Referral commission calculator
Model referral commission splits for recurring or one-time deals. See total commission, profit after commission, net margin, and break-even timing.
Deal Details
Commission Terms
Commission Analysis
Total Commission Owed
$6,000
on $120,000 in revenue
Net Margin
50%
Break-even
2.2mo
Before you offer terms: Compare margin after commission with your margin on clients you win directly. Lifetime commission only works if the margin can carry it for as long as the client stays.
How referral commission is calculated
- Commission periods = the commission months or the client lifetime, whichever is shorter (recurring deals). One-time deals have one period.
- Total revenue = monthly deal value x client lifetime (recurring), or the project fee (one-time).
- Total commission = deal value x commission % x commission periods.
- Gross profit = total revenue x deal margin %. Profit after commission = gross profit - total commission.
- Margin after commission = profit after commission / total revenue. It is shown as net margin but does not include your overhead.
- Break-even = total commission / monthly gross profit, in months (recurring deals only).
Worked example
With the defaults, a $5,000-a-month retainer at a 55% margin lasts 24 months: $120,000 of revenue and $66,000 of gross profit. A 10% commission for 12 months costs $500 x 12 = $6,000. Profit after commission is $60,000, a 50% margin. The commission is covered by the first 2.2 months of gross profit ($6,000 / $2,750).
How to read the result
Compare the margin after commission with the margin on clients you win directly. If the referred client would not have come to you otherwise, a few points of margin is usually a fair trade. If the client lifetime you enter is optimistic, the commission takes a bigger share: at a 12-month lifetime in the example, it is 10% of all revenue.
How to use this calculator
Choose whether the deal is recurring (monthly retainer) or one-time (project). For recurring, enter the monthly deal value. For one-time, enter the total fee. Set the commission percentage and, for recurring deals, how many months commission is paid plus the expected client lifetime.
Enter your deal gross margin, the percent of revenue you keep after direct delivery cost but before commission. If you're not sure, run the profit margin calculator first to dial this in.
The tool shows total commission owed, profit after commission, net margin, and for recurring deals the break-even month. Compare the net margin to your normal direct-sold margin to decide whether the referral is worth the trade.
Key insights
- Cap the commission period. A fixed term, such as 12 months, keeps the cost predictable. Lifetime commission lowers margin for as long as the client stays.
- Pay as you collect. Never pay upfront on revenue not yet received. Client churn becomes your problem entirely.
- Model before you commit. For example, a 15% lifetime commission on a 55%-margin retainer leaves 40% margin before overhead for the life of the client.
- Different tiers for different partners. A partner who closes enterprise deals with 12-month sales cycles deserves different terms than a friend who made one warm intro.
Frequently asked questions
What is a typical agency referral commission?
There is no industry standard. Common structures are a percentage of recurring revenue for a capped period (for example, 10% for the first 12 months) or a one-off percentage of a project fee paid when the client pays. Some agencies pay a higher percentage for the first month or two instead of a longer tail. Model each option here before you offer it.
Should I pay commission monthly or upfront?
Pay monthly as you collect, never upfront. Upfront commission on a year of revenue you haven't collected is a recipe for partners getting paid on churned clients. Monthly pay-as-you-collect aligns incentives and protects cash flow if the client leaves early.
What margin do I need to afford a referral commission?
Enough that margin after commission still covers your overhead and leaves profit. Subtract your overhead as a percentage of revenue from the margin after commission this calculator shows. If what remains is close to zero, lower the rate, shorten the period or pass on the deal.
When does a referred deal break even?
The calculator divides total commission by one month of gross profit from the deal. In the default example that is $6,000 / $2,750 = 2.2 months. One-time deals break even at once if margin after commission is positive.
Should I offer lifetime commission?
Think carefully before you do. Lifetime commission reduces the margin on that client for as long as they stay, and removes the partner's reason to keep sending new work. A capped period is easier to sustain; reserve longer terms for partners who bring large, long-running accounts.
Run a referral program that pays for itself
AgencyPro Plus connects to Rewardful, so you can run a client referral program with commission tracking alongside your portal and billing.