How revenue share works
A partner refers, resells or supports a customer. Every time that customer pays you, a percentage of the payment is credited to the partner. Payments are usually totaled monthly or quarterly and paid with a statement showing which customers generated what.
Because the payment follows real collected revenue, revenue share scales with the account. If the customer upgrades, the partner earns more. If the customer downgrades or leaves, the partner earns less or nothing.
What a revenue share agreement needs to define
- Net revenue. Which amounts count and which are excluded, such as taxes, refunds, credits and one-time services.
- Attribution. Which customers belong to the partner and how that is recorded. See partner attribution.
- Rate and term. The percentage, and whether it runs for 12 months, 24 months or the life of the customer.
- Timing. When the share is calculated and paid, and any holding period before payment.
- Clawbacks. What happens when a customer is refunded after the share was paid. See clawback.
- End of the agreement. Whether the share continues on existing customers after the partnership ends.
The revenue share agreement template covers each of these.
When to use revenue share
Revenue share suits partners who stay involved after the sale: agencies that manage the account, technology partners whose integration keeps the customer using both products, and affiliates promoting self-serve plans. For a one-off introduction where the partner steps back, a referral fee on first-year revenue is usually simpler.
Example
Signal Partners, a marketing agency, refers Lumen Health to an analytics vendor. Their agreement pays 20% of net revenue for 24 months.
Lumen starts on a $2,000 monthly plan. Signal earns $400 a month. In month seven Lumen upgrades to $3,000 a month, and Signal's share rises to $600. In month 10 Lumen is credited $500 for an outage, so net revenue that month is $2,500 and Signal's share is $500. After month 24 the share ends, and the vendor keeps all of Lumen's revenue.