Adding an Affiliate Commission to An Offering in a Business Plan Pro Forma
Q: I've set up an affiliate sales channel, but I don't see how to add an affiliate commission that I will be paying my affiliates. Can you please provide some guidance on how to do this in your business plan pro forma app?
An affiliate commission is modeled at the offering level like any type of Revenue Share in our app. That means that if you have an affiliate channel selling an initial offering, but then you are upselling another offering and not paying an affiliate commission, you can add the commission on Offering #1, link the sales forecast of Offering #2 to Offering #1 and simply don't add the affiliate commission expense to the second offering. This is critical to really nailing down your customer acquisition cost (CAC) properly for each distinctive offering.
A Revenue Share is typically used for situations such as the following:
You have an app hosted in an app storeYou sell through an affiliate network or affiliate channelYou have a revenue or royalty-based marketing alliance or licensing agreementYou have a retail lease that calls for a royalty
To quickly and easily set up your affiliate commission, do the following:
1. Be sure you've configured the model for a Revenue Share in the General Setup menu as shown below:
2. Enter the proper percentage of the commission under Revenue Share in the Offering assumptions input menu for each Offering where your affiliate commission applies (step #2 in our example here shows an affiliate commission of 35%):
3. Enter how you will be billing the customer in the step #3 shown below (we've opened up our Tips to show you the explanation of why this is important). The goods news is that you don't need to know how accrual accounting works to satisfy GAAP or IFRS accounting standards, but our business plan pro forma app will automatically do the accounting and prepare your statements accurately for you given how your Revenue Share is billed and collected. Some affiliate networks do the billing and collecting and then pay you the net, while others are billed and collected by you and then you pay them. Simply select which method of billing will be used in your affiliate network setup.
