Recently in the Dallas market there was a conversation in our DFW Wedding Industry Facebook Forum about the practice of kickbacks. There are typically three main types of common kickbacks:
1. If you receive a referral/booking from a vendor who sent a client your way, you pay them a percentage (often up to 15-20%) of the deal or a flat dollar amount.
2. You’re asked to be on a “Preferred Vendor List” for a Venue, Planner, etc. You can either pay them a flat fee, monthly rate, etc. to be on their list they give clients.
3. You receive a discount from another wedding pro (ie – Planner receiving discounts on linen rentals) and instead of telling the client about the discount and passing it on to them, you pocket the discount.
This topic stirred up quite the conversation as there are many Venues and Planners in town who are just calling up companies they don’t even know to ask them for a kickback to see if they want to be on the Venue or Planner’s “preferred list”. Just last month while Michelle and I were in LA for The Simple Plan workshop, this question came up again about kickbacks and the ethics related to this practice. So here is where I (and the majority of successful business owners I know) stand on the topic:
- A strong, healthy business model is built on solid relationships you develop with other professionals because of the way you treat them, their clients, and the value you provide them – NOT from kickbacks.
- Just randomly asking people you don’t even know if they’re willing to give you a kickback so you can put them on your “preferred vendor list” is just bad practice, plain and simple. It leaves a bad taste in the person’s mouth that you hit up.
- When a business offers a kickback, often times they are charging the client much less than market value because they are “making up” for the difference by earning kickback income from the vendors on their “preferred list”. This is terrible because that business is devaluing the industry and their profession, low-balling everyone else. That business also starts to be known as the “cheap” or “budget” option in town. Not good.
- It’s an old school practice and times have changed. If you’re trying to get kickbacks, you may be cutting off the hand that feeds you. People talk and once they know you’re in the “kickback” category they may automatically write you off from ever wanting to do business with you.
- It’s a major disservice to your clients. By not disclosing that you receive kickbacks, you’re not being truthful to your clients. The wedding industry is based on a HUGE amount of trust that our clients must have with us as wedding pros. Holding back this information from them is in my opinion, a dishonest way to treat them and run a business.
- Most solid business/networking associations in the wedding industry have policies where their members are not allowed to accept kickbacks (or at least if they do, they must disclose the practice and amount to their clients).
- Instead of kickbacks, send the wedding pro who referred a client to you a small gift card, a bouquet of flowers, etc. Or even just a thoughtful note in the mail thanking them. It’s often the small gestures that go a long way these days.
Bottom line, if it feels wrong in the slightest or it’s a gray issue to you – it probably is wrong.
What are your thoughts on this controversial topic?