Business
Commission Calculator
Works commission, where the basis matters more than the rate.
Result
Paying commission on revenue rewards volume; paying on gross profit rewards margin. If your reps have discounting authority, revenue-based commission quietly encourages them to use it.
Get a Free Business AuditHow the calculation works
Commission as a percentage of revenue or as a share of gross profit, with tiering where it applies. The basis changes the incentive completely: revenue commission rewards volume at any price while profit commission aligns the salesperson with the outcome, which matters wherever they influence the price.
What moves the number
- Whether the basis is revenue or gross profit.
- Whether the salesperson influences the price.
- Tiering thresholds and how they are set.
- Whether commission is paid on invoice or on collection.
Where this one goes wrong
Paying commission on revenue where the salesperson can discount is an invitation to discount, since a lower price wins more deals and costs them only a fraction of the margin given away. Base it on gross profit in that situation. Paying on collection rather than on invoice is the other protection, since commission paid against an invoice that is never settled is a loss twice over.
Before you quote
- Base commission on gross profit where price is influenced.
- Pay on collection rather than on invoice.
- Set tier thresholds from achievable targets, not aspirations.
Questions
About this calculator
Revenue or gross profit commission?
Gross profit wherever the salesperson influences the price, since revenue commission rewards discounting: a lower price wins more deals and costs them a fraction of the margin given away. Revenue commission suits fixed-price selling.
When should commission be paid?
On collection rather than on invoice, since commission paid against an invoice that is never settled is a loss twice over. It also aligns the salesperson with helping resolve slow payment rather than ignoring it.
How should tiers be set?
From achievable targets rather than aspirations, because a tier nobody reaches is not an incentive. Tiers work when the next one is in sight; they demotivate when the first threshold is already beyond a realistic month.
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How to use this calculator
- Sales value ($). Enter your own figure; the page starts at $85,000.
- Commission rate (%). Enter your own figure; the page starts at 6%.
- Commission paid on. Enter your own figure; the page starts at Revenue.
- Gross margin (%). Used when commission is paid on profit.
- Base salary for the period ($). Enter your own figure; the page starts at $3,000.
The result updates as you type, so you can try a figure, see what it does to commission earned, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Sales value | $85,000 |
| Commission rate | 6% |
| Commission paid on | Revenue |
| Gross margin | 42% |
| Base salary for the period | $3,000 |
What comes out
| Result | Value |
|---|---|
| Commission earned main result | $5,100.00 |
| Total pay including base | $8,100.00 |
| Cost as a share of sales | 9.53% |
| Gross profit left to the company | $27,600 |
Commission of $5,100.00 plus base gives total pay of $8,100.00, 9.53% of sales value, leaving $27,600 of gross profit.
How sensitive the answer is
Holding everything else steady and changing only sales value, this is what happens to commission earned. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Sales value ($) | Commission earned |
|---|---|
| $42,500 | $2,550.00 |
| $63,750 | $3,825.00 |
| $85,000 example above | $5,100.00 |
| $127,500 | $7,650.00 |
| $170,000 | $10,200.00 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Sales value ($)
- A money amount, starting at $85,000.
- Commission rate (%)
- A percentage, between 0 and 100, starting at 6%.
- Commission paid on
- Choose from Revenue, Gross profit.
- Gross margin (%)
- Used when commission is paid on profit.
- Base salary for the period ($)
- A money amount, starting at $3,000.
What the results tell you
| Result | What it is |
|---|---|
| Commission earned | The headline result. A money figure. |
| Total pay including base | A money figure. |
| Cost as a share of sales | A percentage. |
| Gross profit left to the company | A money figure. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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