The Anatomy of a Referral Agreement

Building a referral partner program is a method often employed by Software-as-a-Service (SaaS) companies to grow without the need to hire tons of sales representatives. There should be an appropriate written agreement in place between your business and the referral partner outlining how the arrangement will work with provisions to protect your business.

If your SaaS company is planning to build out a referral program – this post will give you a high level overview of what should be in a referral program agreement.

  1. Preamble – this is the first section of your agreement (“WHEREAS”) where you, at a very high level, outline:
    1. What your company does;
    2. What the referral partner does; and
    3. The intention of the arrangement itself.
  2. Engagement – in this section, you will very specifically lay out:
    1. That this is a non-exclusive Referral arrangement in a specific territory (of your choice), and that your business is free to engage any other person or company in a similar type of arrangement as you see fit. You should also lay out what you will be providing the referral partner with, such as sales and marketing materials, etc; and
    2. How the referral partner will be introducing Customers to you; and
    3. What defines a ‘qualified customer’ that will ultimately allow the referral partner to get paid – such as “customer must be a new lead, and not a customer that has engaged with the Company in the 12 months preceding”; and
    4. That your company decides on the prices and terms of all products being sold, and that your referral partner is not to engage in those sales discussions (unless you want them to); and
    5. Any indemnification based on the referral customer.
  3. Compensation – this is very specific to your referral program, and should lay out how your referral partners are going to be paid, and for what amount.
    1. Purchase prices should be laid out in a table format.
    2. Let your referral partners know when they should expect to be paid.
  4. Independent Contractor Relationship – laying out that your referral partner is NOT an employee, and is very specifically, an independent contractor to your business.
  5. Confidentiality – outlining what should be considered confidential information in your communications with your referral partner, and how they should be expected to keep that information confidential.
  6. Term and Termination – outlining how long the referral partner arrangement is for, and under what circumstances either party can terminate the arrangement.
  7. Miscellaneous Provisions – including but not limited to entire agreement, assignment, governing law, arbitration, and severability.

Let us Help

This post is just a high level overview of the what should be in a Referral Agreement.

There are many more nuances and specifics around this type of arrangement, and you should have an experienced attorney help you through drafting the right one to make sure you and your customers are protected.

Kader Law can help you draft, edit, or negotiate any of these agreements. If you’re interested, feel free to contact us.

This post is not legal advice, and does not establish any attorney client privilege between Law Office of K.S. Kader, PLLC and you, the reader.