Partnerships

Channel Partner Commissions: The Math And Logic Behind This Emerging Business Strategy

This eBook from ElevateHQ combines strategic guidance with actionable tips, making it a must-read for partner management professionals.
By
Apoorv Singh
June 21, 2024

Why you should read this eBook:

This book is for sales leaders, business owners, and partner managers who want to understand the intricacies of working with channel partners. By reading this book, you'll gain insights into:

  • Identifying the right time to engage with partners.
  • Establishing clear responsibilities and fair compensation for partners.
  • Designing commission structures that motivate and reward partner performance.

Designing effective commission models

A significant portion of the book is dedicated to explaining different commission models. It talks about how having a straightforward commission structure is vital for capturing your partners' attention and ensuring they prioritize your product over others.

Common Commission Models

  • Revenue-based commission: Partners earn a percentage of the total revenue generated from their sales. For example, an 8% commission on $50,000 sales yields $4,000.
  • Flat-fee commission: Partners receive a fixed amount for each sale, regardless of the sale's revenue. For instance, a $5 flat fee per sale means earning $50 for 10 sales.

Tiered Commissions

  • Volume-Based Tiers: Commission rates increase with higher sales volumes.
  • Revenue-Based Tiers: Higher revenue generation results in higher commission percentages.
  • Performance-Based Tiers: Increasing commissions based on sales performance relative to set targets.

Establishing Fair Compensation

To compensate partners fairly, consider the following tips:

  • Align with sales cycle: The frequency of payouts should align with your sales cycle, whether monthly, quarterly, half-yearly, or annually.
  • Invoice-based payments: It's common to pay partners based on cleared invoices rather than closed deals to prevent unethical practices.
  • Profitability: Ensure your commission rates are profitable by understanding your margins and cost of sales.
  • Competitor benchmarking: Compare your rates with competitors to stay competitive while ensuring sustainability.

Addressing Edge Cases

The book covers how to handle edge cases to ensure a fair and transparent partner program. These scenarios help businesses prepare for various situations that may arise in their partner relationships.

  • Deal reopen: Compensation for previously aided deals that reopen.
  • Deal split: Allocation of commission when a partner collaborates with a sales rep.
  • Cross-selling and upselling: Structuring commissions for additional products or services sold beyond the initial deal.
  • External factors: Addressing commissions when deals are lost due to factors beyond the partner's control.

To learn about how to address them, download the eBook.

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