing this. He may be trying to dump bad clients on you. Steer clear. He may also be setting himself up as a zero-value agent, as Philippe suggested. Steer clear.

But if he can persuade you that what he's doing is reasonable (maybe he's very good and very busy, and would like to monetize some of the clients he doesn't have time to take on?), then negotiate hard, and only pay what seems fair to you.

Remember when you talk to him that he's trying to sell you something, not do you a favour. You're the customer, and you have every right to be sceptical and hard-nosed about it.


 

Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 22:04
Member (2005)
English to Spanish
+ ...
Greedy! Nov 22, 2013

Claire Sjaarda wrote:
He now has his own business (not translation) and receives many translation requests and contacted me to ask whether I would be interested in being referred to providing I pay him a referral fee.

What a good friend! :-/ It is selfish for him to try to make money out of a service he is uncapable of offering or managing.


 

Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 22:04
Member (2005)
English to Spanish
+ ...
Too much Nov 22, 2013

Samuel Murray wrote:
My suggestion is as follows: let him refer people to you, and let him tell you whenever he refers someone, so that you and he can keep a record of which of your clients were referred by him. Then, once a month or once every six months or so, you can take a look at which of those referrals actually turned into clients. I suggest you pay him a percentage (say, 20%) of the total amount of money that you made via such a referral for the first six months after he referred the person.

The method sounds sensible, but 20% is too much! I am sure that if she spent 20% of her working time looking for new customers the result would be much better than paying this referral fee. I think 5% of the invoiced (and collected) amount over a period of six months is very generous.

The agreement would have to include an invoice to be issued on the part of the "friend" so that our colleague can deduct that as an expense.

[Edited at 2013-11-22 06:24 GMT]


 

Michael Wetzel  Identity Verified
Germany
Local time: 22:04
German to English
unusual, but don't know why Nov 22, 2013

Dear Claire,

As you wrote yourself, this is not a friend, but a former colleague and one that is offering you a service that could be very valuable to you.

You would essentially be hiring a salesman to work for you. If he is good, then this would be a good investment in your business. He (claims that he) has something you want - potential clients - and is offering to sell you these. I don't understand why anyone has a problem with that, even if it certainly is very unusual in the translation field.

I would not agree to any flat fee at all and work strictly on a commission basis based on your actual earnings via his contacts (after all, he's not actually a salesman - he is performing a role that is like that of a salesman). A flat fee would mean placing complete confidence in his ability to really provide adequate contacts and you probably don't have any reason to have that kind of confidence about him.

I really don't know how high the commission should be and how long the commitment to pay it should last. However, if he's finding decent direct customers for you, whatever his cut is, you're likely to make more money than you would by finding work with the help of agencies.

I would definitely go into the meeting with clear parameters in mind (minimum prices and deadlines for the clients and a maximum acceptable percentage and length of time that you are subject to pay him his commission) and a commitment to walk away if these conditions aren't met. Then I would let him do the talking. He may propose terms that are more favorable than you would have hoped or at least start things out in a way that allows you to negotiate yourself into a very favorable position.

I don't do anything like this and never have, but I certainly would have done so at the beginning of my career, if I had had the opportunity.


 

Parrot  Identity Verified
Spain
Local time: 22:04
Member
Spanish to English
+ ...
Unusual on this side of the pond Nov 22, 2013

... where anything that makes money is supposed to be reflected in black and white (and declared).

The practical reason we don't usually do this in Spain (as Philippe for one says), is that you end up spending an inordinate amount of time running after and keeping track of fractions of cents. Not to mention you might actually end up changing your official economic activity.

I like being a translator and translating - perhaps too much to actually do this. But if I had a friend who worked well and a job came my way that could be referred to the kind of specialization that friend had, I'd simply give him/her a heads-up, facilitate their e-mail and - to the client - call it the added value of having me on a supplier list.icon_biggrin.gif

Check the implications before you jump in. Would you end up paying the friend's taxes?


 
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