After going through all the red tape I am now a legal cake business based in my home. I live in a rual area with several small towns within 20 miles. A new Bakery/Eatery has opened in a town about 4 miles away. They wanted a cake decorator. I went by and talked with them and showed them pictures of my cakes. They were very interested and gave me the name and number of a customer wanting a cake. I called the customer and am making the cake from home and she will pick it up from me. They are going to get back to me regarding future work and thier pay. Do any of you do this, if so what to pay for the referral? Basically all they do is take the name and number. But I understand that they did get me the customer. I am stumped on what to do. A percentage? flat rate? Any ideas.
Thanks,
Darlene
Most professionals (photog's, florists, etc) will send biz back and forth and just ask the same in return.
I have a referral credit that earns my customers credit. Alice sends Betty to me ... Betty spends $3000 .... Alice earns 5% or $150 to apply toward her own order. I don't write a check for this amount.....it's a credit to be applied to a future order.
I would not pay anyone for a referral. In no time at all your calendar will be full and you won't need to pay anyone for new business!
Thank you Indydebi. I knew I could get an answer here. I believe they want to cater and sponsor inhouse parties. Maybe we can come to an understanding. I appreciate the guidance. 
While I totally agree with Indydebi of NEVER paying for a referral other than the discount program...and believe me...that pays for itself in no time! I had a similar situation come up recently. Someone was opening a wedding planning/consulting type business. She contacted me to be her cake person referral. (I'd been contacted by her for her wedding months prior to this...and it never got any further than the e-mail inquiry stage.) Anywho, if I'm remembering correctly, she was asking for something like a 25% finder's fee. I was aghast! First of all, my business is doing very, very well, so I'm not out doing the free sample thing anymore...no need for it currently. WHY would I pay her 1/4 of my profits when all that she's doing is giving someone a phone number? I work with a number of local vendors (that I personally know due to their own personal orders being purchased through me), and in return, I place a link up on my site for them. There is no $$$ being exchanged...no discounts....simply a courtesy that I choose to do. There are a number that don't even have links up to me, and that's perfectly fine with me. I know them to be reputable and I want to send the extra business to them with that in mind.
In short, in no time at all, you'll see that it isn't necessary to pay anyone to send customers to you. Take sample cakes out to any and every local business, club, civic organization, you name it. In no time, you'll have more orders than you can handle.
Good luck!!!
Amy
also remember that in most cases, they are not asking for 25% of your PROFITS. They are looking for 25% of your selling price, which are two different figures!
I work with a facility that is trying to implement a policy that I, as a caterer, CANNOT comply with (liquor license issues). I emailed them and told them if this was the new policy, they'd have to refer their clients to other caterers who had already chosen to take on that responsibility and liability as we would be unable to comply. I'm not sure the owner was used to vendors being willing to walk away from his site because he emailed it would not be a problem....nothing was finalized on the policy. (And he said, "YOu must have taken a class in negotiation." I'm thinking "Dont' let this little grandmother face fool ya, dude!") 
While I LUV working at this facility, my calendar is full without them. I'm not going out of business without them .... they are not going out of business without me.
You'll be amazed how fast your calendar fills up.
I always give a 20% fee back to the restaurant/catering facility for the referral, since I use their banquet kitchen. I also cut them a break on things they order from me directly.
If someone is just giving you a name, and you're using your own facility, I'd think a 10% referral fee is reasonable, IF you book the job.
IMHO!
If you're just starting out and especially if you're needing help getting your name out there, I think it's not a bad idea at all. Once you start getting a decent customer base, you won't need them anymore, but for now...not a bad way to start up a business.
I don't see any difference between paying a referral fee and giving cakes away as advertisement. Besides, I've found that giving away cakes doesn't really work that well for me. Most of the time I'm lucky if the group I give to even makes an effort to promote me as the baker of the cake they are serving. Then I have the issue of having given a cake to them for free once, they get the idea I'm just a place to go to for a donation. With a referral system, you know they're doing the job you're paying them to do.
You might also want to get a return deal for yourself, you get a percentage of whatever business you refer to them!
I agree with justme50
While it may burn us to do so it is a good way to get additional business. My Busines Planning teacher once said it aptly 0% of 0 is still zero. But but if you give 10% of a 100% you will still have some thing comming in while you lay your ground work making a name for yourself. Just be carefully not to end up with nothing after your take out your cost of production.
Samples do work as well you may not see the result right way but it comes later down the line. However you should not carelessly give out sample, target a group that you believe can afford and want to spend with you. Make sure you are reaching your market with sample and not wasting samples.
Besides, I've found that giving away cakes doesn't really work that well for me. Most of the time I'm lucky if the group I give to even makes an effort to promote me as the baker of the cake they are serving.
I had this problem once too, when I was first starting out. I had this woman who was an acquaintance of my mom's, she had this big horse farm and stables and they were having this big open house party. Well she called me and ordered a full sheet cake with their logo in FBCT. Lo and behold, she nickeled and dimed me down to half what I'd normally cost per serving, YEAH she was going to keep ordering from me, YEAH she knew I was just starting out and it would be great advertising for me, YEAH she was going to tell all her associates and could I please leave her with a stack of cards too (which I did)
Needless to say NOW - I never heard from her again, and I never got a call from anyone who would have gotten one of my cards either. And it was a gorgeous, time-consuming cake too. Some people just know how to take advantage.... 
MHO -
If you start off giving them $$ for referrals - then you stop doing it because your business has grown - you are going to cause hard feelings with that shop... "she used us to get where she's at, now she doesn't want to pay us for getting her there...."
think about the future... much easier to implement the policy now, then try to change things later.
Act like your big time, they will treat you like you are big time.
Nevermind the fact that a LOT of brides are being educated about the wedding industry, and don't like the idea of paid referrals.
The idea is that if you were any good, you wouldn't need to pay a company to refer you. When they find out that you've paid for it, they don't trust the word of the referring company.
I know that businesses in other facets of the industry are really cracking down on the practice and taking a stand - photographers and florists, for instance. I know many people make a point of saying that they don't pay commissions, and I know many brides as if we take/pay commissions on OUR referrals.
That said, I try to send a thank you note and maybe a bottle of wine or flowers if referred a good wedding. I guess now I can send cake
Quote by @%username% on %date%
%body%