Define the baseline before designing the plan
The central question is not “How much commission can we pay?” It is “What additional retained contribution must this plan create?” A plan can increase reported revenue while transferring contribution to payouts on sales that would have occurred anyway.
Records and assumptions to state
- Decision period, currency and indirect-tax basis. (not complete)
- Comparable no-plan revenue, gross contribution and sales-support cost. (not complete)
- Eligible base: revenue, gross contribution or another precisely defined amount. (not complete)
- Marginal or retroactive tier rules, thresholds and the exact order of calculation. (not complete)
- Refund, cancellation and clawback treatment supported by the plan terms. (not complete)
- Incremental support, onboarding, administration and delivery-capacity cost. (not complete)
- Attribution assumption: which sales are incremental rather than displaced or pre-existing. (not complete)
| Input | Unit | Evidence or status |
|---|---|---|
| Revenue or contribution base | CU per period | Reconciled sales records |
| Commission rate | Percentage of named eligible base | Plan terms |
| Threshold | CU of named base per period | Plan terms |
| Refund recovery | Percentage of attributable payout | Plan terms and records |
| Support cost | CU per period or CU per sale | Business record or scenario |
Follow the contribution chain
Contribution after commission = gross contribution - commission payout - included support cost; incremental plan contribution = plan contribution - comparable no-plan contribution
- gross contribution
- Revenue less the included variable costs before commission (CU per period) — reconciled business record or user scenario
- commission payout
- Payout produced by the named eligible base, tier rules and refund treatment (CU per period) — plan terms and calculated output
- included support cost
- Incremental administration, enablement or delivery cost inside the decision boundary (CU per period) — business record or user scenario
- comparable no-plan contribution
- Contribution expected on the same period and boundary without the plan (CU per period) — reconciled baseline or explicit counterfactual assumption
The commission planner owns marginal-versus-retroactive tier calculations. This article owns the baseline and interpretation boundary.
- Freeze one comparable decision period, currency and cost boundary.
- Calculate the no-plan contribution before introducing a payout.
- Name the eligible base and apply the exact tier rules from the proposed plan.
- Apply refund or clawback treatment only to the payout it actually affects.
- Subtract incremental support and delivery cost once.
- Compare plan contribution with the no-plan baseline and expose the attribution assumption.
- Stress-test weaker incrementality, higher refunds and higher support cost before deciding.
Worked example: the same revenue can produce a different decision
Fictional monthly CU scenario, tax excluded. The simplified flat rates illustrate denominator choice; they are not recommended plan terms.
| Intermediate row | No plan | 5% of revenue | 10% of gross contribution |
|---|---|---|---|
| Revenue | 100,000 CU | 100,000 CU | 100,000 CU |
| Variable costs before commission | 60,000 CU | 60,000 CU | 60,000 CU |
| Gross contribution | 40,000 CU | 40,000 CU | 40,000 CU |
| Commission calculation | 0 CU | 5% × 100,000 = 5,000 CU | 10% × 40,000 = 4,000 CU |
| Incremental support cost | 0 CU | 1,500 CU | 1,500 CU |
| Contribution after commission | 40,000 CU | 33,500 CU | 34,500 CU |
| Difference from no-plan baseline | 0 CU | -6,500 CU | -5,500 CU |
Stress-test the assumptions that can reverse the result
| Branch | What to recalculate | Decision boundary |
|---|---|---|
| Incrementality | Reduce the share of plan revenue treated as additional rather than pre-existing. | Stop when incremental contribution no longer covers payout and included support cost. |
| Refunds and clawbacks | Increase refunded sales and apply only the contract-supported recovery rate. | Do not assume every refunded payout is recovered. |
| Support and capacity | Add enablement, administration and incremental delivery cost. | A plan that clears the payout test can still consume scarce delivery capacity. |
| Tier boundary | Test sales immediately below and above each threshold. | Inspect payout discontinuities and distinguish marginal from retroactive tiers. |
Avoid the margin-transfer traps
Review before approval
- Do not call all plan revenue incremental. (not complete)
- Do not compare rates that use different commission bases. (not complete)
- Do not mix marginal and retroactive tier arithmetic. (not complete)
- Do not apply refund recovery to more payout than the refund generated. (not complete)
- Do not omit sales support or delivery-capacity cost. (not complete)
- Do not optimise financial output by ignoring fairness, behaviour or legal constraints. (not complete)
Sales commission decision questions
- Should commission use revenue or contribution?
- Neither base is universally correct. Compare the plan’s incentives, traceability and retained contribution on the exact denominator before deciding.
- What is a normal commission percentage?
- This guide supplies no benchmark. A sustainable rate depends on the named base, contribution, incremental sales, refunds, support cost and plan terms.
- Does higher revenue prove the plan worked?
- No. Compare against a documented no-plan baseline and keep attribution uncertainty visible.
Sources and methodology boundary
- Contribution margin per unit, ratio and total — OpenStax: Supports stable contribution-margin structure; instructional examples are not benchmarks.