Is this a good referral fee?
A woman I have met before, but don't know very well personally, has asked me if I would consider making cakes, etc. as part of party packages she offers through her childrens' themed party planning business. Here is part of what she wrote:
"How it would work is, a mom would order a party from me, either a tea party, a princess party, Under the Sea Party, or a Spa Party, and she would have the option to order a coordinating cake/cupcakes or cake pops, choc covered strawberries as an add on. Any orders that come in, would go to you, and you would provide that through me. I would bill and collect and pay you. In return I would keep a percentage of the sale, say 20% or whatever you feel is fair for the referral."
This is not a typical referral, where she would tell her clients that she recommends me and then gives them my contact information (for that, I would not pay a referral fee). Rather, when she has a client that would like to "add on" a cake to a party package they purchase through her, that client automatically goes to me, so there is regular, guaranteed work involved here. I would be her only cake vendor, so there is no competition. In this case, I don't see a problem with a referral fee. However, I'm new to this - is 20% a reasonable take? If not, what is? Do you foresee any issues I would have to watch out for? Thanks for your input!
Replies to This Discussion
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Permalink Reply by Joann Gottermeyer on
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Personally I think 20 percent is pretty steep for doing nothing other than asking if they want a cake and then having you bake it. And then what if the mom having the party absolutely loved the cake and wanted to get something for her sons birthday but doesn't want to have a spa party for him? How does she know that you were the provider of the cake and not the woman who planned the party? Maybe it's just me.....but knowing the hours that I put into my cakes I would want full disclosure that I was the one who provided the cake, and not be hidden behind a 'middle man'. If I were going to be involved in this I want to be the one to talk with the mom requesting the party myself.....and sorry, but 20 percent in my opinion is way out of line. If you would have a cake that you would charge $50 for, you should get your $50. You are providing her a service by making her parties easier to sell to her clients as a 'one stop shop'.
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Permalink Reply by Rebecca Glandon on
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I wouldn't be advertising on her website, but I would be delivering the cake to the party personally. At that time, I have complete freedom to give out business cards, talk to the mom and/or guests about the cake and future orders, and disclose that she can contact me at my business directly for any other cakes she wants in the future for any parties without having to go through the planner. If it were any other way than this, I would never consider it. I also think that 20% is too steep, even with this provision. Thanks for your input.
Joann Gottermeyer said:Personally I think 20 percent is pretty steep for doing nothing other than asking if they want a cake and then having you bake it. And then what if the mom having the party absolutely loved the cake and wanted to get something for her sons birthday but doesn't want to have a spa party for him? How does she know that you were the provider of the cake and not the woman who planned the party? Maybe it's just me.....but knowing the hours that I put into my cakes I would want full disclosure that I was the one who provided the cake, and not be hidden behind a 'middle man'. If I were going to be involved in this I want to be the one to talk with the mom requesting the party myself.....and sorry, but 20 percent in my opinion is way out of line. If you would have a cake that you would charge $50 for, you should get your $50. You are providing her a service by making her parties easier to sell to her clients as a 'one stop shop'.
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Permalink Reply by Tammy Owenby on
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to me, if she wants 20%, let her tack it onto your price when she gives it to the customer. Your price should be what you want to get fully. She can call it referral fee or handling fee or however she wants to explain it to the customer.
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