Worked example
A rep sells $500,000 of new business at 10%, $300,000 of renewals at 4% and $100,000 of services at 6%.
| Input | Value |
|---|---|
| Line 1 revenue | $500,000.00 |
| Line 1 commission rate | 10% |
| Line 2 revenue | $300,000.00 |
| Line 2 commission rate | 4% |
| Line 3 revenue | $100,000.00 |
| Line 3 commission rate | 6% |
| Result | Value |
|---|---|
| Blended commission rate | 7.56% |
| Total commission | $68,000.00 |
| Total revenue | $900,000.00 |
| Line 1 share of commission | 73.53% |
| Line 2 share of commission | 17.65% |
| Line 3 share of commission | 8.82% |
| Line 4 share of commission | 0% |
- Line 1: revenue × 10%: $50,000.00
- Line 2: revenue × 4%: $12,000.00
- Line 3: revenue × 6%: $6,000.00
- = Total commission: $68,000.00
- Total revenue: $900,000.00
- Blended rate: commission ÷ revenue: 7.56%
How the blended rate is calculated
Line commission = line revenue × line rate
Blended rate = (sum of line commissions) ÷ (sum of line revenue)
Line share of commission = line commission ÷ total commission
The blended rate is a revenue-weighted average, not the simple average of the rates. In the example, the simple average of 10%, 4% and 6% is 6.67%, but the blended rate is about 7.56% because new business, the highest-paying line, is more than half of revenue.
What the blended rate is useful for
- Budgeting: multiply forecast revenue by the blended rate to estimate commission cost, then refine it with the commission budget calculator.
- Plan design: check that the mix you want to encourage actually pays more. If renewals carry most of the commission, the plan may reward account maintenance over new logos.
- Comparison: compare a rep’s blended rate with the company-wide cost of sales from the total commission rate calculator.
For a single deal at one rate, the commission calculator is simpler. Terms like effective rate are defined in the glossary.
Limitations
- Flat rates per line only: tiers, accelerators and caps are not applied.
- The result describes one period’s mix; a different mix next period gives a different blend.
- Estimates only — your signed compensation plan governs what is paid.
Frequently asked questions
What is a blended commission rate?
It is the single rate that would produce the same total commission on the same total revenue: total commission divided by total revenue across every product line or deal type.
Why is the blended rate not the average of my rates?
Because each rate applies to a different amount of revenue. Lines with more revenue weigh more, so the blend leans toward the rate of your biggest line.
Can I use it for more than four lines?
Group smaller lines that share a rate into one line, or run the calculator twice and combine the totals: add the commissions and the revenue, then divide.
Does a higher blended rate mean a better plan?
Not on its own. A higher blend means more commission per dollar of revenue; whether that is good depends on the margin of each line and the behavior the plan is meant to drive.