You arrived at this page by selecting:Referral Fees — are they bad for business? (YEP 24/04/08)
Lots of professional practices these days seem to be paying referral fees. I'm not opposed to the principles of mutual business benefit and 'one good turn deserves another' but I do question whether the referral fee phenomenon is actually good for business and our clients.
The property conveyancing market is one area where referral fees seem to be common place. Estate agents regularly request monies from solicitors if a client is referred to them for conveyancing work. I don't believe those clients are aware that when their friendly estate agent is recommending someone it is not because they believe that particular firm are the best and therefore they will look after their valued client. The referral is being made purely because they are receiving a fee. I don't believe that's very upfront or in the best interests of customers. I know a small statement on documentation might 'cover their backs' - but how many clients will actually see it?
That's not all. When that business is passed on what is the solicitor's incentive to do the best job they can possibly do. The solicitor knows business will come in from referrals no matter what type of service they give. If one client decides not to return it's not the end of the world because there will always be another on the referral conveyor belt. I think that's bad for business. Businesses should strive to give excellent customer service and if business deteriorates you're probably doing something wrong. Identifying problems and making efforts to improve can ensure that business does come back. If you do get repeat business you can bet you are doing something right and the customer is getting something with you that they can't get elsewhere.
Buying work in is a short term view. You are giving yourself and your staff a reason not to give their absolute best and if you and your colleagues become complacent your business could be in trouble in the months to come. Top level figures might look healthy initially but in the long term there is a need to look deeper at business statistics to make sure existing clients are returning. If you don't it could be foolish to say the least.
My firm's ambition is to give a good quality service and be the best we can possibly be. We either get work because we deserve it or we don't get the work. It's that simple and exactly how it should be. Lots of our competitors have ignored that lesson and now times are tougher they are in difficulty.
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