What to Include in a Simple Referral Agreement

What goes in a simple referral agreement? Three things: the fee, when it gets paid, and what counts as a closed deal. Everything else is optional. A simple referral agreement is a few sentences both partners can repeat from memory: not a document, not a template, just shared terms written down where both of you can find them.

Why Shorter Is Better

I have referral arrangements with a plumber, a wedding planner, a web developer, and a videographer. Not one of them runs on anything longer than a text message or a short email. The longest is four sentences.

That is not because we are careless. It is because a referral arrangement between two independent professionals lives or dies on whether both people remember the terms the same way six months from now. A short agreement gets remembered. A long one gets filed away and argued about later.

To be clear about what this post covers: this is the note itself: what you actually write down once you and a partner have decided to work together. The conversation that comes before it is its own topic, and I have covered the six things to agree on before you start sending referrals separately. And if you are wondering whether your arrangement even needs to be written down yet, the post on signs your referral relationship has outgrown the handshake walks through when that moment arrives.

This post is about what to write when you get there.

The Three Terms Every Simple Referral Agreement Needs

Here is the core of it. If your written note covers these three points, you have an agreement. If it misses any of them, you have a misunderstanding waiting for its moment.

1. The fee: the amount or percentage, stated plainly
2. The timing: the event that makes the fee due, and how soon after
3. What counts as a closed deal: the definition you will both use

Let me take each one in turn, because the details are where people slip.

1. The fee, stated so a stranger could calculate it

“10% of the job” sounds clear until the job includes materials. Is the fee 10% of labor, or 10% of the total invoice? For a $12,000 kitchen remodel where $5,000 is materials, that is the difference between $1,200 and $700. Neither answer is wrong, but only one of them is what your partner is expecting.

So write the base, not just the percentage. “10% of the labor portion of the invoice” or “10% of the total contract value” or, simpler still, “$200 flat per booked job.” Flat fees sidestep the whole question, which is why a lot of trades prefer them for smaller work. Percentages make more sense when deal sizes swing widely: a wedding planner referring caterers might see one booking at $4,000 and the next at $20,000, and a flat fee feels wrong at both ends. If you are not sure what the number itself should be, typical referral fee percentages by industry covers the going rates.

One related note: make sure you both mean the same thing by the word you are using. A referral fee and a finder’s fee are cousins, not twins, and the difference between a referral fee and a finder’s fee matters when one of you comes from an industry where the other term is the norm.

2. Timing: the trigger event plus a deadline

Timing is two decisions, and most people only make one of them. The first is the trigger: does the fee become due when the client books, when the work is done, or when the client pays? The second is the deadline: once triggered, how long until the money actually moves?

A videographer I know had an arrangement with a wedding DJ: fee due “when the couple books.” The couple booked in November for an October wedding. The DJ assumed he would settle up after the event, eleven months later. The videographer expected it that month. Both were acting in good faith on the same four words.

The fix is one sentence with both parts in it: “Fee due within two weeks of the client’s deposit clearing.” Trigger and deadline, no gap for assumptions.

3. What counts as a closed deal

This is the term almost everyone skips, and it is the one that causes the most genuinely awkward conversations. Because “closed” means something different in every line of work:

• For a wedding vendor, is it closed at the signed contract, the deposit, or the event itself?
• For an electrician, is it closed when the estimate is accepted or when the job is finished and paid?
• For a freelance designer, is it closed at the signed proposal or the first invoice?
• And in every industry: what if the client cancels, or the deal falls through halfway?

Pick the definition that fits how money actually arrives in your industry and write it down. Most pros I know land on “deposit received” or “first payment cleared”, late enough that the deal is real, early enough that the referring partner is not waiting on a project that runs long. And agree on the cancellation case while you are at it: if the client backs out before any money changes hands, most partners simply agree no fee is owed, and that one sentence saves the weirdest conversation of all.

The Repeat-Client Question: Decide It Before It Happens

Here is the situation that breaks more mature referral partnerships than any other. You refer a client to a landscaper. The job goes well, the fee gets paid, everyone is happy. Two years later, that same client calls the landscaper directly for a new project, twice the size of the first one. Does a fee apply?

There are three honest answers, and I have seen all three work:

• First job only. The fee covers the introduction. Everything after is the receiving partner’s client. Clean, simple, and the most common choice.
• A window. Any work booked within the first 12 months of the introduction carries a fee; after that, the client belongs to the partner. Common in trades and digital work where follow-on projects are the norm.
• A step-down. Full fee on the first booking, a reduced fee on repeat work after that. I see this most between wedding and event pros whose clients come back for anniversaries, corporate events, and family occasions.

The same logic applies to follow-on work inside one referral. If you refer a client for a logo and the project grows into a full brand identity, does the fee apply to the logo or to the whole engagement? Whatever you choose, choose it before the first referral goes out. This is the term you cannot fairly negotiate after the situation has already happened, because by then one of you has money on the line and the other does not.

When to Revisit the Terms

A simple referral agreement is not carved in stone. It is a snapshot of what made sense when you wrote it, and good partnerships outgrow their first terms the same way they outgrew the handshake. A few moments that should prompt a fresh look:

• Volume has changed. Terms set for two referrals a year may not fit two a month, in either direction. Higher volume sometimes justifies a lower percentage; a partner sending you steady premium work may deserve a better rate.
• Deal sizes have shifted. A flat fee that felt fair on $500 handyman jobs feels very different when the referrals are now $15,000 renovations.
• One of you changed your business. New services, new pricing, a new service area, any of these can quietly make the old definition of a closed deal obsolete.
• The first repeat client showed up. If you did not settle the repeat-client question upfront, the first time it happens is your prompt to add that term now, before the second time.

In practice, an annual check-in covers most of this. One partner says “same terms for this year?” and nine times out of ten the answer is yes. The value is not in the renegotiation. It is in the standing permission to raise the topic without it feeling like a complaint.

And if a payment ever goes sideways, the written terms are what keep the conversation calm. You are not accusing anyone; you are pointing at a sentence you both wrote. Restate the terms, sort out the miss, and if it keeps happening, slow down the referrals until it is resolved. The agreement’s job is to keep the relationship easy, not to win arguments.

What You Can Leave Out

Just as important as the three core terms is everything that does not belong in a simple referral agreement. You do not need definitions sections, exclusivity language, or anything that reads like it was written to be enforced rather than remembered. If a term does not change what either of you does next week, it is padding.

You also do not need to restate the relationship itself. Whether the arrangement is one-way or reciprocal, what kinds of work are in scope, how you will both track referrals. Those belong in the conversation before the first referral, and they mostly do not need to be in the written note at all. The note exists to answer exactly one future question: a deal just closed, so what happens now?

A Complete Example, Start to Finish

Here is what all of this looks like assembled: a real-world-shaped example between a general contractor and a flooring specialist:

“For flooring clients I send you: 10% of the labor portion of the invoice, due within two weeks of the client’s deposit clearing. A deal counts as closed when the deposit is received; if the client cancels before then, no fee. Fee applies to work booked within 12 months of the introduction. Let us review these terms each January.”

Four sentences. Fee, timing, closed-deal definition, the repeat-client window, and a built-in review date. You could send that as a text message, and both of you could quote it from memory in a year. Once the referrals start flowing, the remaining work is keeping track of which ones closed and which fees have been settled, which you can do with a shared note, or with a tool like PureIntro that records the agreed fee on each referral and coordinates the payment when the deal closes.

The pros who get referral partnerships right are not the ones with the most thorough paperwork. They are the ones who wrote down three or four plain sentences early, revisited them once a year, and spent the rest of their energy sending each other good clients.

If you want the agreement, the tracking, and the fee payment handled in one place, see how PureIntro works for professionals who send and receive referrals.

This post reflects one professional’s experience and is for informational purposes only. It is not business, legal, financial, or professional advice. Results described are individual and not guaranteed. Referral fee arrangements may be subject to state and local regulations. Consult a qualified professional for guidance specific to your situation. PureIntro facilitates referral tracking and payment processing but does not guarantee payments between users or any particular business outcome.