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Are Paid Referrals Worth the Cost? A look at the value of paid referrals and advisers and the difference between ethics and compliance.

By Gael O'Brien

This story appears in the March 2015 issue of Entrepreneur. Subscribe »

Andy Martin

Q: I've been approached by people who want me to pay them to introduce big-name clients to my business, and by others who want to advise my business in exchange for a percentage of the company. Are these arrangements ethical?

A: It sounds like you have opportunists at your gate—but that doesn't mean you should dismiss them all straightaway. Reduce the likelihood of walking onto shaky ethical ground by making decisions based on transparency, integrity and accountability. Take time to think through the benefits, drawbacks, implications and potential for unintended consequences in paying money for client referrals or handing over a percentage of your firm as payment for advice. Due diligence on potential business partners or suppliers should always include assessing whether they are likely to be an asset in your efforts to build your company's reputation and trust with stakeholders.

Regarding referral fees for introductions, research the integrity of the person who approached you, and find out if paid introductions are an accepted practice in your industry or if they're considered dodgy and will undermine your firm's reputation. If you decide to move ahead, be upfront with prospective clients about the arrangement—it is unethical not to tell them. Then quickly move to fill them in on why your company is uniquely suited to exceed their expectations.

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