Recruiting partners step 2: Build your partner commission structure

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Who is this article for?
This article is part of a series intended for anyone who would like to grow their program and recruit additional partners.

Partnerships can provide immense value to your business in terms of accelerating customer acquisition and revenue — but for that to happen, your business needs to provide value back to partners to keep them motivated.

Unsurprisingly, monetary commissions are the key to almost every successful partner program. The more partners can earn from promoting your product, the more likely they are to dedicate their time and resources to promoting it. Let’s be honest, incentives work.

How you choose to pay partners is one of the most important decisions to make for your program’s success.

What types of conversions will you pay partners for?

Hint: They should be tied to revenue!

For SaaS partner programs, you should almost always only pay partners when they drive paying customers back to your business.

Some partner programs, especially in the B2C space, will pay partners for driving clicks or free sign-ups. Best practices in B2B are a bit different — for instance, you should generally avoid paying partners for conversions that don’t correlate to revenue because:

  1. Non-revenue generating conversions can hurt the profitability of your partner program. Paying partners only when they produce paying customers ensures that you’re not losing money on paying partners, because the commission should always be a fraction of the amount the customer pays.
  2. Non-revenue generating conversions are much more prone to fraud. Affiliate programs can unfortunately attract bad actors who are just looking to make a quick buck. Paying partners based on clicks, lead conversions, or free account sign-ups opens the door to partners submitting fraudulent conversions through their links. Paid transactions are significantly more difficult to fake.

Instead of non-revenue generating conversions like clicks, leads and free sign-ups, consider focusing on paying partners only when they drive paying customers to best safeguard your business.

If you still want to pay partners for free conversions, be sure to closely monitor the conversions partners are driving to ensure their legitimacy.

Percentage vs flat rates: How much should you pay your partners?

To decide how much your partners will earn from the conversions they drive, you first need to decide if you’ll pay partners through flat or percentage commissions.

  • Flat commission: A commission for a fixed monetary amount, e.g. “Earn $100 for each sale”
  • Percentage commission: A commission for a percentage of the transaction value, e.g. “Earn 25% from every sale”

Percentage commissions are the most common choice for SaaS partner programs, because they offer partners the opportunity to earn more when they refer more valuable customers, thereby motivating partners to drive more revenue for your business.

If you choose percentage commissions, you also need to decide how long partners can continue earning a percentage of revenue from referred customers: only once, for a limited amount of time, or for the entire customer’s lifetime.

One-time Limited recurring Unlimited recurring
Earn 30% on every customer’s first transaction Earn 50% on paid plans for the first year Earn 30% lifetime commission on paid plans

What we recommend

We analyzed the commission structures of every partner program on PartnerStack to understand what kinds of commissions the most successful programs have.

In our analysis, we find that the most successful programs pay partners on a recurring basis for at least one year, with a majority of top-performing programs having no time limit at all.

Looking at those same top-performing programs, we see that the most popular percentage commissions range between 20 to 40% of the transaction value, with some programs offering up to 50% revenue share for the first year only.

Only you can know how much of each transaction your business can afford to share with partners, but you need to make sure that your offer is compelling to partners and competitive with other products in your space. Look at what commissions other companies in your space are offering to partners before settling on your own.

You can also see what programs on PartnerStack are offering to partners on the PartnerStack Marketplace.

A note on tiers

Many partner programs use tiers to motivate partners to drive more business. Partners who sell more get access to higher tiers, which typically have more benefits including higher commission rates.

We recommend avoiding tiers when starting out. Tiers add many complications to a partner program, as you have to consider:

  • What is the right commission amount for each tier?
  • What are the criteria for upgrading partners between tiers?
  • What benefits beyond additional commissions can I provide higher-tier partners?

That’s why although tiers are a common part of partner programs, we recommend that new programs ignore tiers and instead focus on delivering a single compelling offer for their ideal partner persona.

How do you use PartnerStack to pay partners?

At PartnerStack, commissions are set using offer triggers. These can be created by going to Triggers in the vendor portal. For additional guidance, you can find common triggers here.

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