8 ms·

Ask HN: A friend introduced me to a client, now he wants a 25% cut

26 points by thrwwwy123 7y ago

I work as an independent software consultant in a somewhat specialized area. A friend recently introduced me to the founders of a company that are looking for help in this area. It's interesting work and I want to pursue it. However, my friend is insisting that I bill his company at my rate of $X/hr, and he bill them at $1.25X/hr. The client appears to be fine with the rate he quoted them. I understand that business is all about relationships, and I want my friend to be compensated for the value that he's provided. However, this seems pretty steep to me, especially if it turns into a long term engagement. In my experience, recruiters usually charge a one time fee, but his reasoning is that he's more of a staffing agency than a recruiter. While theoretically I should be content with earning my rate, this has also made me realize that I should be charging more. One possibility I'm thinking about is that we engage under his terms for a short term initial contract, after which point I start billing the client directly, either at my current rate or at his. However, I'm not sure how this might be received by both the client and my friend, nor what the norms are in this type of situation. What does HN think? What is the value that a staffing agency provides to justify their cut? Is my friend being reasonable?

sarcasmatwork 7y ago
Value depends on the user, and the ones that benefit from the arrangement imho. Counter offer with something lower? Make sure contracts are signed when an agreement is made.
- thrwwwy123 7y ago
  Just to clarify, are you suggesting that I offer the client to bill them directly at a lower rate right off the bat? My friend would not receive this well, since he would get nothing from the introduction, and he probably not refer me to something similar in the future. Do you think my friend is being unreasonable?
  - segmondy 7y ago
    You're being unreasonable.
svennek 7y ago
I think that his cut is about normal, I have heard of higher and lower. Both short and long term... I think you are going for a world of hurt, if you try to cut him out later. My advise, in the contract with your friend make sure, that HE is listed as your customer (and not the end customer) and hence that HE has to pay you regardless of what the end customer does (i.e. he cannot say "I didn't get paid, so neither will you"). If he barks, then you have some room for negotiation... Also for a long term engagement 25% is a rather cheap sale (which is even free (in monetary terms) for you)!
- thrwwwy123 7y ago
  Thank you for the perspective, and for the suggestion regarding terms! Regarding 25% being cheap, can you clarify what is standard in this type of situation?
  - svennek 7y ago
    I don't know of enough to know "standards", but I have heard percentages around 25% before. It might be a little on the high side, but everything is a negotiation ... And I know what it cost my company to sell long term consultancy contracts... Don't get blinded with what he earns. If he consistently gives you work for the next decade or so, be happy :) (That happen to a acquaintance of mine)
- ddingus 7y ago
  This: >My advise, in the contract with your friend make sure, that HE is listed as your customer That is a reasonable margin, but only when your friend is willing to earn it. Paying for value now will serve you later. Then, yes! Up your rates for work you source. Leave the margin there for work brought to you. Find enough, and form a firm. That is where the real money is for both of you. Seems like your friend is already thinking along those lines. Join him, bring others to the party and make similar deals. This will leave you and your friend as peers, a great basis for establishing a firm. Invest in your networking with your time freed up by other people taking on work. Bank some money so you can offer similar value to others.
Fr33maan 7y ago
While you could increase your rate, I feel it's fair as your friend company is billing his client for the entire period. For me it feel like your are employed by your friend company. 1.25x is really low then. If he just introduced you to the client then it's not his company who should bill the client but yours. In this case it's your client and your friend just get a commission, 25% seems then pretty high. I usually give 15%. But what I understand is that the business relationship is between the client and your friend, it's not your client.
- thrwwwy123 7y ago
  Regarding who the business relationship is between: I've never worked with the client before. But as far as I know, neither has he, beyond introducing me to them.
mdorazio 7y ago
Consultant here. 20% cut is pretty normal. 25% is a bit high, but not excessive. Also, no, recruiters often don't charge a one-time fee anymore - they will often get an initial fee plus a percentage of the employee's salary if they stay for a full year. To your next point, what you're describing about going direct to the client is not only likely a breach of contract, but also generally a dick move. If you want to get 100% of billable with no sales/subcontracting commission, find your own client.
- thrwwwy123 7y ago
  > To your next point, what you're describing about going direct to the client is not only likely a breach of contract, but also generally a dick move. We haven't signed anything yet. I wouldn't go direct to the client immediately, but rather let him have his cut on the initial engagement. After that point, I feel like I would have more of a relationship with them than he does. > Also, no, recruiters often don't charge a one-time fee anymore - they will often get an initial fee plus a percentage of the employee's salary if they stay for a full year. Just to clarify: this isn't a full time engagement, but a short term hourly contract, with potential to extend to long term if things work out. > If you want to get 100% of billable with no sales/subcontracting commission, find your own client. This is what I'm struggling with. What does it mean to find a client? Is it the case that as soon as there is someone performing an introduction of any sort, they are entitled to an ongoing fee?
  - mdorazio 7y ago
    It seems like you're thinking about this in terms of perceived value fairness instead of objective if/then outcomes. If your friend hadn't brought the client to you, you would get exactly $0 from them. Ever. 80% of a profitable amount is a hell of a lot more than 80% of nothing. If you've never actually landed a client yourself, it's a lot more difficult than you're likely thinking it is. I highly doubt this is merely an introduction based on nothing - more likely your friend has been working his network for a long time, vetting potential people who need work done, ruling out the ones that can't or won't pay a decent rate, setting up a business and all the contracts you need beforehand to make it easy to get started, etc. You're also probably not accounting for the fact that being a subcontractor has a lot of benefits. You're not that one that needs to chase POs, AP payments, renewals, etc. on a regular basis. To your last question, it tends to be a spectrum in practice. A casual introduction that leads to a deal with no actual involvement from the salesperson will have a lower rate (possibly one-time) than one where the person is setting up the whole deal and subbing it to you. In your case, your friend already quoted the company a rate and they're ok with it, so this isn't a casual intro - he basically did the hard part for you.
davismwfl 7y ago
I have built two successful consulting groups, while some people here are saying 25% cut is normal that is astronomical in my experience for what he is providing. I would never agree to that rate just for an introduction, 8-12% is more reasonable for an intro and payable only when the client pays their invoice. If your friend is doing some work and on-going management or something than that's a different story and this may all be very fair. But if he is literally just making an intro and then now saying you have to sub-contract from him that is odd to me and for me and has red flags all over the place. Essentially it seems like he wants to control the client relationship and just have you do the work, there are a lot of potential downfalls here. For example, if you aren't talking directly to the client and instead he is playing middle man you may get a bad wrap from the client because your friend doesn't understand something properly. That client then talks to other potential clients and next thing you know you are taking a hit for your friends behavior. If he is letting you have direct access to the client and he literally is just billing, his 25% is insane. Other downfall is if you don't control the client relationship how are change requests going to go? Is he going to properly represent them? How is billing going to be handled, they pay him net 30 and you wait again to get paid so you now risk 45-60 days of non-payment? Is his company big enough you can feel confident he'll pay you timely and properly? If things go south, is his company large enough to compensate or protect you during a legal suit? Is he carrying all the proper insurance? This just has so many red flags to me. Essentially IMO your friend is taking advantage of you by introducing you to a client he knows (maybe does business with regularly) and he knowing you charge too little is jacking your rate to something more reasonable and taking the difference. With friends like that you don't need any enemies for sure. I usually introduce friends to clients for free because it is good business to make sure clients stay happy and my friends find work. Plus if a friend fucks up I am not on the hook for their screw up, just for the intro which I can manage around. For people I don't know or that are just acquittances, I'll do intros but I do take a referral fee paid as they are paid from the client. Only time I take money for an intro when a friend is involved is if I need to get involved or the value of the contract would be such they can afford to pay a fair referral, but I'd never ask for 1/4 of the value even if I told them to charge 1.25x more. Don't compare to staffing agencies, that isn't an accurate representation unless that is the business your friend is in.
- 7y ago
cascom 7y ago
I don’t understand why you care if you are Still getting full billing? E.g. list is $100/hr and you are still getting $100/hr net...
rat9988 7y ago
I have a hard time understanding how does his rate affect exactly your situation.
yabadabadoes 7y ago
In my market, most consultants bill the customer directly and pay 20% of the first 2 years to each other as finding fee for introducing a new customer. When they subcontract in the fashion you suggest, it is more about keeping the relationship and looking like more of a one stop shop. It's really not a good way for them in terms of numbers and responsibility. I would raise my prices on future business to 1.25x or try 1.5x given the indication the market supports it, and so I could pay fees and costs of finding new customers from my standard rates. I would look to negotiate something that would work in future business in both directions (assuming your friend also does some consulting) making it clear that the more the deal looks like subcontracting the more likely it is a one off deal.
- aksss 7y ago
  > it is more about keeping the relationship and looking like more of a one stop shop. IME, it's often about the customer trust relationship and convenience. The customer doesn't want to deal with 10 W-9s and managed 10 new vendor relationships, and they trust us to source the other work and warranty it. A good analogy would be a GC in construction.
  - yabadabadoes 7y ago
    > A good analogy would be a GC in construction. Yes, and a GC is very much on the hook, dealing with communication and looking to make as much as any subcontractor on the project even if that is by taking a small percentage from each. If a project amounts to work by one subcontractor, I think a busy GC doesn't make an offer.
spraveenitpro 7y ago
Offer him a starbucks gift card.
cityzen 7y ago
how much time have you wasted thinking about this? Is it worth it? after over 20 yrs of being independent, any engagement that starts out with drama will end in drama.
saluki 7y ago
If you're getting your full rate, let your friend enjoy marking up your services. Make sure he's paying you promptly though, not paying you after he waits for the final client to pay his invoice, so specify he's your client in the contract and that he's comfortable paying your invoices in a time frame you expect not dependent on the final client paying his invoice. Maybe he will bring you other engagements, you could even outline this in your contract with him that he will actively market you to his network. Finding projects isn't trivial, it's mainly relationships and who you know. If he can keep bringing you projects I'd enjoy the ride. Maybe let him know that for future engagements like this you're increasing your rate if you think you need to increase it.
- brudgers 7y ago
  The standard rate doesn’t include a premium for the nonstandard conditions.
aksss 7y ago
If he's the one managing the relationship, doing the end-customer billing, it's perfectly normal to have a markup, especially if it's for a short-term engagement. He owns the relationship and is subcontracting you to perform your service. A referral fee would be appropriate if he was handing the customer off to you for direct billing and leaving you to manage your relationship directly. In essence, he's also warranting your work (which means he's bearing risk). Don't be so quick to say that this means you should raise your rates. If you did, he might not sub work out to you anymore and you'd lose the advantage of having people like him finding you work (which is a cost you'd need to bear). We have worked with subcontractors like this where they see us marking up their service and think they should raise their rates to what we're billing. That's the wrong response, because I can't then mark that up further. It just means we're going to find someone else to do the work for the rate we need. Ultimately, maybe it would be good to consider a higher bill rate for direct engagements and a lower bill rate for subcontracting jobs, and in the meantime try and move more of your business into direct engagements. But again, this takes work and will cost you, but at least you derisk the approach by continuing to get business (and build reputation) through subcontracting.
Spooky23 7y ago
I did something like this once and was able to have the middleman pay me upon customer acceptance of the time card. I benefited from not having to deal with the receivable. There was also the ability to push off business issues to the middleman and avoid mixing money with the technical work — which was hard for me at that stage of my career. If you think this may turn into longer term work, negotiate a compromise. Maybe you pay your friend for a year, for a particular project, or something similar.
brudgers 7y ago
Your standard rate does not include the overhead created by the more complex relationships. Your standard rate doesn’t apply a discount for the lower probability of future work when you don’t own the client relationship. Your standard rate does not include a risk premium for the increased chance of payment problems, law suits, and misunderstandings. If you think it’s bullshit, then it’s costing you. Here you are on HN fooling with “the deal” instead of doing billable work. And it’s just the honeymoon. It takes a while to learn to trust your gut. It takes a while to learn avoiding bad projects is important. If your friend can find someone else should you take a pass, then your friend can find someone else for the client’s next project, too. My gut is “the deal” isn’t in the client’s interest. But I could be wrong. The test is your friend getting the client to sign a contract paying 25% of whatever the client pays you. That’s the test of a win-win-win. Good luck.
codegeek 7y ago
Everything is fair in business. Your friend has a right to ask you for whatever cut he thinks is reasonable. You have the right to negotiate that. It is simple. But make sure you don't undercut/undermine your friend. I would just say "Hey 25% is a bit high and I would like to give you x% instead". You may now think that your friend is not really adding a lot of value by a simple introduction but if he had not introduced you to the client who probably are going with you due to the referral, you would make $0. That is how business works. Referral and Networks is the key and try not to burn bridges with anyone.
deleted 7y ago
[deleted]
Mikeb85 7y ago
If he's marking up by 1.25x, he's actually only taking 20% of the total (0.25, his cut, divided by 1.25, the total charged, is 20%). Dunno, it's probably not too bad. And it is his client after all...
rajacombinator 7y ago
Your friend is in the wrong here for not discussing terms up front. Maybe an honest mistake by him. Tell him whatever you’re comfortable with and walk otherwise. But this “friendship” is likely over regardless of the outcome.
TaylorGood 7y ago
I give a 25% referral fee standard and bake it in on the backend. Value based projects have plenty of "margin" where I am happy to share the profit. That business wouldn't have happened otherwise. Does his company regularly practice "finder" services?
kanchan-sales 7y ago
Let your friend enjoy too!
muzani 7y ago
I've done an 80% cut from someone who intro'ed me to a major telco. Sometimes the value of the job is not just the money, but also the connections. He charged them a ludicrous price, but also paid me well. It depends a lot on his role. I'd be happy to pay up to 50% to someone who acts as a full time agent, dealing with negotiations, client filtering, writing and proofreading contracts, harassing them for payment. They have to eat too. Unfortunately, most people who take this role don't do it very well. But as a pure referral fee, 10% seems fair.
chrisbennet 7y ago
Consultant here, some data points: 30+ years experience, consulting prob 10+ years If they are paying you on a timely basis (not waiting until they get paid, pay you even they don’t get paid). * Yes, OK even if they take up to 100%+ Intro and nothing else: I try to give these away. Your “friend” is trying to exploit you in my view. Intro and nothing else: If he won’t let me take nothing. (He’s stretched or otherwise needs financial help) I’d give him 20%.

26 points by thrwwwy123 7y ago

sarcasmatwork 7y ago

Value depends on the user, and the ones that benefit from the arrangement imho. Counter offer with something lower? Make sure contracts are signed when an agreement is made.

thrwwwy123 7y ago
Just to clarify, are you suggesting that I offer the client to bill them directly at a lower rate right off the bat? My friend would not receive this well, since he would get nothing from the introduction, and he probably not refer me to something similar in the future. Do you think my friend is being unreasonable?
- segmondy 7y ago
  You're being unreasonable.

svennek 7y ago

I think that his cut is about normal, I have heard of higher and lower. Both short and long term... I think you are going for a world of hurt, if you try to cut him out later. My advise, in the contract with your friend make sure, that HE is listed as your customer (and not the end customer) and hence that HE has to pay you regardless of what the end customer does (i.e. he cannot say "I didn't get paid, so neither will you"). If he barks, then you have some room for negotiation... Also for a long term engagement 25% is a rather cheap sale (which is even free (in monetary terms) for you)!

thrwwwy123 7y ago
Thank you for the perspective, and for the suggestion regarding terms! Regarding 25% being cheap, can you clarify what is standard in this type of situation?
- svennek 7y ago
  I don't know of enough to know "standards", but I have heard percentages around 25% before. It might be a little on the high side, but everything is a negotiation ... And I know what it cost my company to sell long term consultancy contracts... Don't get blinded with what he earns. If he consistently gives you work for the next decade or so, be happy :) (That happen to a acquaintance of mine)
ddingus 7y ago
This: >My advise, in the contract with your friend make sure, that HE is listed as your customer That is a reasonable margin, but only when your friend is willing to earn it. Paying for value now will serve you later. Then, yes! Up your rates for work you source. Leave the margin there for work brought to you. Find enough, and form a firm. That is where the real money is for both of you. Seems like your friend is already thinking along those lines. Join him, bring others to the party and make similar deals. This will leave you and your friend as peers, a great basis for establishing a firm. Invest in your networking with your time freed up by other people taking on work. Bank some money so you can offer similar value to others.

Fr33maan 7y ago

While you could increase your rate, I feel it's fair as your friend company is billing his client for the entire period. For me it feel like your are employed by your friend company. 1.25x is really low then. If he just introduced you to the client then it's not his company who should bill the client but yours. In this case it's your client and your friend just get a commission, 25% seems then pretty high. I usually give 15%. But what I understand is that the business relationship is between the client and your friend, it's not your client.

thrwwwy123 7y ago
Regarding who the business relationship is between: I've never worked with the client before. But as far as I know, neither has he, beyond introducing me to them.

mdorazio 7y ago

Consultant here. 20% cut is pretty normal. 25% is a bit high, but not excessive. Also, no, recruiters often don't charge a one-time fee anymore - they will often get an initial fee plus a percentage of the employee's salary if they stay for a full year. To your next point, what you're describing about going direct to the client is not only likely a breach of contract, but also generally a dick move. If you want to get 100% of billable with no sales/subcontracting commission, find your own client.

thrwwwy123 7y ago
> To your next point, what you're describing about going direct to the client is not only likely a breach of contract, but also generally a dick move. We haven't signed anything yet. I wouldn't go direct to the client immediately, but rather let him have his cut on the initial engagement. After that point, I feel like I would have more of a relationship with them than he does. > Also, no, recruiters often don't charge a one-time fee anymore - they will often get an initial fee plus a percentage of the employee's salary if they stay for a full year. Just to clarify: this isn't a full time engagement, but a short term hourly contract, with potential to extend to long term if things work out. > If you want to get 100% of billable with no sales/subcontracting commission, find your own client. This is what I'm struggling with. What does it mean to find a client? Is it the case that as soon as there is someone performing an introduction of any sort, they are entitled to an ongoing fee?
- mdorazio 7y ago
  It seems like you're thinking about this in terms of perceived value fairness instead of objective if/then outcomes. If your friend hadn't brought the client to you, you would get exactly $0 from them. Ever. 80% of a profitable amount is a hell of a lot more than 80% of nothing. If you've never actually landed a client yourself, it's a lot more difficult than you're likely thinking it is. I highly doubt this is merely an introduction based on nothing - more likely your friend has been working his network for a long time, vetting potential people who need work done, ruling out the ones that can't or won't pay a decent rate, setting up a business and all the contracts you need beforehand to make it easy to get started, etc. You're also probably not accounting for the fact that being a subcontractor has a lot of benefits. You're not that one that needs to chase POs, AP payments, renewals, etc. on a regular basis. To your last question, it tends to be a spectrum in practice. A casual introduction that leads to a deal with no actual involvement from the salesperson will have a lower rate (possibly one-time) than one where the person is setting up the whole deal and subbing it to you. In your case, your friend already quoted the company a rate and they're ok with it, so this isn't a casual intro - he basically did the hard part for you.

davismwfl 7y ago

I have built two successful consulting groups, while some people here are saying 25% cut is normal that is astronomical in my experience for what he is providing. I would never agree to that rate just for an introduction, 8-12% is more reasonable for an intro and payable only when the client pays their invoice. If your friend is doing some work and on-going management or something than that's a different story and this may all be very fair. But if he is literally just making an intro and then now saying you have to sub-contract from him that is odd to me and for me and has red flags all over the place. Essentially it seems like he wants to control the client relationship and just have you do the work, there are a lot of potential downfalls here. For example, if you aren't talking directly to the client and instead he is playing middle man you may get a bad wrap from the client because your friend doesn't understand something properly. That client then talks to other potential clients and next thing you know you are taking a hit for your friends behavior. If he is letting you have direct access to the client and he literally is just billing, his 25% is insane. Other downfall is if you don't control the client relationship how are change requests going to go? Is he going to properly represent them? How is billing going to be handled, they pay him net 30 and you wait again to get paid so you now risk 45-60 days of non-payment? Is his company big enough you can feel confident he'll pay you timely and properly? If things go south, is his company large enough to compensate or protect you during a legal suit? Is he carrying all the proper insurance? This just has so many red flags to me. Essentially IMO your friend is taking advantage of you by introducing you to a client he knows (maybe does business with regularly) and he knowing you charge too little is jacking your rate to something more reasonable and taking the difference. With friends like that you don't need any enemies for sure. I usually introduce friends to clients for free because it is good business to make sure clients stay happy and my friends find work. Plus if a friend fucks up I am not on the hook for their screw up, just for the intro which I can manage around. For people I don't know or that are just acquittances, I'll do intros but I do take a referral fee paid as they are paid from the client. Only time I take money for an intro when a friend is involved is if I need to get involved or the value of the contract would be such they can afford to pay a fair referral, but I'd never ask for 1/4 of the value even if I told them to charge 1.25x more. Don't compare to staffing agencies, that isn't an accurate representation unless that is the business your friend is in.

7y ago

cascom 7y ago

I don’t understand why you care if you are Still getting full billing? E.g. list is $100/hr and you are still getting $100/hr net...

rat9988 7y ago

I have a hard time understanding how does his rate affect exactly your situation.

yabadabadoes 7y ago

In my market, most consultants bill the customer directly and pay 20% of the first 2 years to each other as finding fee for introducing a new customer. When they subcontract in the fashion you suggest, it is more about keeping the relationship and looking like more of a one stop shop. It's really not a good way for them in terms of numbers and responsibility. I would raise my prices on future business to 1.25x or try 1.5x given the indication the market supports it, and so I could pay fees and costs of finding new customers from my standard rates. I would look to negotiate something that would work in future business in both directions (assuming your friend also does some consulting) making it clear that the more the deal looks like subcontracting the more likely it is a one off deal.

aksss 7y ago
> it is more about keeping the relationship and looking like more of a one stop shop. IME, it's often about the customer trust relationship and convenience. The customer doesn't want to deal with 10 W-9s and managed 10 new vendor relationships, and they trust us to source the other work and warranty it. A good analogy would be a GC in construction.
- yabadabadoes 7y ago
  > A good analogy would be a GC in construction. Yes, and a GC is very much on the hook, dealing with communication and looking to make as much as any subcontractor on the project even if that is by taking a small percentage from each. If a project amounts to work by one subcontractor, I think a busy GC doesn't make an offer.

spraveenitpro 7y ago

Offer him a starbucks gift card.

cityzen 7y ago

how much time have you wasted thinking about this? Is it worth it? after over 20 yrs of being independent, any engagement that starts out with drama will end in drama.

saluki 7y ago

If you're getting your full rate, let your friend enjoy marking up your services. Make sure he's paying you promptly though, not paying you after he waits for the final client to pay his invoice, so specify he's your client in the contract and that he's comfortable paying your invoices in a time frame you expect not dependent on the final client paying his invoice. Maybe he will bring you other engagements, you could even outline this in your contract with him that he will actively market you to his network. Finding projects isn't trivial, it's mainly relationships and who you know. If he can keep bringing you projects I'd enjoy the ride. Maybe let him know that for future engagements like this you're increasing your rate if you think you need to increase it.

brudgers 7y ago
The standard rate doesn’t include a premium for the nonstandard conditions.

aksss 7y ago

If he's the one managing the relationship, doing the end-customer billing, it's perfectly normal to have a markup, especially if it's for a short-term engagement. He owns the relationship and is subcontracting you to perform your service. A referral fee would be appropriate if he was handing the customer off to you for direct billing and leaving you to manage your relationship directly. In essence, he's also warranting your work (which means he's bearing risk). Don't be so quick to say that this means you should raise your rates. If you did, he might not sub work out to you anymore and you'd lose the advantage of having people like him finding you work (which is a cost you'd need to bear). We have worked with subcontractors like this where they see us marking up their service and think they should raise their rates to what we're billing. That's the wrong response, because I can't then mark that up further. It just means we're going to find someone else to do the work for the rate we need. Ultimately, maybe it would be good to consider a higher bill rate for direct engagements and a lower bill rate for subcontracting jobs, and in the meantime try and move more of your business into direct engagements. But again, this takes work and will cost you, but at least you derisk the approach by continuing to get business (and build reputation) through subcontracting.

Spooky23 7y ago

I did something like this once and was able to have the middleman pay me upon customer acceptance of the time card. I benefited from not having to deal with the receivable. There was also the ability to push off business issues to the middleman and avoid mixing money with the technical work — which was hard for me at that stage of my career. If you think this may turn into longer term work, negotiate a compromise. Maybe you pay your friend for a year, for a particular project, or something similar.

brudgers 7y ago

Your standard rate does not include the overhead created by the more complex relationships. Your standard rate doesn’t apply a discount for the lower probability of future work when you don’t own the client relationship. Your standard rate does not include a risk premium for the increased chance of payment problems, law suits, and misunderstandings. If you think it’s bullshit, then it’s costing you. Here you are on HN fooling with “the deal” instead of doing billable work. And it’s just the honeymoon. It takes a while to learn to trust your gut. It takes a while to learn avoiding bad projects is important. If your friend can find someone else should you take a pass, then your friend can find someone else for the client’s next project, too. My gut is “the deal” isn’t in the client’s interest. But I could be wrong. The test is your friend getting the client to sign a contract paying 25% of whatever the client pays you. That’s the test of a win-win-win. Good luck.

codegeek 7y ago

Everything is fair in business. Your friend has a right to ask you for whatever cut he thinks is reasonable. You have the right to negotiate that. It is simple. But make sure you don't undercut/undermine your friend. I would just say "Hey 25% is a bit high and I would like to give you x% instead". You may now think that your friend is not really adding a lot of value by a simple introduction but if he had not introduced you to the client who probably are going with you due to the referral, you would make $0. That is how business works. Referral and Networks is the key and try not to burn bridges with anyone.

deleted 7y ago

[deleted]

Mikeb85 7y ago

If he's marking up by 1.25x, he's actually only taking 20% of the total (0.25, his cut, divided by 1.25, the total charged, is 20%). Dunno, it's probably not too bad. And it is his client after all...

rajacombinator 7y ago

Your friend is in the wrong here for not discussing terms up front. Maybe an honest mistake by him. Tell him whatever you’re comfortable with and walk otherwise. But this “friendship” is likely over regardless of the outcome.

TaylorGood 7y ago

I give a 25% referral fee standard and bake it in on the backend. Value based projects have plenty of "margin" where I am happy to share the profit. That business wouldn't have happened otherwise. Does his company regularly practice "finder" services?

kanchan-sales 7y ago

Let your friend enjoy too!

muzani 7y ago

I've done an 80% cut from someone who intro'ed me to a major telco. Sometimes the value of the job is not just the money, but also the connections. He charged them a ludicrous price, but also paid me well. It depends a lot on his role. I'd be happy to pay up to 50% to someone who acts as a full time agent, dealing with negotiations, client filtering, writing and proofreading contracts, harassing them for payment. They have to eat too. Unfortunately, most people who take this role don't do it very well. But as a pure referral fee, 10% seems fair.

chrisbennet 7y ago

Consultant here, some data points: 30+ years experience, consulting prob 10+ years If they are paying you on a timely basis (not waiting until they get paid, pay you even they don’t get paid). * Yes, OK even if they take up to 100%+ Intro and nothing else: I try to give these away. Your “friend” is trying to exploit you in my view. Intro and nothing else: If he won’t let me take nothing. (He’s stretched or otherwise needs financial help) I’d give him 20%.