Marcus T from Dallas, TX. A CPA who handles several commercial clients referred a large client to me — a retail chain with 22 locations in Oncor territory. The CPA expects a referral fee but we never discussed the amount. What is the standard? I charge 45% contingency. How much do I share with the CPA?
CPA referred me a client — what is the standard referral fee
Marcus, referral fees in this business typically range from 10-25% of your fee, not 10-25% of the savings. So if your fee is 45% and the referral split is 20%, the CPA gets 20% of your 45% which is 9% of the total savings. On a $30,000 finding, your fee is $13,500 and the CPA gets $2,700. You keep $10,800.
Randy, 20% of my fee seems reasonable. The CPA made a phone call and an introduction. I do all the work. But the client is a 22-location chain so the total findings could be substantial. Should I offer a lower referral percentage for larger engagements?
I have standing referral agreements with 4 CPAs and 2 commercial insurance brokers. I pay 15% of my fee for warm introductions (CPA calls the client and introduces me) and 10% for cold referrals (CPA gives me a name and I make the first contact). The difference reflects the conversion rate — warm introductions close at about 60% vs 20% for cold referrals.
One thing to formalize: is the referral fee a one-time payment or ongoing? If the CPA refers the client and you end up doing annual audits for 5 years, does the CPA get a cut every year? My referral agreements pay the referral fee only on the first engagement. Repeat business is mine.
Angela, good point. I do not want to pay 20% of my fees for 5 years on a client I retain through my own quality of work. First engagement only makes sense.
Offered the CPA 20% of my fee on the first engagement only. She accepted immediately and has already mentioned two other clients she wants to refer. The 22-location audit produced $68,000 in total findings across all stores. My fee at 45%: $30,600. CPA referral fee at 20% of my fee: $6,120. I keep $24,480. She made $6,120 for one phone call and is highly motivated to keep referring.
Everybody wins. The client saves $68,000. You earn $24,480. The CPA earns $6,120 and looks like a hero to her client for connecting them with savings. This is how professional referral networks should work. Marcus, formalize this arrangement with a written referral agreement and replicate it with every CPA, attorney, and financial advisor in your network.