How much should you pay your affiliates? Setting a commission that stays profitable
Rate, duration, tiers: a simple method to set your affiliate commission from what a member really earns you, with worked examples.
Too low, and the commission motivates no one. Too high, and every new member costs you more than they bring in. You can't guess the right answer: you calculate it from what a member earns you, and from what you would be willing to spend to find one.
In short: start from what a member earns you before tax over the commission period, decide what share you're willing to pay out to acquire them, and turn it into a rate. For most subscription spaces, 20 to 30% for 12 months stays profitable.
Commission is calculated before tax
On LearnFloo, the commission is based on the amount before tax of each payment the referral makes. For a €29 subscription incl. VAT with 20% VAT:
- amount before tax: 29 / 1.20 = €24.17;
- at 25%, the commission is €6.04 a month.
So you never pay out the VAT you collect for the government.
Step 1: what a member earns you
Two figures are enough:
- the amount before tax they pay per month (or per year, divided by 12);
- how long they stay, on average. If you lose 8% of your subscribers every month, a member stays 1 / 0.08 = 12.5 months on average.
The commission only runs for the period you have chosen (12 months by default). What matters, then, is what the member pays during that period.
| Subscription | Before tax / month | Over 12 months | Commission at 25% |
|---|---|---|---|
| €19 incl. VAT / month | €15.83 | €190 | €47.50 |
| €29 incl. VAT / month | €24.17 | €290 | €72.50 |
| €49 incl. VAT / month | €40.83 | €490 | €122.50 |
| €290 incl. VAT / year | €241.67 | €241.67 | €60.42 |
These figures assume the member stays at least 12 months. If they leave earlier, the commission stops with their payments.
Step 2: what you would pay for a member
Ask yourself the question differently: how much would you spend on advertising to get this member? If a campaign costs you €80 per subscriber, a commission of €72.50 over a year is cheaper, and you only pay it if the member actually pays.
That's the big advantage of affiliate marketing: you only pay for results, and a refund cancels the commission.
Then subtract your costs: Stripe fees, the LearnFloo cost for the space, your time. What's left is the margin the commission has to fit into.
Step 3: turn it into a rate and a duration
Two levers, which don't have the same effect:
- The rate motivates at the moment of sharing. An affiliate compares "25%" with what they know from elsewhere.
- The duration pushes up the total without changing the advertised rate. 25% for 12 months earns twice as much as 25% for 6 months.
A few benchmarks for a subscription space:
- You're just starting out: 20% for 12 months. Simple, and profitable almost every time.
- Your margin is comfortable: 30% for 12 months, or 25% for 24 months.
- Your offer is lifetime access, paid once: duration no longer plays a part, only the rate counts. Aim for 20 to 30% of the price before tax.
Step 4: use tiers
Tiers increase the rate with the number of converted referrals (by default 20%, then 25% from 5, then 30% from 10). They let you:
- keep a reasonable entry rate for occasional affiliates;
- reward the real recruiters, who move up to the next tier and see it on their dashboard;
- keep your margin under control, since the top rate only applies to affiliates who have already brought you plenty of members.
A referral is converted when their first invoice is paid; the new rate applies to the following commissions.
Step 5: special cases
For a partner who carries weight (an influencer, an organisation, an association that recommends your course), you can set on their row:
- a negotiated flat rate, on all their payments;
- or own tiers, different from the programme's.
Put it in writing in your exchanges: the negotiated rate shows on their dashboard, but the terms (commitment period, exclusivity, expected content) stay between you.
A complete example
An academy sells a subscription at €29 incl. VAT per month. Its members stay 14 months on average. It chooses 25% for 12 months.
- Each referral brings in at most €290 before tax over 12 months.
- The affiliate earns at most €72.50 per referral.
- The academy keeps €217.50 before tax over 12 months, then 100% of what the member pays after that.
An affiliate who brings in 6 members over the year earns up to €435. The academy, for its part, has gained 6 members without spending a single euro on advertising before they paid.
Key takeaways
- Calculate on the amount before tax and over the commission period, not over the member's whole lifetime.
- Compare the commission with what a member would cost you in advertising.
- Start simple, 20 to 25% for 12 months, and let the tiers reward the best.
- Don't change the rules along the way: your affiliates recommend a space they trust.
Ready to set up your programme? Follow the launch guide or discover the affiliate programme for your space.