Sales Commission Calculator

What is sales commission?

The sales commission is a fee that the company has to pay to the third party or the salesman as a reward for their generated sales. 

The sales commission usually is proportional to the sales volume. Due to that fact, it is a variable cost of marketing. 

The percentage rate is always set before any marketing activities start, and since the value depends on the sales volume, the marketing cost is very predictive. That is why this form is prevalent.

The perception of sales commission depends on the perspective. For some, it could be the cost. For others, it's revenue. 

Who can benefit from the sales commission calculator?

Business owners

This tool allows business owners to estimate marketing costs, prepare budgets, and plan future marketing activities.

Affiliate marketers

Affiliate marketers can estimate the revenue they receive from their marketing activities. 

How to calculate sales commission?

The correct calculation of sales commission is crucial for the performance evaluation of a marketing campaign. Any mistake may lead to the wrong conclusion and generate a loss in revenue as a result.

More importantly, since this calculation is a base for the billing between companies, any mistakes could destroy trust between partner companies. 

The percentage calculations may be tricky, and it's easy to make silly mistakes. That's why most marketers prefer to use dedicated tools.

Sales commission formula

If you wish to calculate the value of the commission for a given rate, use the formula below.

Commission = Price * Sales Commission

Where:

• Price - the selling price of the product or revenue from the campaign
• Sales Commission - the percentage value 

Revenue after commission formula

If you wish to find out your revenue after the commission is deducted, use the formula below. 

Revenue = Revenue - Revenue * Sales Commission

Where:

• Revenue - the revenue from the campaign
• Sales Commission - the percentage value 

How high should the price be to cover the commission 

Use the formula below to find out how to set your prices to guarantee a specific revenue after the commission is deducted.

Revenue = Price / (1- Sales Commission)

Where:

• Price - the selling price of the product or revenue from the campaign
• Sales Commission - the percentage value 

Final thoughts

In order to run profitable marketing campaigns, you need to ensure that the sales commission is not too high. 

The sales commission should not exceed your margin, or if you focus on recurring customers, it should be lower than the customer's lifetime value. 

What's more, since the commission is not the only cost of running a business, there should always be some margin left to cover other costs of operations and profits. 

Authors

Created by Lucas Krysiak on 2022-07-20 16:46:40 | Last review by Mike Kozminsky on 2023-11-01 13:20:36