How much can you pay a partner for each sale?

Many businesses pick a partner reward by copying someone else: 20%, 30%, even 50%. But a copied number says nothing about what your business can afford. Two shops with the same price can have very different costs. The same reward can be fine for one and a loss for the other.

A better way is to start from one sale. Once you know what it brings in, what it costs and what you want to keep, the most you can pay a partner is simple maths, not a guess.

If you are a partner: this guide shows how a business decides your reward, so you can judge whether an offer is fair and likely to last.

Why copied percentages go wrong

• They ignore your costs. A 30% reward on a product where you only keep 35% leaves almost nothing after fees and refunds.
• They ignore refunds. If one order in ten comes back, every reward paid on it is lost money unless you plan for it.
• They ignore other spending. Discount codes and partner tools cost money too. Add them to a big reward and a sale can turn into a loss.
• They are hard to lower later. Cutting a reward after launch upsets partners. Start with a number you can keep.

Step 1: Decide which sale you reward

Be clear about what counts: a paid order, the first subscription payment, or a booked call that becomes a customer. This decides which amount of money you work from.

Use the money you actually keep: the price after tax, after any discount and after platform fees. For subscriptions, decide if you reward the first payment only or a set number of months.

Step 2: Take away the cost of each sale

• The cost of making and delivering the product, or hosting and support for software.
• Payment fees.
• Money set aside for refunds and returns, on average.

What is left is what one sale earns you before you spend anything to win the customer.

Step 3: Decide how much profit you keep

Each sale needs to leave something for wages, rent and growth. Decide how much you want to keep and write it down.

The gap between what the sale earns and what you keep is what you can afford to pay per sale to win that customer, through partners or any other way.

Step 4: Split what is left

Partner sales often have other costs: the discount code the partner shares, material you make for them, and the tools and time to run the program. Take those away first.

The rest can go to the partner reward. Many businesses keep a little back so they can give top partners a bonus later.

An example (illustrative)

Imagine an online shop selling a product for $100 after tax. The numbers are made up to show the method.

1. Money kept from one sale: $100.
2. Product and shipping $40, payment fees $3, refunds set aside $5. Left: $52.
3. Profit the shop wants to keep: $30. Can afford per sale: $22.
4. Discount and program costs per sale: $7. Left: $15.
5. The shop pays partners $12 per sale and keeps $3 for future bonuses.

A copied 30% reward would have cost $30, twice what the shop can afford. It would lose money on every partner sale while sales looked like they were growing.

When the numbers don't work

Sometimes there is little or nothing left to pay. That is useful to know before you start. Some honest options:

• Raise the price, or reward a bigger sale such as a bundle or yearly plan.
• Lower your cost per sale, for example delivery or payment fees.
• Keep less profit on new customers if you know they come back and buy again.
• Offer other rewards, like early access or free product.
• Work with fewer partners whose followers really buy.

Checklist before you set a reward

• The sale you reward is written in one sentence.
• Amounts are after tax, discounts and fees.
• Refunds are planned for.
• Your profit goal is agreed.
• Other partner costs are counted first.
• There is a little left for bonuses.

A second example: a monthly subscription (illustrative)

Now imagine an app that costs $20 a month. Again, the numbers are made up to show the method.

1. Money kept each month after tax and fees: $19.
2. Hosting and support per customer: $3 a month. Left: $16 a month.
3. On average, customers stay about 10 months, so one customer earns about $160 in total.
4. The business wants to keep $100 of that. It can afford about $60 to win the customer.
5. It pays partners 30% of the first 6 months: about $34 per customer, and keeps the rest for tools and bonuses.

The key is to only count months you are fairly sure of. If you don't yet know how long customers stay, reward fewer months and add more later once you have real numbers.

Fixed amount or percentage?

• A fixed amount (for example $12 per sale) is easy to understand and suits products with one price.
• A percentage (for example 12% of the order) suits shops where order sizes vary, because the reward grows with the order.
• Whichever you choose, check it against your biggest discount and your smallest order, so no single sale turns into a loss.

Rewarding customers who come back

Some customers buy again, or keep paying every month. You can reward the partner only for the first sale, for a set number of months, or for as long as the customer stays. Paying for longer is attractive to partners, but only do it if the numbers still work when you count those future rewards.

What partners look for in a reward

Good partners compare programs. A reward that is high but unclear, or that keeps changing, puts them off. Most value three things: a fair amount, rules they can read in a minute, and confidence that the offer will still be there next month. A steady, honest reward often attracts better partners than a big number that may not last.

Common mistakes

• Working from the full price instead of the money you actually keep.
• Forgetting that refunds come back after the reward was earned.
• Adding a big discount code on top of a big reward.
• Promising rewards for life before you know how long customers stay.
• Never checking the numbers again after launch.

Try this with your own numbers in the free Cifelo calculator. It runs in your browser.