Referral Fees - Great Marketing Tool or Legal Liability?

You're crazy booked for the next three weeks with numerous staging jobs.  A new client calls and says they have a big job, and they need it done pronto.  Aargh!  You just can't fit it in your schedule, so you refer the new potential client to another stager friend of yours, who happens to have agreed to give you a percentage of any job you send her way. 

Was this referral a great way to make a little money off all the hard work you've done marketing yourself, or did you just open up a legal can of worms with the new client?  I've been asked this question a number of times, so I thought I'd address it in a blog.

I believe that referral systems are a great marketing tool, which, when used right, can help you make a little extra cash and help develop mutually beneficial relationships.  Because the staging industry is largely unregulated at this point, there are no laws which I am aware of (although if anyone knows about any, let me know!) barring stagers from giving or receiving referral fees. The situation may be different if you are a Realtor or agent, but for stagers, I do not see any legislative barriers to this practice.

However, many staging accreditation or licensing programs require their licensees to sign off on a "code of conduct" or something similar, which may bar referral fees.  This is a binding agreement, so be sure to look over your applicable code of conduct or contract to see if there is a similar provision.  

There are many ways you can set up a referral fee system.  You could offer agents you work with a cut of any jobs they send your way.  You can set up an agreement with another stager to funnel excess work or jobs out of your area to them for a fee. If you've done a good job with your marketing, you may be receiving more calls than you can handle, and this would be a great way to still receive some benefits from your marketing.

If the idea of referral fees doesn't sit well with you (as I know they do not for some people), you can always cover all your bases and simply disclose the fact that you are receiving a referral fee, or simply just that you have a relationship with the other person involve.  You can always explain that you've picked this person to have a referral system with because you're sure that the quality of their work is just as high as yours.  That should dispel any hesitation on the part of your client.