How much affiliate commission can a SaaS afford?
Most advice on affiliate commission starts with what other programs pay. That tells you what the market tolerates, not what your business can afford. Your ceiling comes from four numbers you already have: revenue per account, gross margin, churn and what it costs you to win a customer.
This guide shows the arithmetic, one worked example, and how to read the answer. You can run your own numbers in the LTV, CAC and affiliate commission calculator, which uses exactly the formulas below. Last reviewed 2026-10-10.
Start with gross profit, not revenue
A commission is a share of revenue, but you pay it out of gross profit. If hosting, support and payment fees take 20% of each payment, only 80% is left to cover everything else, including whatever you pay to acquire the customer.
Let ARPA be average revenue per account per month, and let gross margin be a decimal. Then:
- Gross profit per account per month, m = ARPA x gross margin.
- Expected lifetime in months = 1 / monthly churn.
- Lifetime value, LTV = m / churn.
Take an example that we will reuse: ARPA $49, gross margin 80%, monthly churn 3%, and a CAC of $300 from your other channels.
- m = 49 x 0.80 = $39.20 per month.
- Lifetime = 1 / 0.03 = 33.3 months.
- LTV = 39.20 / 0.03 = $1,306.67.
- LTV:CAC = 1,306.67 / 300 = 4.36.
None of these figures assume an industry average. They are this example's inputs, and yours will differ.
Payback is the constraint that binds
LTV looks generous because it counts years of future profit. A commission paid every month is cash leaving now, so the practical question is how fast a new customer earns back what you spent on them.
Simple payback is CAC / m, which here is 300 / 39.20 = 7.65 months. It assumes nobody leaves. A cohort does lose customers, so the honest figure uses the expected profit across a cohort:
Expected gross profit in the first n months, per customer won = m x (1 - (1 - c)^n) / c
where c is monthly churn as a decimal. This counts the customer as paying in month one and surviving each later month with probability 1 - c. Setting it equal to CAC and solving for n gives churn-adjusted payback. In the example that is 8.56 months, about a month longer than the simple figure.
The maximum recurring commission
Say you pay affiliates a percent r of every payment for as long as the customer stays subscribed. Each paid month then contributes ARPA x (gross margin - r) instead of ARPA x gross margin. Let f be the expected number of paid months inside your payback target T:
f = (1 - (1 - c)^T) / c
You need the cohort to earn back CAC within T months:
ARPA x (gross margin - r) x f >= CAC so r <= gross margin - CAC / (ARPA x f)
In the example with a 12 month target, f = (1 - 0.97^12) / 0.03 = 10.21 paid months. Then r <= 0.80 - 300 / (49 x 10.21) = 0.80 - 0.60 = 0.20. The most you can pay is 20% of each payment while the customer stays, with payback on target.
What moves the ceiling
The same inputs with one change at a time, using the formula above and a 12 month target unless noted:
| Change | Max recurring commission |
|---|---|
| CAC $0 | 80.0% |
| CAC $100 | 60.0% |
| CAC $200 | 40.0% |
| CAC $300 (the example) | 20.0% |
| CAC $400 | 0.0% |
| Payback target 9 months | 3.4% |
| Payback target 18 months | 36.5% |
| Payback target 24 months | 44.6% |
| Monthly churn 2% | 23.1% |
| Monthly churn 5% | 13.4% |
| Monthly churn 8% | 2.5% |
Three readings of the table:
- CAC enters as dollars, so it dominates. Each extra $100 of other acquisition cost takes about 20 points off the ceiling at this price.
- A longer target buys a higher rate. Stretching 12 months to 18 raises the ceiling from 20% to 36.5%, but it also means you wait longer to recover cash. Pick a target your cash position can carry.
- Churn quietly sets the rate. At 8% monthly churn, the same program can afford only about 2.5%.
At a 6 month target the example has no answer at all: expected profit inside six months is $218.25, below the $300 CAC, so even a 0% commission misses the target. The calculator reports that case as "None fits" instead of a negative number.
If CAC is zero, the ceiling equals gross margin. That is the break-even point where affiliate customers contribute nothing, not a rate to run.
One-time bounty instead of recurring
A bounty is paid once, so it adds to CAC instead of eating into every payment. The largest bounty that keeps payback on target is the expected profit in the window minus CAC:
Max bounty = m x f - CAC
Example: 39.20 x 10.21 = $400.05, minus $300 = $100.05, roughly two months of revenue. A flat $100 per customer and a 20% recurring commission are equivalent for payback purposes in this example. They differ in who carries the risk. A bounty is paid before you know whether the customer sticks. A recurring commission only pays while they do. The guide to program structures compares them in more detail.
From ceiling to rate
The ceiling is where payback exactly hits the target, so it is a limit and not a recommendation. A few ways to choose a rate under it:
- Leave room. If churn drifts up a point, the ceiling falls. In the table, going from 3% to 5% churn cuts it from 20.0% to 13.4%.
- Cap the commission window. Paying for 12 or 24 months limits total exposure and lets you quote affiliates a number. The calculator assumes commission is paid while the customer stays, so a capped window leaves you more room than the ceiling shows.
- Check what you can offer elsewhere. A rate under the ceiling that affiliates find unattractive may call for a bounty or a longer window, not a higher percent.
- Write the rate into terms before launch. The affiliate agreement builder produces plain-English terms with the rate, window, hold period and clawback rules in one place.
To see the revenue and payout side of a given rate, use the affiliate commission and ROI calculator.
Frequently asked questions
Should the commission be calculated on revenue or on profit?
Affiliates and customers see revenue, so programs state the rate as a percent of the payment. Your own check should still run on gross profit, which is why gross margin is an input to the ceiling.
Does this work for annual plans?
Yes, with monthly equivalents. Use ARPA as annual price / 12 and churn as the monthly equivalent of your annual churn. Annual prepayment pulls cash forward, which this monthly model does not capture, so treat the result as conservative.
What if I only have a blended CAC?
Enter it. If it includes spend that an affiliate program would replace, the result is conservative. If most of your CAC is paid ads you would keep running, it is the right number to use.
Why not just copy the percent other programs pay?
Another company's rate rests on its margin, churn and CAC, none of which you share. Their number can be a useful sanity check after you have your own ceiling.
Does the maximum already include refunds?
No. It uses the revenue you enter. If a share of payments is refunded, lower ARPA accordingly or choose a rate comfortably under the ceiling.
What payback target should I use?
The calculator takes any target. Choose the shortest one your cash flow requires, because every extra month of target raises the ceiling and also the time cash is tied up.