The math behind a 20% for 12 months commission

A recurring affiliate commission of 20% for 12 months on a $49 a month plan pays the partner $9.80 for every month the customer stays, up to twelve months. With 5% monthly churn the customer is expected to pay about 9.2 of those twelve invoices, so the partner earns about $90 per referred customer and you collect about $450 in the same window. The headline rate is 20%; the real cost is the rate multiplied by how long customers survive. This post works that arithmetic in full, shows how churn, annual plans, upgrades and refunds move the number, and ends with a procedure for choosing a rate and the five lines to put on your program page.

What "20% for 12 months" actually promises

The phrase bundles three separate decisions, and it helps to pull them apart. The rate, 20%, is the share of each invoice that goes to the partner. The duration, 12 months, is how many invoices after the first one are eligible. The base, which is usually left unsaid, is the invoice amount, which means the commission moves when the customer upgrades, downgrades or gets a refund. A fourth decision hides inside: whether the duration counts calendar months from signup or counts paid invoices. We count paid invoices, because a customer who pauses for a month and comes back should not cost the partner a month of eligibility.

Here is the simplest case with no churn at all. $49 × 20% = $9.80 per invoice. Twelve invoices × $9.80 = $117.60. You collect 12 × $49 = $588. The partner share of revenue is exactly 20%, by construction. That is the ceiling: no referred customer can ever earn a partner more than $117.60 on this plan at these terms unless they upgrade. Everything below is about how far reality lands under the ceiling.

The expected value of a recurring affiliate commission

Customers churn, and churn is what turns a 12 month promise into something smaller. Suppose the customer pays the first invoice for certain and then, each month, has a 5% chance of cancelling before the next one. The expected number of paid invoices within twelve is a geometric sum: 1 + 0.95 + 0.95² + ... + 0.95¹¹. That sum is (1 − 0.95¹²) ÷ 0.05. Since 0.95¹² is about 0.540, the result is about 9.2 invoices.

So the expected partner payout is 9.2 × $9.80 ≈ $90, and your expected revenue in the same window is 9.2 × $49 ≈ $450. The ratio is still 20%, but the absolute number the partner sees is $90, not $117.60. Partners who understand this will ask about your churn before they ask about your rate, and the good ones do.

Read the table from the partner's side. At 2% churn the program is worth $105 per customer to them; at 8% it is worth $77. Same rate, same plan, 36% difference in what they earn. This is why a founder who says "we pay 20%" and a founder who says "we pay 20% and our monthly churn is under 3%" are making two different offers, and only the second one is comparable across programs.

Lifetime commission versus 12 months

Some programs offer a recurring affiliate commission for the lifetime of the customer. The same arithmetic shows what that costs. With no cap, expected paid invoices are simply 1 ÷ churn. At 5% monthly churn that is 20 invoices: the partner earns 20 × $9.80 = $196 and you collect $980. At 2% churn it is 50 invoices: $490 to the partner against $2,450 collected. At 8% it is 12.5 invoices, which is barely more than the capped program.

The lesson is not that lifetime is bad. It is that lifetime is expensive precisely when your product is good. A low-churn product with a lifetime commission is promising partners a long annuity, and you should price the rate accordingly, perhaps 10% for life rather than 20%. A high-churn product gains little from the cap and can afford to drop it as a selling point. Decide with your own churn number, not with what a competitor's program page says.

Annual plans change the shape, not the share

A $490 annual plan at 20% pays the partner $98 on one invoice, in month one. Compared with the monthly case this is roughly the no-churn ceiling, paid up front, because the customer has prepaid the year. The share is the same 20%; the timing is completely different, and the timing is where the risk lives.

The risk is refunds. If your annual plan has a 30 day money-back guarantee, a $98 commission paid in week two can be followed by a $490 refund in week four. This is what the hold period is for. RelayWonder defaults to a 30 day hold before a commission becomes payable, which covers a 30 day refund window exactly. If your annual guarantee is 60 days, set the hold to 60 for that program. A refund that arrives during the hold simply produces a negative row that cancels the positive one before anything is paid; a refund that arrives after the hold produces a negative row that reduces the partner's next balance.

One more detail for annual plans: the 12 month cap. An annual invoice is one invoice. If your terms say "12 months" and you mean "12 invoices", an annual customer who renews in year two would be eligible for a second $98, which may or may not be what you intended. Say it explicitly: "20% of each invoice for the first 12 months after signup" closes the question.

Upgrades, downgrades and refunds live on the invoice

Because commission is calculated on the invoice amount, not on the plan the customer signed up with, every change in what the customer pays flows through automatically. This is what invoice-level attribution means in practice: the first payment and every renewal are matched to the partner from the Stripe invoice itself [1][2].

Three things in that table are worth saying out loud on your program page. Upgrades count, which is a genuine selling point: a partner who sends you customers that grow earns more without asking. Refunds count against, which is fair and should be stated so nobody is surprised. And the ledger is append-only, so the partner can reconstruct any balance from the rows, and so can you when a partner asks why month 7 went down.

Cash timing: when the partner actually gets paid

Expected value is one thing; a partner also wants to know when money arrives. Two defaults govern that: the 30 day hold and the $50 minimum payout. Take a partner whose only referral is one $49 customer at 20%. They earn $9.80 a month. After five invoices they have $49.00, still below $50. After the sixth invoice they have $58.80 and cross the minimum. The sixth invoice then sits in the 30 day hold, so the balance becomes payable in month seven, and it goes out in that month's payout batch, which the brand exports as a PayPal or Wise CSV and pays from its own account [3][4].

That is seven months to a first payout for a partner with one referral. It is not a problem to hide; it is a reason to say "most partners reach their first payout after their third or fourth referral" if that is true for you, and a reason to let partners carry one balance across every brand they work with, so a $9.80 from you and a $42 from someone else make a payout together instead of waiting separately.

Choosing a rate: a five-step procedure

There is no universal right rate for a recurring affiliate commission, but there is a right way to pick one. The steps below use only numbers you already have.

1. Start from gross margin. If your gross margin is 80%, a 20% commission for 12 months leaves 60% on referred revenue during the window and 80% afterwards. If your margin is 50%, 20% is a quarter of your gross profit; consider 15% or a shorter duration.
2. Multiply by your real churn. Compute expected paid invoices with the formula above using your own monthly churn for customers acquired through partners, if you have it, or for all customers if you do not.
3. Compute payout per referred customer and compare it to what you pay to acquire a customer through any other channel. If a referred customer costs you $90 spread over nine months and your other channels cost more up front, the rate is fine. If it is higher, lower the rate or the duration, not the base.
4. Look at two or three competitor program pages and note their rate, duration, cookie window and minimum payout. You do not have to match them; you have to know what a partner will see next to your offer.
5. Pick the simplest form that works: one rate, one duration, commission on invoice amount, refunds deducted. Tiered rates and bonuses can come later when you have partners to reward.

What to put on the program page

A partner compares programs in seconds, and increasingly an AI assistant does it for them by reading the page and extracting the terms. Make the terms extractable. Five lines, one number each, no paragraph of marketing between them.

• Rate: 20% of each invoice.
• Duration: the first 12 months after signup.
• Cookie window: 60 days. Personal coupon codes attribute with no click.
• Hold period: 30 days before a commission becomes payable. Refunds and disputes are deducted.
• Minimum payout: $50, paid monthly by PayPal or Wise.

If you also state your monthly churn or your typical customer lifetime, a partner can do the arithmetic in this post for themselves, and the ones who do are the ones worth having. The number they will arrive at for a recurring affiliate commission of 20% for 12 months on a $49 plan with 5% churn is about $90 per customer. Make sure it is a number you are happy to pay.