A referral partnership is an ongoing arrangement with another business whose customers need what this one does.
Who makes a good partner
A trade serving the same customers without competing. A plumber and an electrician. A roofer and a gutter specialist. A property manager and any trade that maintains buildings.
The strongest are those whose work naturally precedes this business's own, because their customer already has the need at the moment the recommendation is made.
Why it produces better work than advertising
The recommendation carries the partner's credibility, so it arrives pre-trusted and closes at a higher rate, at almost no cost per lead — see referrals.
And it is steady rather than occasional, because it comes from a business encountering the need repeatedly.
Reciprocity is what sustains it
Arrangements that run one way stop. The partner is spending their own credibility, and if nothing returns, they eventually recommend someone else.
Where genuine reciprocity is not possible because the work does not flow both ways, some other consideration has to exist — a fee where lawful, or a service provided.
What protects the relationship
The partner is recommending on their own reputation, so poor work damages them as well. Treating referred work at least as carefully as direct work is the whole of the maintenance.
Telling the partner what happened closes the loop and is the part most often skipped.
Fees
Referral fees are lawful in many trades and restricted in regulated ones. Where used, they belong in marketing cost so the channel can be compared honestly — see marketing costs.
Not the same as subcontracting
A partner refers work and the customer contracts with this business. A subcontractor performs work under this business's own contract. The liability, insurance and payment arrangements are entirely different.