At what revenue level should I launch an additional profit center?

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addtl profit center

Speaker 1: That’s a quick follow-up question and I believe I know where the answer’s going, but one profit center is this affiliate model. We’ve seen this work, obviously, in major accounting platforms or various software companies. They’ve got advisor status, or they have this program where you can get affiliates or commissions, or things like that.

For your service referral, different world. We’re now back into service and we’re going away from software for the tax providers, for the payroll, whatever. Those relationships, are they purely we’re going to refer you the right types of clients if somebody comes to you? It’s this unspoken, or maybe it is, or some sort of written referral agreement, or you actually get a percentage or some sort of payment for then giving that lead or cross-selling that service in some way?

Speaker 2: For us, part of this is strategy, part of it is personal. I prefer to have that more casual exchange. I’ll refer you clients that I think are a good fit for you, and in exchange I hope that you refer clients to me that you feel like are a good fit for myself. Part of any of those partnership programs or other is managing the overhead and making sure that you have ways to measure the performance, and who should get paid what.

Part of that just adds to the complexity. So, if that’s not something that’s easy to manage or easy to measure or if it’s something that’s going to put an undue load on the firm, I’d argue that it’s not worth the time unless it’s going to be a very material profit center for you.

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