Question About Ethics...need Advice.

Business By SomethingSweetByFlo Updated 15 Aug 2011 , 2:26pm by QTCakes1

SomethingSweetByFlo Posted 13 Aug 2011 , 3:53am
post #1 of 39

Hello everyone! I am hoping that someone could give me some good advice!

I need to know what to do when a client originally came to you through an event coordinator (who received commission for joining us) comes back again for another event and doesn't involve the coordinator.

Should I still give her (the coordinator) a percentage of my profit?

Or would that only occur if the coordinator was involved?

What are your suggestions? MANY THANKS for your input!!

I'm new to the biz side of baking icon_smile.gif

38 replies
LindseyLoocy Posted 13 Aug 2011 , 4:13am
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are they using the coordinator at all for their event? If not, I say you don't owe them a thing.

SomethingSweetByFlo Posted 13 Aug 2011 , 4:21am
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Quote:
Originally Posted by LindseyLoocy

are they using the coordinator at all for their event? If not, I say you don't owe them a thing.




Nope, the client decided not to use the coordinator anymore, I'm not sure exactly why. It might be because of pricing.

Either way, I just wondered what the best thing to do when working with a coordinator.

Thanks for your reply!!

DoniB Posted 13 Aug 2011 , 4:51am
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I would say that, if you didn't sign anything with the coordinator saying you wouldn't see the client for future events, then you're off the hook.

costumeczar Posted 13 Aug 2011 , 1:40pm
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I wouldn't work with a coordinator who expected to get a kickback from referring to you, which is what "commission" is. That's unethical, in my opinoin. I would charge the client the same price as anyone else and not worry about the coordinator, she's not involed in this new transaction.

SomethingSweetByFlo Posted 13 Aug 2011 , 2:07pm
post #6 of 39
Quote:
Originally Posted by costumeczar

I wouldn't work with a coordinator who expected to get a kickback from referring to you, which is what "commission" is. That's unethical, in my opinoin. I would charge the client the same price as anyone else and not worry about the coordinator, she's not involved in this new transaction.




You know what costumeczar, I agree with you completely. What the coordinator did was take my prices, raised them and then gave them to her client. So she made a profit off my product, but I'm also sure she charged her a fee for her service.

How do you handle coordinators when they come to you for your goods but are not interested in spliting the profits? Do you move on or make a deal?

OhMyGanache Posted 13 Aug 2011 , 2:25pm
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I am happy to work with wedding coordinators. I give them 10% or $50 - whichever is lower (this applies to product, they don't get a cut of extras such as delivery fees or stand rentals). This would apply only to NEW customers they bring in - they would not be entitled to anything on future orders from someone they referred to me.

I'm a little surprised at the idea that wedding coordinators shouldn't get a cut of things - they need to earn a living too, and I would assume they have to deal with Bridezillas more than we do. I see that 10% cut I give them as money well earned for dealing with the bride and family so that I don't have to. LOL!

ETA: Think of the portion you give them as advertising fees/promotion costs (they are promoting your business and bringing customers through your doors), debt collection (they make sure you get paid and you don't have to deal with it), and mediator (if there is a problem with the cake, the coordinator will help resolve any issues). I think if you look at it that way, you might realize the cost isn't that great all.

E(again)TA: This only applies to PROFESSIONAL coordinators.

jason_kraft Posted 13 Aug 2011 , 2:35pm
post #8 of 39
Quote:
Originally Posted by OhMyGanache

I'm a little surprised at the idea that wedding coordinators shouldn't get a cut of things - they need to earn a living too, and I would assume they have to deal with Bridezillas more than we do.



That's why wedding coordinators charge the bride a separate fee. I've never had a coordinator ask for a percentage, but if I did I would just add that percentage to the price of the cake.

OhMyGanache Posted 13 Aug 2011 , 2:39pm
post #9 of 39
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by OhMyGanache

I'm a little surprised at the idea that wedding coordinators shouldn't get a cut of things - they need to earn a living too, and I would assume they have to deal with Bridezillas more than we do.


That's why wedding coordinators charge the bride a separate fee. I've never had a coordinator ask for a percentage, but if I did I would just add that percentage to the price of the cake.




You specialize in allergen-free cakes though, and I'm sure the competition is very sparse. For regular cakes, the competition is greater, and coordinators will steer their clients to the bakers who give them a little kickback. So if it's not me, it will be the baker down the street. I would rather have it be me, because they will likely come to me next time and pay full price (and as I said earlier - I consider their cut to be payment for the headaches they have saved me). icon_lol.gif

jason_kraft Posted 13 Aug 2011 , 2:49pm
post #10 of 39
Quote:
Originally Posted by OhMyGanache

You specialize in allergen-free cakes though, and I'm sure the competition is very sparse.



While it's true there aren't very many other bakers in this area that make allergy-friendly cakes, non-allergy-friendly bakers are still our competition, since many brides with food allergies aren't even aware that it's possible to make a wedding cake they can eat.

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For regular cakes, the competition is greater, and coordinators will steer their clients to the bakers who give them a little kickback.



Reputable coordinators will steer their clients toward vendors who provide the best quality product within their client's budget.

If they make their decisions based on kickbacks instead of quality, they run the risk of selecting a low quality vendor (as high quality vendors already have enough business without paying kickbacks) which leads to poor word of mouth for both the planner and the vendor.

SammieB Posted 13 Aug 2011 , 3:16pm
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I don't see anything "ethically" wrong with offering a referral commission on the first order. However, followups are a different matter.

I dealt with this same scenario on a much larger scale at my last job. I was a showroom consultant for high end building supplies. We had contracts with builders, plumbers, designers, and so on for them to send their clients to us for their product selections. Most of the time it was a pretty good system. Prices were based upon the amount of business that our original customers did with us. The more volume you bought of a particular product brand, the better the price. If you deviated from something brand specific (which often happened) it was normal pricing the same as anyone who walked in without an account.

The only problem with this arrangement was the snooty customers that thought it didn't matter what brand the product was, they should still get a discount of the same nature, even if it was below our cost. Foolish. Their incentive was to have their client use brand x and not need to come in our store, and if they came in our store they were no longer doing the work on the selections so we made our money too.

Designers were the WORST though. This is where I would most likely compare SOME wedding coordinators. They expected a kickback for every customer they ever mentioned our store too, even if they didn't send them in. They expected better prices on truly custom handmade items than our biggest builders, essentially cutting into our commission as sales associates. The thought when they brought clients in that we shouldn't even tell pricing, but give them a quote later so they could mark it up as they saw fit, but they should still receive the best pricing possible. So of course when they finally gave the client the quote, the client thought our prices were outrageous and wanted to shop somewhere cheaper.

So it's a sticky world of kickbacks and referral fees. Some people are completely out of their minds expecting something for nothing regularly. Jason is right. The most reputable coordinators put their clients needs above a kickback, because they know that they will make money doing what they do best and making their brides happy.

So just because someone comes in and suggests this arrangement, do not by any means feel obligated to respond immediately or even participate. In my opinion, the ones that are more insistent on the front end are the ones who are the biggest pains and least loyal on the back end, because it's not about building a solid business relationship, it's about the fastest way to get money in their pocket.

SomethingSweetByFlo Posted 13 Aug 2011 , 3:21pm
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Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by OhMyGanache

You specialize in allergen-free cakes though, and I'm sure the competition is very sparse.


While it's true there aren't very many other bakers in this area that make allergy-friendly cakes, non-allergy-friendly bakers are still our competition, since many brides with food allergies aren't even aware that it's possible to make a wedding cake they can eat.

Quote:
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For regular cakes, the competition is greater, and coordinators will steer their clients to the bakers who give them a little kickback.


Reputable coordinators will steer their clients toward vendors who provide the best quality product within their client's budget.

If they make their decisions based on kickbacks instead of quality, they run the risk of selecting a low quality vendor (as high quality vendors already have enough business without paying kickbacks) which leads to poor word of mouth for both the planner and the vendor.






Jason I tend to agree more with you on this one. For some reason it just doesn't sit right with me when a coordinator double dips, I've been getting business on my own and by the way she asked for 20%!!!! That's a huge amount in the cake industry! Especially since my prices are pretty low.

I do want to work with coordinators but how would I address the commission part with them? I don't want to turn them off but I don't want them to twist my arm either!

Thanks you guys!!

jason_kraft Posted 13 Aug 2011 , 3:34pm
post #13 of 39
Quote:
Originally Posted by SomethingSweetByFlo

I do want to work with coordinators but how would I address the commission part with them? I don't want to turn them off but I don't want them to twist my arm either!



If you really need the business, just build that referral percentage into the price quote, since it is now part of your cost structure. So if the coordinator asks for a 20% referral, and your normal price for a cake is $500, quote $625 instead.

SammieB Posted 13 Aug 2011 , 3:49pm
post #14 of 39
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by SomethingSweetByFlo

I do want to work with coordinators but how would I address the commission part with them? I don't want to turn them off but I don't want them to twist my arm either!


If you really need the business, just build that referral percentage into the price quote, since it is now part of your cost structure. So if the coordinator asks for a 20% referral, and your normal price for a cake is $500, quote $625 instead.




I understand the reasoning behind this, but what if you get a coordinator that also puts a percentage on top of the quote that you send them? Suddenly "your" prices could be as much as 40-50% higher than what you would normally charge, and if the bride thinks that is too much and price shops on her own, it could reflect negatively on your business.

The only way I could see that being avoided would be to have the bride pay the baker directly for the cake, with the 20% increase to cover the referral for the coordinator, and the coordinator issued that 20% as a check separately. That way you aren't worried about your reputation being messed with because of a less than reputable coordinator, and you can easily keep up with how much you have going out the door in referrals to begin with.

costumeczar Posted 13 Aug 2011 , 4:22pm
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I never, never, never deal with coordinators who want a cut of anything, or who refuse to allow me to deal directly with the client. They get paid a flat fee for their services from the bride, and that's how they earn their money. If they want a percentage from you that's a kickback, and I believe it's illegal. At best it's unethical, because the coordinator will steer clients in the direction of the people who are willing to give the kickbacks, regardless of the quality of their work. That doesn't benefit the bride, who, I assume, has hired the coordinator under the premise that the coordinator will know who does the best work.

The coordinators who I work with call me, say "I have a bride for such and such a date" then leave it up to me to deal with the bride from there. Not one asks me for any kind of percentage or fee to refer the bride. They know that the benefit that I'm giving them is that I'll try to work the bride into my schedule, even if I have on my calendar that I'm booked.

For example, if a bride calls and asks for a cake on a date that I'm booked, I look at my calendar and say "I'm sorry, but I'm booked for that date." If she's hired a coordinator who I work with, though, and the coordinator calls for the same date, I'll walk into my office and check the other delivery times and locations for that date before I say that I can't do it. That's the benefit of hiring a coordinator,they can open doors that may be closed otherwise.

One so-called coordiantor who I'd never heard of before refused to give me the bride's contact info and told me that she controlled all the appointments, etc. I assumed that meant that the bride was going to get a markup if I sent the coordinator the contract, and that the bride wouldn't ever see what I said the actual price was. I told the coordinator that I wouldn't work with her under those terms. I'm not in the business of gouging people.

costumeczar Posted 13 Aug 2011 , 4:26pm
post #16 of 39
Quote:
Originally Posted by SomethingSweetByFlo

Quote:
Originally Posted by costumeczar

I wouldn't work with a coordinator who expected to get a kickback from referring to you, which is what "commission" is. That's unethical, in my opinoin. I would charge the client the same price as anyone else and not worry about the coordinator, she's not involved in this new transaction.



You know what costumeczar, I agree with you completely. What the coordinator did was take my prices, raised them and then gave them to her client. So she made a profit off my product, but I'm also sure she charged her a fee for her service.

How do you handle coordinators when they come to you for your goods but are not interested in spliting the profits? Do you move on or make a deal?




To answer this question, the coordinator doesn't make my cakes, so if they think for some reason that they should make a profit on them, they can go find someone else to deal with. But you probably fgured that out from my last answer icon_smile.gif

costumeczar Posted 13 Aug 2011 , 4:31pm
post #17 of 39
Quote:
Originally Posted by SammieB

I understand the reasoning behind this, but what if you get a coordinator that also puts a percentage on top of the quote that you send them? Suddenly "your" prices could be as much as 40-50% higher than what you would normally charge, and if the bride thinks that is too much and price shops on her own, it could reflect negatively on your business.

The only way I could see that being avoided would be to have the bride pay the baker directly for the cake, with the 20% increase to cover the referral for the coordinator, and the coordinator issued that 20% as a check separately. That way you aren't worried about your reputation being messed with because of a less than reputable coordinator, and you can easily keep up with how much you have going out the door in referrals to begin with.




The first point is right, that if the bride price shops on her own and finds out that you're charging different prices, she'll be pissed off. And that will make you look really bad.

The second part is simple. Don't work with shifty coordinators who want to double dip. The wedding business is reputation-based, and if you work with creeps you'll get the reputation of being someone who works with creeps, so you must be a creep.

Don't think for a minute that the coordinators are telling the brides that they're charging the vendors they hire. I have no doubt that the brides are totally clueless about this.

SammieB Posted 13 Aug 2011 , 4:52pm
post #18 of 39

Costumeczar, I actually thought about going back and amending my post for the second point, but decided to leave it as food for thought so people could make their own call on it. One of the perks of being smaller businesses such as bakeries is that you can absolutely choose your clientele (within reason). I worked for a very large international company, and within that company the policy was for certain that the customer was always right, regardless of what type of customer it was. So we spent a lot of time trying to make everyone in the world happy, regardless of what reputation they had. It was absolutely exhausting and ridiculous to see some lazy designer profit off my knowledge and work with no input of their own whatsoever. Had I had the support of my superiors, I certainly would have shooed many clients right on out the door along with their sense of entitlement.

If I were a small scale business and profiting well enough to survive, I would certainly try to build my customer base without including people who want something for nothing.

As far as the legalities of it, honestly there are so many loopholes and ways around it. Part of my job as a salesperson (at least according to my headquarters) was to push certain brands that we got better pricing or kickbacks with. There were all sorts of incentive programs offering spiffs (monetary or product compensation that we still claimed taxes on) for pushing certain products. I know some people specifically tried to sell everything that they could get a spiff for. I won't deny they were nice perks, but I was one of the few that really tried to give the client what they wanted regardless of how it would affect my paycheck. That was my job, and I took pride in that. I took a lot of heat for not pushing HQ preferred brands and going with small companies with better products.

jason_kraft Posted 13 Aug 2011 , 5:10pm
post #19 of 39
Quote:
Originally Posted by costumeczar

The first point is right, that if the bride price shops on her own and finds out that you're charging different prices, she'll be pissed off. And that will make you look really bad.



If a bride has already paid for a wedding coordinator it's doubtful that they will fire the coordinator and shop on their own. Besides, you would already know the name of the bride (if the coordinator doesn't reveal the identity of the bride I wouldn't do business with them period) and could potentially offer a discount off the +20% price quoted to the former coordinator.

Wedding cakes are usually one-shot deals anyway, followup orders like anniversary cakes would typically be smaller and less expensive.

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The second part is simple. Don't work with shifty coordinators who want to double dip. The wedding business is reputation-based, and if you work with creeps you'll get the reputation of being someone who works with creeps, so you must be a creep.



Agreed -- if a coordinator is charging vendors a referral fee, marking up the vendor's products, AND charging a flat fee, they either have very rich clients who don't care about the cost or they won't be in business for long.

I don't necessarily see a problem with including the referral fee in the price as long as the coordinator doesn't add a second markup. But in any case, being thought of as "too expensive" is not necessarily the worst reputation to have, as long as you can deliver a product of commensurate quality.

QTCakes1 Posted 13 Aug 2011 , 5:16pm
post #20 of 39

The one thing I could never stand was being told by a coordinator or venue that for a fee, they would refer people my way by being on their "preferred vendors list". I assume preffered is cause they are a good vendor, but how does that work when just anyone can pay to be on their list. I always felt that was just low. So, if I was a really crappy vendor, I guess it wouldn't matter to the coordinator or venue, cause I am giving them a kickback. Hence, why I find it to be so unethical. If you hire a wedding corrdinator, she ain't working for free, she gets paid a nice up front sum. And her job is to find you the best vendors, for the right reasons, not cause they pay her. I know one that charges $5,250. Now, to want kickbacks on top of that is just insane! And this the wedding business, so I am sure kickbacks work differnt in other business areas, but not the cake business.

indydebi Posted 13 Aug 2011 , 6:02pm
post #21 of 39

Having a number of wedddign planners as personal friends, I can safely add to this conversation that GOOD coordinators/planners are APPALLED at those who hike prices on products and/or expect a kickback and I, too, would not work with such planners.

This practice actually discredits the planners reputation because their brides tend to think (as was hinted at in an earlier post), "She's only referring me to THAT vendor because she's getting a kickback from them!" It leaves a bad taste in the brides' mouths. Brides are advised that any discount or 'commission' a planner gets should be a savings that is passed on to the bride, which is how reputable planners view it.

because ... as has been stated ..... the planner makes her money by the fee she charges, not from the kickbacks she gets from vendors.

The vendors will make money from her referrals ... the planner will make money as her reputation grows for providing good qualtiy vendors at good quality pricing.

To the original question, you owe nothing to the planner for subsequent bookings. Just because she sent you a bride, doens't mean she owns you for life.

costumeczar Posted 13 Aug 2011 , 7:23pm
post #22 of 39

Jason, I've run into a lot of brides who have either changed their venue and subsequently worked with different planners, or who fired their planner for whatever reason and are looking for new vendors. And remember that even though wedding cakes are one-shot business, they're good for many, many referrals from happy brides to their friends who are getting married. And for many, many "don't use that vendor" from the unhappy brides. icon_wink.gif

QTcakes1--I wrote a blog article about that issue, which also really cheeses me off. http://acaketorememberva.blogspot.com/2010/12/preferred-vendor-list-sometimes-isnt.html

Sometimes the wedding business stinks, and you just have to decide how low you want to go. Unfortunately my parents raised me to be honest, so I'm often at a disadvantage icon_rolleyes.gif

costumeczar Posted 13 Aug 2011 , 7:34pm
post #23 of 39

I guess that based on the number of responses I've given on this thread you can all tell that this is a pet peeve of mine. I found this other article I'd written about it after I got about 5 people emailing me saying "Put me on your preferred vendor list." Seriously, a few people said "put me on your list." No please, thank you or introducing themselves. What the heck? Plus, I got to use the word "pimp" in my blog, which was fun. icon_lol.gif
http://acaketorememberva.blogspot.com/2011/06/i-am-not-wedding-pimp.html

cakestyles Posted 13 Aug 2011 , 10:25pm
post #24 of 39

"pimping" is the exact word that came to mind as I was reading this thread too.


I would never ever work with a planner who wanted a kickback from me....no way.

It cheeses me too, to think that just any crappy baker could become a "preferred vendor" just by paying 10 or 20% to the planner.

No thank you. I wouldn't want my name associated with planners like that.

OP I don't think accepting future orders from this client is unethical at all...as others have said the planner isn't involved.

Great thread BTW...it's nice to see how many of my professional peers feel as I do about sketchy planners.

indydebi Posted 14 Aug 2011 , 12:02am
post #25 of 39

costumeczar, both of those article are "nail on the head" articles! We share very similar philosophies!

http://cateritsimple.blogspot.com/2010/06/what-does-it-mean-to-be-preferred.html

OhMyGanache Posted 14 Aug 2011 , 5:00pm
post #26 of 39

I find it a little odd that coordinators bumping up prices is considered unethical, but the baker inflating the price to cover the coodinator's cut is OK?

Really?

jason_kraft Posted 14 Aug 2011 , 5:24pm
post #27 of 39
Quote:
Originally Posted by OhMyGanache

I find it a little odd that coordinators bumping up prices is considered unethical, but the baker inflating the price to cover the coodinator's cut is OK?



There's a difference: when the coordinator marks up a vendor's price, the markup does not reflect increased costs on the part of the coordinator, and in any case the coordinator is already being compensated via a flat fee charged to the client. When a vendor marks up the price to reflect a new cost (in this case a referral fee), that's a sound business decision. Now if the vendor marks up the price quote to the coordinator without being charged a referral fee, that would be just as bad.

From an ethical standpoint it's still not an ideal situation, which is why I only recommended agreeing to a referral fee if you really needed the business.

OhMyGanache Posted 14 Aug 2011 , 5:32pm
post #28 of 39

Justify it any way you like - it's gauging the bride. At least when I pay a referral fee, it's not costing the unsuspecting bride anything extra.

As for a coordinator knowing who the best in town are, how the heck are they going to know about me until they work with me? And why would I not want to encourage them to work with me? I don't feel the suggestion that a coordinator will steer clients to lousy vendors just to get a cut is really viable - since the bride will also be unhappy with the coordinator and will give him/her bad reviews and complain to them.

In my previous profession, referral fees were the norm. It's considered a "thank you" for bringing me business. I don't see anything sneaky or underhanded about it unless I were do as has been suggested here and pass that fee along to the customer. Now THAT is unethical in my opinion.

To each their own (ethics) though, eh?

jason_kraft Posted 14 Aug 2011 , 5:43pm
post #29 of 39
Quote:
Originally Posted by OhMyGanache

Justify it any way you like - it's gauging the bride. At least when I pay a referral fee, it's not costing the unsuspecting bride anything extra.



The coordinator is the one gouging the bride. As a vendor you are free to eat the referral cost if you wish, but when you're in business you should price according to your costs, and the referral fee is one of those costs. Unless you are expecting the coordinator to stop charging referral fees in the future?

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As for a coordinator knowing who the best in town are, how the heck are they going to know about me until they work with me? And why would I not want to encourage them to work with me?



Because coordinators who charge both flat fees and referral fees gouge their clients?

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I don't feel the suggestion that a coordinator will steer clients to lousy vendors just to get a cut is really viable



Good vendors (at least once they are established) don't need to pay a referral fee to get business. This leaves lousy vendors and new vendors.

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- since the bride will also be unhappy with the coordinator and will give him/her bad reviews and complain to them.



Agreed.

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In my previous profession, referral fees were the norm.



Referral fees on their own are perfectly OK -- it's the double dipping of referral fees charged to vendors and flat fees charged to clients that presents a problem. (Or triple dipping if the coordinator adds an additional markup to vendor services.)

If there was a coordinator who didn't charge the bride any flat fees (or mark up services) and only relied on vendor referral fees that would be OK in my book from an ethical standpoint as long as the coordinator was up-front with the client about how they are compensated. Of course that means all the vendors involved in the wedding would charge higher prices, unless the vendors are running charities instead of businesses.

OhMyGanache Posted 14 Aug 2011 , 5:57pm
post #30 of 39

A referral fee has never been demanded of me. I pay it as a thank you, as I said previously - it was the norm in my previous prefession and something the coordinators are happy to receive.

As for my "costs", if you will go back to my first post on the subject, I believe that a coordinator often earns that 10% by acting as a mediary between the bride and myself. I have saved time by not doing consulations or extended tastings - a bride comes to me with a cake in mind. I don't have to call repeatedly or send out reminders when payment is due, etc. I believe a coordinator often saves me at least 4 hours, and that to me is worth at least the 10% (or $50) that I pay. So since I am the one saving time and money (and also making money that I wouldn't have otherwise if she referred them elsewhere), then I should be the one paying that money, right? In my opinion it's a professional courtesy that helps establish good working relationships with others in the industry.

Personal choice, and again, doing it my way isn't gauging the customer.

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