What a referral partner is actually worth

The four numbers

You need four figures for each partner. Rough estimates are fine to start.

1. Referred enquiries per year (E). Calls, texts and emails from customers this partner sent.
2. Close rate (C). The share of those enquiries that become booked jobs.
3. Average job value (V). Revenue per booked job from this partner.
4. Gross margin (M). The share of revenue left after materials, direct labour and subcontractors.

Annual partner value = E × C × V × M.

Where to find them

• E: from per-partner tracking, or from an intake question asked on every new enquiry.
• C and V: from your job software or invoices, filtered by source.
• M: from your bookkeeper. If you don't know it by job type, use your overall figure for now.

A worked example

Consider a plumbing company in the Tri-Cities with three partners. The figures are illustrative; replace them with yours.

Check the first row: 10 × 0.8 = 8 jobs; 8 × $4,500 = $36,000 revenue; × 0.35 = $12,600 gross profit.

The property manager sends four times as many enquiries as the designer but is worth less than half as much. That doesn't make the property manager a poor partner. Steady small jobs fill gaps in the schedule and can lead to larger work. It does mean the designer's relationship deserves the most protection.

Compare with paid enquiries

Referred work has a hidden saving: you didn't buy it. To see how much, work out what the same gross profit would cost from paid channels.

Say your paid enquiries cost $55 each and close at 25%, so each booked job from ads costs $220 in spend. The designer's eight jobs a year would cost about $1,760 in ad spend to replace, assuming paid enquiries produced jobs of the same size, which they often don't. For large, trust-heavy jobs, paid channels may struggle to replace a good partner at any price.

Run this comparison for each partner. It answers a question owners often get wrong: "Should I spend more time on partners or on ads?"

Setting a ceiling on what you give back

Not every partnership needs money. Reciprocal referrals, a fast-response promise for the partner's customers, and good communication are often worth more to a partner than cash. But if you're considering a thank-you, a fee or a customer discount, set a ceiling first.

A simple rule many owners use: never offer more than a modest share of the gross profit a referral produces, and never more than the paid-acquisition cost you'd otherwise face. Using the figures above:

• The designer's average referred job yields about $1,575 in gross profit ($4,500 × 35%).
• Replacing it through ads would cost about $220 in spend, ignoring the size gap.
• A thank-you of a few hundred dollars per booked job sits within both limits; one of $1,000 does not.

Whatever you decide, write it down and disclose it to the customer. Our guide on putting referral terms in writing shows how. If either business is in a regulated profession, check with the regulator before agreeing to any payment, because some professions restrict referral fees.

Signs a partnership costs more than it brings

Value isn't only the plus side. Watch for these:

• Referred jobs that consistently run over time or budget, because the partner sets expectations you can't meet.
• Customer complaints that trace back to the partner's own work, which you then inherit.
• A one-way flow. You send them six jobs a quarter; they send you none.
• Disputes over who referred what, which usually mean tracking or terms are missing.
• Pressure to trade reviews or website links, which creates risk for both of you. The partner links guide explains why.

If two or more apply, have a direct conversation before deciding anything. Often the fix is a clearer scope or a better handover, not ending the relationship.

A one-hour worksheet

Set aside an hour with your job records and fill this in.

1. List every business that sent you at least one job in the last 12 months.
2. For each, count enquiries and booked jobs. If you can't tell, mark "unknown".
3. Add average job value and an estimated margin.
4. Calculate annual value with E × C × V × M.
5. Note how many referrals you sent each one.
6. Rank the list by annual value, then by balance of referrals.
7. Circle the top three. Those are the relationships to formalise first.
8. Count the "unknown" rows. If there are more than a few, start with tracking.

What the numbers can't tell you

Arithmetic misses some things that matter. A partner who calls you first in an emergency, who gives honest feedback, or who introduces you to their own network may be worth more than their direct referrals show. Equally, a partner whose standards slip can damage your name in ways a spreadsheet won't capture.

Use the numbers to make decisions you'd otherwise make on instinct, then sanity-check them against what you know. In Metro Vancouver, also check geography: a partner whose customers sit across two bridges from your crews may look valuable on paper and still be impractical. The areas page covers that region by region.

Where to go from here

If the worksheet shows one or two partners carrying a lot of value, protect them: written terms, a service standard and regular contact. If it shows very little referral value, you have a choice between building it deliberately through program design and outreach, or putting your effort elsewhere. Either is a reasonable answer. Want someone to sanity-check your worksheet? The contact page lists the few details worth sending with it.