A new customer call and says he wants me to bid a basement remodel. I make an appointment and arrived 15 minutes early. The customer isn't home yet but I hear people in the basement doing work. I find an outside door leading to the basement and walk in to find a plumber I worked with on a project a few months ago. He said he gave the guy my name and he wants me to add 10% to my bid for his referral fee. I more or less ignore him and start looking at the plans to get an idea of the scope of my work. The customer shows up and we go outside to look at some work to be done there. We start talking about money and I tell him I have to add 10% to my bid for the plumber's referral fee. He gets pissed and starts boohooing about how the remodel is over budget (This is an $800,000 house folks). I tell him I will get back to him and split. The plumbercalls me a couple hours later and he's pissed because the owner is torqued about his referral fee. Was I wrong in telling the customer about the referral fee?
No, I don't think so, That plumber is wrong for requesting 10% of your sales. He should know better than that. Do you charge him 10% of his sales when you refer him? That's bull crap.
I refer people all the time, I don't expect them to pay me a referral fee. How rediculous. I do it simply for the fact that I hope they will pass the favor on to me and let the chain continue.
That plumber got greedy and now he will have to learn the hard way about how to conduct an honest business. Thanks to you. You did the right thing. Lets just hope the plumber learned something now that the owner is upset.
This looks like it has the potential to be a no-win situation between you and the plumber.
1) You go to the plumber and tell him that you appreciate the referral but you should be informed in advance of your arrival that he expects a fee. Perhaps you can negotiate "the first one's a freebie and others after that are on a fee-basis" - - IF you want to establish a referral-for-fee element in your business. (How badly do you need his referrals or the additional business?)
2) You can tell the plumber to not refer you anymore if he expects a fee and that you're not going to pay this fee either. You have to know he'll badmouth you as a result though.
3) You can (laughingly) tell the plumber that THIS TIME you'll render to him his so-called-referral-fee (which, by the way, if not agreed upon by you prior to him making the referral, is extortion basically) THIS TIME and mention something about a "highway robbery" and "never again". Then you must decide between option a or b below: a) Pay it yourself and don't cause the customer any more $ grief AND mention to the customer that you're above board and integrity-based in your business dealings and as such, you'd appreciate if they would make mention of your name to their friends, co-workers, neighbors, and acquaintances if the opportunity arises. b) Pass the cost along to your customer knowing that he'll be aware that your price included the referral fee. This will also put you in the same light (reputation-wise) as the plumber since it appears for all intents & purposes that the two of you are sort of connected or even a team. If there's ever a problem with the plumbing or any ill will over the cost of the two elements of the project, you and the plumber both will bear the burden of blame. You probably won't get referrals via this customer either.
Another way to look at it, We got a call from our plumber "The customer I am working for needs an outlet for his dryer, can you take care of this" We went to the job, and as soon as we got there, he called us aside and said, "Please bill me for the job, I am the general contractor for the work here. Ok we did the job and billed him. A year later that customer called and said could you please come and give us an estimate on some recess lighting, we liked your response when you worked with the plumber and we thought your prices were reasonable. We found out the plumber marked up the job 100% and they thought this was a fair mark-up. We work for other General contractors that also mark-up jobs from subs. Good idea not to talk to customers about any dealings with subs or prime contractors, however this guy should have let you know in advance.