How do I avoid giving away the farm?

Cover image by Stephen Phillips - on Unsplash

I had a question from one of my subscribers this week. It goes something like this:

I have contractors delivering part of the services I provide to my clients. I would like to offer some of these contractors an affiliate program, where they will work under my banner and using my methodologies, but bring (some of) their own clients and largely manage them on their own. In return, they will earn a higher percentage of the fees we charge to clients. How do I get prevent them from taking those clients away from me?

First of all, congratulations that you've grown your business to the point where you're considering this. You're at a critical point in your business's growth and you have some interesting decisions to make.

Here's the first thing to get out of the way:

Don't worry about affiliates "taking" your clients

It's very difficult to "prevent" someone from taking away a client - but the chances of that happening is very small. When an affiliate brings a client to you in the first place, they're doing so because you can offer something that they can not do on their own. For them to then - later - try to take the client away from you a lot will have to change.

It also takes two to tango - both the affiliate and the client will have to want to do it, and I've seen this blow up in people's faces when they approach a client with this kind of idea.

And if someone does take a client away from you, you probably don't want to work with that client anyway. They're probably leaving because they think they're going to save a few bucks - and you don't want those kinds of clients.

So given that the chances are quite small and you probably don't want to work with those types of clients anyway, I would not worry about it.

But that doesn't mean that you shouldn't put at least some basic prevention measures in place. A non-solicitation clause in an appropriate document (such as an NDA or a Master Services Agreement) will prevent most people attempting such a move in the first place.

Now let's move on to some other things you need to consider.

Why would affiliates bring clients to you in the first place?

You already know the answer to that - they will bring clients because of your name, your reputation, the quality of work that you do and because there are things that the affiliate can't do on their own.

But in most cases affiliates won't bring a client that's ready to sign up for your services. They're going to bring (hopefully) qualified leads that require you to make and close the sale, and then hand over the client and engagement management to them.

The affiliate is relying on you to close the sale.

Because you're making the sale, you are the person with the most important relation with the client. And as long as you maintain that relationship, you can do two critical things:

  • keep an eye on the quality of the work the affiliate is delivering; and
  • ensure the client knows that you're actually the person in charge.

Quality is the first thing to go

You've built your business with great care. You've maintained very high levels of quality (this is your baby, after all) and your client relationships are great.

When you let other people take care of your clients, one of the first things that will go is quality. No one else is going to take care of your clients with the same level of care that you do, and you have to accept that drop in quality or put mechanisms in place to make sure quality doesn't slip.

One of the best-known ways to maintain quality is in the franchise model. When you buy a franchise, you're effectively buying a manual that tells you exactly what you need to do, and how to do it. Almost every franchise business out there will penalize you if you don't follow the manual - to the point where you can lose your franchise.

To maintain quality you need detailed processes

When you start building a business you're doing almost everything - and you know exactly what can go wrong. That experience allows you to deliver consistently high quality - until you have more clients than you can handle and you start bringing in contractors to do the work for you.

You don't want to spend your life looking after your contractors either - so you've started putting in processes that they can follow. These processes (sometimes as simple as a collection of checklists) have a lot of benefits: stuff doesn't fall through the cracks; you can onboard contractors much faster; quality is maintained; people can work remotely; and so on.

When you're considering an affiliate program, you're effectively considering outsourcing even more of the work that you would normally do. To make sure that work is done well and quality doesn't slip you will need more processes to make sure they can do that additional work at the level of quality you would like your clients to experience.

And this collection of checklists becomes your affiliate manual.

Should you kick off an affiliate program now?

I won't venture a specific opinion for your business without a lot more analysis. But I've been in this kind of situation before, and here are two things that worked for me:

  • Offer higher rates to contractors that effectively manage client relationships. I've done this before and it works well - contractors have the benefit of higher fees without having to take on the full responsibility of an affiliate. This is also easy to implement and a lot less overhead than an affiliate program. (I also offered higher rates for referrals that resulted in sales.) However, you need to make sure that both you and your contractor understands what "managing the client relationship" means.
  • Progressively work yourself out of working "in" the business to where you're spending the majority of your time working "on" the business. You've already started doing that by having contractors do some of the work for you, and you're transitioning into a management role. Your first goal is to spend most of your time managing and selling with other people doing the technical delivery. Your second goal will be to have someone else do that day-to-day operational management, and from there you're off to the races.

These are exciting times for your business and I hope that it works out well. You don't have to do this all at once - try stuff out and throw out what doesn't work. But in the end make sure you're moving towards the kind of business and life you want to lead.

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