The other day my young, talented, but still occasionally naïve sales guy came to me with a proposition.

“The customer has agreed to our deal, but he wants to offset some of the monies he owes us against referrals that he’ll provide us. He actually wants ten percent of any revenues he gets from deals sold by us after being referred by them.”

“I see,” I said while pushing back from the table and unbuttoning my shirt sleeves, “And what, exactly, and in this case, is a referral?”

The next answer was predictable --- “What do you mean?”

“What I mean is, what exactly constitutes a “referral?”

My young, good-looking prodigy cleared his throat, “Well … I … err, guess that a referral … would be some business that we ultimately close.”

Since I uttered nothing, he, and after an unpleasant and very pregnant pause, continued, “You know … Ron, err … a referral. Umm … a deal.”

“No, I really don’t know,” I said, “That’s exactly why I’m asking for clarity. Because if you don’t know what constitutes a referral, what do you think our attorney is going to say when he reads your language?” (I made sure that he understood that he, and not I, was going to “own” this deal.)

This conversation went on. After it was clear to me that there had been absolutely no discussions between him and his customer vis-à-vis the precise definition of “referral,” I decided it was time for a story.

“You know, when I was not much older than you, I came across a very sharp guy who told me that he “knew everyone in town” (which later proved to be very prophetic) and that he could virtually “choke us” with leads. I got so excited that I signed his deal right away. It gave him a sliding scale that ended up at almost 25% of revenues going his way on all “leads” provided.

Trouble is, and at age 26, neither one of us had bothered to define the term, “Lead.”

In my mind, a lead would have been someone who not only had a need for our product, but who also had budget and signature authority. In other words, all I had to do was go and get contracts signed.

His idea was quite different from mine. And that could not have been made clearer than when I opened the mail and found that he had actually sent me what pretty much amounted to a phonebook!

There was a short note covering the “phonebook.” It said, “XYZ Company hereby provides the following names as legitimate prospects for (our company) and that whenever such deals are closed, XYZ shall be entitled to the appropriate percentage of gross revenues generated, based on the attached graduated payment schedule.”

I thought he was kidding.

He wasn’t.

It took a lot of time and money to extricate myself from that deal. In all, it may have cost me $25,000 that I didn’t have. It was a very expensive business lesson.

Anyone that has ever carried a bag knows that there are really only three or four “grades” of prospect. First, there is the “Suspect”; a suspect being someone that may be a reasonable fit for your product or service.

Next, there is the “Lead”; the key difference between a lead and a suspect being that the lead has been talked to and he or she has expressed interest in the product/service and may even have some budget to acquire it.

Next to a closed deal, the highest-rated category is that of “Prospect.” And a prospect is all of the above plus signature authority plus sense of urgency. (This, by the way, was what I had in mind with the phonebook deal.)

The truth of the matter is that there will probably never be a real meeting of the minds between prospecting companies and sales companies. I, in fact, once even tried to start a company that would do nothing but provide “advanced leads” (a term we came up with after much deliberation) --- but even then, we could not get anyone to buy off on paying us a percentage of their revenue. Worse, we couldn’t find anyone who would even pay us to work by the hour. They just didn’t trust that our people were going at it as hard as they would have liked.

What I wanted was a deal that was “on the tee” just awaiting me and my driver.

What they wanted was to give me a name and then they would stand to the side, clapping vigorously, while we attempted to roll a rock to the pinnacle of the mountain.

Oh, and there is one other, and not at all insignificant problem with this approach. And this is the fact that, whenever you “deputize” a third party to represent you, that third party is now representing you!

Sounds pretty basic, no? (Hell, 95% of the stuff I write in this column is basic.)

But it’s true. Let’s say that you have two salespeople and you do a deal with someone who is referral happy and happens to have two-dozen salespeople on the street. In a moment of unrestricted euphoria, you give the sales manager of this organization a few thousand samples of your product and/or two-dozen sales training kits. You don’t actually do the training --- but you still give them the kits.

It just took you five years to build a business that required seven salesperson turnovers in order to keep just two. Now, these two are gold. But it was agony to find them, train them, and eat their mistakes while they matured.

Well, guess what?

You just started that whole process over --- except this time you have no idea what they’re actually doing day-to-day.

But they’re wearing your badge!

When they speak, it’s as if it’s coming from your lips. When they demo your product, they’re demoing in their style. And when they negotiate, they give away your margins.

You gonna sleep well the night you make this deal?

Thought not.

The only way (and this is strictly my opinion) for deals like this to work is to simply “Let Nature Take Its Course.” That is, you do a deal with a customer and you say to that customer, “Hey, if somebody comes along that we think should also know about your business, we’ll be more than happy to tell them.”

And conversely, one would hope that the reverse works as well.

And isn’t this the real world anyway? Isn’t this how you would prefer things to be?

Now the only way that this will work is if the customer is thrilled with your product/service. It has been my experience over the years that when you do a great job for someone, they literally cannot wait to let others know about it. In fact, they will scream it from the rooftops, “I’ve got a great vendor here and you should use him/her, too!”

Leave the referrals for blind dates, great breeds of dogs and hot cars. Instead, focus on what I call the “Law of the Jungle”: help others and they’ll help you.

It’s axiomatic.