Is This A Good Referral Fee?

Business By glanduners Updated 22 Aug 2012 , 11:15pm by costumeczar

glanduners Posted 22 Aug 2012 , 7:40pm
post #1 of 6

I was contacted today by a woman I have met before (but don't know personally) who owns a children's party planning business. Here is part of what she wrote:

"Im looking for a bakery that can do some custom cakes, cake pops, and cupcakes to match my themes. Would you be interested in partnering with me to provide that? 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."

So, this is not a typical referral, as the clients would choose whether to have a treat added on to their package with her, but I would get 100% of the orders she receives. My question is, is 20% a reasonable referral rate? If not, what is? Thanks for your input!

Rebecca

5 replies
jason_kraft Posted 22 Aug 2012 , 8:18pm
post #2 of 6

How much is your cost (including ingredients, labor, and overhead) for the products you will be offering, and how much will she be selling them for? How does that compare to your current retail price for those products?

lilmissbakesalot Posted 22 Aug 2012 , 8:39pm
post #3 of 6

Also... do you provide all of these things regularly or will you need to add new items to your bag of tricks? Also, if you are doing this from home there are things that you cannot provide (like the chocolate dipped fruits).

She is asking you to give her 20% of your sales... is it worth it to you? Do you make enough of a profit to sustain a 20% cut in your fees? Will she be marking your goods up 20% or just taking it off of what you charge?

Do you want to be a slave to her business? Will this arrangement interfere with your independent orders? Do you have the capacity to add on a last minute party for her if you are techncally booked? Will she be pissy if you had to say no?

There are TONS of variables that all need to be ironed out and thoroughly explained and laid out in contract form in order for this to work. It could be a wonderful relationship, especially if she is busy and you ar enot, but only you can decide if this is the avenue for you.

ApplegumPam Posted 22 Aug 2012 , 9:09pm
post #4 of 6

I won't pay referral fees for anything - or to anybody

I see it as a way for the referee to make money for nothing...... and nothing else

DeliciousDesserts Posted 22 Aug 2012 , 10:57pm
post #5 of 6

I would suggest an alternative. Instead of a fixed percentage, come up with a price list. You will charge HER x for sheet cake, x for pops, etc. She's given you the themes so you can be specific to each cake.

Then, she can charge her client what she thinks they will pay. If it's a 20% mark up, fine. If it's not who cares. You have given her a price that will work for you...kind of like selling to other retailers. I think it is a wonderful opportunity!

costumeczar Posted 22 Aug 2012 , 11:15pm
post #6 of 6
Quote:
Originally Posted by DeliciousDesserts

I would suggest an alternative. Instead of a fixed percentage, come up with a price list. You will charge HER x for sheet cake, x for pops, etc. She's given you the themes so you can be specific to each cake.

Then, she can charge her client what she thinks they will pay. If it's a 20% mark up, fine. If it's not who cares. You have given her a price that will work for you...kind of like selling to other retailers. I think it is a wonderful opportunity!




I would go with this or not do it at all. But the question of whether you can commit to doing all of her orders is important. I personally wouldn't do it, but that's me. I've had arrangements with venues where they refer everyone to me as part of their package, but they didn't take a percentage to refer them. I just made sure to stay within the venue's budget as far as the cake part of their package went so that they wouldn't have to pay me any overages.

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