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Referral Fees

by AustinSEOFreelancer
8 replies
I'm thinking about offering some type of referral fee for those who refer me business.

I wanted to know if anyone has had success with this? and if so if you have any tips for us thinking about offering referral fees?
#fees #referral
  • Profile picture of the author David Miller
    I would and have offered 10% in almost all cases. It's a pretty fair number and most people are really appreciative of it. Once in a while you'll run into someone that tells you he's got a million great contacts and he can get you tons of business.

    This guy is going to be your worst nightmare if you set him loose. This is the guy that's going to spend too much of your time trying to cut deals with you and it will all come to nothing. Just tell him 10% and don't even imply that you would work anything out with him in the future.

    On the flip side, it's not unusual for some people that you never expected to, turn out to be full time salesperson for you. That's happened to me a few times over the years.
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  • Profile picture of the author Seantrepreneur
    We do referral fees to some folks, but we don't get a ton out of it. We actually found tho by building solid business relationships that the ppl that we don't offer a referral fee actually refer more business to us.

    I'm not a CPA but I would suggest checking into your states tax regulations. Uncle Sam is going to want to get paid on that money.

    Sean
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  • Profile picture of the author AustinSEOFreelancer
    Thanks David! I'd like to avoid that guy if I can. I never really thought about paying taxes on money dished out. I'll have to look into that. Thanks Sean for the heads up!
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    • Profile picture of the author David Miller
      Money you pay for referrals is a cost of doing business. It's a tax deduction and you can never have enough of those!
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      • Profile picture of the author RobbieT
        Originally Posted by David Miller View Post

        Money you pay for referrals is a cost of doing business. It's a tax deduction and you can never have enough of those!
        Hi David,

        I guess if it's paid through the business then the receiver should declare it in his taxable income.

        If there's not a lot involved should it be a cash payment ??

        Take good care of those that you love.

        Robbie T
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        • Profile picture of the author David Miller
          If you pay someone over 600 in a calendar year, you should give them a 1099. Regardless of the amount what you can do is keep a record of what you pay to various people as an advertising expense. This is a deductible business expense.

          How the person receiving the money handles their taxes is not your problem and you have no reason to be involved.

          1099 is US of course.
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          The big lesson in life, baby, is never be scared of anyone or anything.
          -- FRANK SINATRA, quoted in The Way You Wear Your Hat
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  • Profile picture of the author RichardDin
    Give you customers coupons, each with unique number, and write that number and customer data, so when someone goes to you, you can identify who is a refferer. That'a a working system I saw in clinics, where doctors are recommending pills, giving away these coupons.
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  • Profile picture of the author wiseme11
    Of course you can give referral fee to those who bring you customer. You have to make it clear the referral fee is paid upon successful of each deal or each time they provide you a name list or reference. You can declare this expenses in your business accounting as commission or to make it simple, you give it from your own income and it is depend on them to declare with tax dept as income or not.
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