Referral Agreement Templates
Introduction to referral agreement:
Marketing and advertisement is the lifeblood of any business and organization. You can’t just sit around and hope potential customers and clients will somehow find you and will conduct business with you. In order to get business and increase number of clients, you need to make efforts. Most businesses hire a marketing team or advertisement agency to prepare campaigns for their products and services while some depend on referral business. A customer who is referred or recommended by an existing customer is hundred times better than a customer who finds you after watching an ad campaign. We use references in our daily lives more than we can think of.
For instance, you want to do a home remodeling or kitchen repair and you ask a friend if he knows a good contractor. If that friend has worked with a contractor who did an excellent job, you will be referred to him. This is how businesses work these days. Clients and vendors refer other clients and businesses to each other and when there is some sort of compensation involved as a reward for each referral, a referral agreement is created. This agreement includes all the terms and conditions on which two individuals or businesses conduct referral services together. For instance if a client refers a new customer to your business, you can sign a contract with him to given him discount of 20% on next order or something like that.
Types of referral agreements:
- Direct referral agreement:
A direct referral is a system where an existing client recommends your services or product to a new client. This is not a very common agreement because here the other party is not getting any compensation most of the time and he is just recommending you out of courtesy or because of the quality of your services or products.
- Tangible referral agreement:
This sort of referral agreement is very common because here the new client or customer gets something that has an actual value. Most of the companies offer gift coupons or vouchers to their existing clients and request them to share these with their friends and family members.
- Community referral agreement:
This sort of referral is also very common and here you team up with a non-for profit organization i.e. a local shelter home or soup kitchen and you provide your services at their doorstep. In exchange, they say a few good things about your product or services at a community event and with this word of mouth, you get new clients.
Tips on creating a referral agreement:
- Names and details of involved parties:
An agreement is signed between at least two parties i.e. individuals or businesses and in order to create the agreement, names, addresses and other details of each involved party should be mentioned on the agreement. Once the names are included, these parties are referred to as party A and party B throughout the agreement.
- Define nature of the agreement:
This part here is very important because it removes any ambiguity and dark areas from the agreement. Basically you need to specify the services that you are getting from the 2nd party and the compensation that they will get in return i.e. money, discount on business etc. In order to remove any misunderstanding, you can also include specific terms and conditions i.e. non disclosure clause and ownership of intellectual property.
- Explanation of exclusive services:
Most of the partners who work with each other for referral business want to stay exclusive. This means they agree that while working with each other, they won’t conduct same services with another party or business without the knowledge of the other party. If this clause is important for your business, you should mention it in the referral agreement.
- Duration of the agreement:
There are basically two types of referral agreements; long term and short terms. A short term agreement can last from few months to 2-3 years while a long term agreement doesn’t have any expiry and it ends only when both parties mutually end it or either of them breaches the agreement.
- Referral compensation:
Then there is the part where you need to specify what the other party will get in return of referring new clients and customers to your business. Some companies offer cash payment for each new client while some offer discount and it mainly depends on you what you and your partner prefer.