Before launching an affiliate program, you need to understand the true cost. Beyond commission payments, there's software, management time, and often-overlooked expenses that affect your total investment.
This guide breaks down what running an affiliate program actually costs, so you can budget appropriately.
Cost Categories
Affiliate program costs fall into four categories:
- Software/Platform costs — The tools you use to run the program
- Commission costs — What you pay affiliates for referrals
- Operational costs — Time and resources to manage the program
- Hidden costs — Often-forgotten expenses
Let's examine each.
Software/Platform Costs
Purpose-Built Affiliate Software
Most SaaS companies use dedicated affiliate software:
| Platform | Starting Price | Notes |
|---|---|---|
| PromoteKit | $39/month | Flat fee, Stripe-native |
| Rewardful | $49/month | Simple and straightforward |
| FirstPromoter | $49/month | Revenue-based tiers |
| Tapfiliate | $89/month | More features, higher price |
| PartnerStack | $500+/month | Enterprise-focused |
Typical range: $40-200/month for small-to-medium programs.
Watch for:
- Revenue caps requiring plan upgrades
- Hidden fees for features you need
Affiliate Networks
If using networks like ShareASale or CJ Affiliate:
- Setup fees: $0-500
- Monthly minimums: $0-100
- Transaction fees: 20-30% of commissions
- Additional fees for features
Networks are generally more expensive than self-hosted software, but provide access to established affiliates.
Build vs. Buy
Building in-house tracking costs:
- Development time: 80-200+ hours
- Ongoing maintenance: 5-10 hours/month
- Opportunity cost of not working on your product
For most companies, buying software is more cost-effective than building.
Software Cost Summary
Budget: $50-200/month for software
Annual: $600-2,400
Commission Costs
This is typically your largest expense.
Typical Commission Rates
| Commission Type | Typical Rate | Example Cost |
|---|---|---|
| Recurring | 15-30% | $20-30/month per $100/month customer |
| One-time (percentage) | 20-50% of first payment | $20-50 per $100 first payment |
| One-time (flat) | $50-200 | Fixed per customer |
Calculating Commission Costs
Recurring commission example:
Your average customer:
- Pays $100/month
- Stays 24 months
- LTV = $2,400
At 25% recurring commission:
- Monthly commission: $25
- Lifetime commission: $600
- Commission as % of LTV: 25%
One-time commission example:
Same customer ($100/month, 24-month lifetime):
- One-time commission: $100
- Commission as % of LTV: 4.2%
Recurring is more expensive but often worth it for affiliate motivation.
What to Budget
Early program (Year 1): Commission costs are usually 5-15% of affiliate-generated revenue.
Mature program (Year 3+): As top affiliates earn higher tiers and your program grows, might reach 20-30% of affiliate revenue.
Example:
- Affiliate revenue: $10,000/month
- Commission rate: 25%
- Commission cost: $2,500/month
Commission Cost Summary
Budget: 15-30% of affiliate-generated revenue
Not a net cost: You only pay when you earn revenue. $2,500 in commissions means $7,500+ in revenue you wouldn't otherwise have.
Operational Costs
Running a program takes time.
Program Management
Small program (< 50 affiliates):
- 2-5 hours/week
- Can be done by founder or marketing person
Medium program (50-200 affiliates):
- 10-20 hours/week
- Part-time dedicated person or significant time from existing staff
Large program (200+ affiliates):
- Full-time affiliate manager
- Support staff for affiliate inquiries
Tasks include:
- Reviewing and approving applications
- Answering affiliate questions
- Creating and updating marketing materials
- Monitoring for fraud or policy violations
- Building relationships with top affiliates
- Recruiting new affiliates
- Processing payouts (if not automated)
Staff Cost Calculation
DIY (founder/existing staff):
- No direct cost
- Opportunity cost of your time
Part-time help:
- Contractor: $25-75/hour
- 10 hours/week = $1,000-3,000/month
Full-time affiliate manager:
- $50,000-80,000/year salary
- Plus benefits, overhead
Marketing Materials
Creating affiliate assets costs:
DIY:
- Your time
- Canva/basic tools: Free-$15/month
Professional:
- Designer: $50-150/hour
- Video production: $500-5,000
- Copywriter: $50-200/hour
Initial asset creation: $500-5,000 depending on quality level Ongoing updates: $100-500/quarter
Operational Cost Summary
Small program: 5-10 hours/week of time, minimal cash Medium program: $1,000-3,000/month for dedicated help Large program: $5,000-8,000/month for full-time staff
Hidden Costs
Often overlooked but real expenses:
Payment Processing Fees
When you pay affiliates:
- PayPal: 2-4% per transaction
- Wire transfers: $20-50 per transfer
- ACH: $0.50-1.00 per transfer
On $5,000/month in payouts:
- PayPal fees: $100-200
- ACH fees: $50-100
Tax and Legal
- Bookkeeping for 1099/W-9 management
- Legal review of affiliate terms
- International tax complexity
Budget: $500-2,000/year for accounting/legal help
Fraud Losses
Despite best efforts, some fraud slips through:
- Fake referrals paid before detection
- Chargebacks from fraudulent customers
- Commission clawbacks that can't be recovered
Budget: 1-3% of commission payments
Opportunity Cost
Time spent on affiliates is time not spent on:
- Product development
- Other marketing channels
- Direct sales
This is real but hard to quantify.
Hidden Cost Summary
Budget: Add 10-15% to visible costs for hidden expenses
Total Cost Scenarios
Scenario 1: Small Bootstrap Program
Monthly costs:
- Software: $39
- Commissions (on $5,000 revenue): $1,250
- Your time: 5 hours/week
- Payment processing: $50
- Total cash: ~$1,350/month
- Net revenue: $3,650/month
Scenario 2: Growing Program
Monthly costs:
- Software: $150
- Commissions (on $25,000 revenue): $6,250
- Part-time manager: $1,500
- Marketing materials: $200
- Payment processing: $200
- Total cash: ~$8,300/month
- Net revenue: $16,700/month
Scenario 3: Mature Program
Monthly costs:
- Software: $300
- Commissions (on $100,000 revenue): $25,000
- Full-time manager: $6,000
- Support staff: $2,000
- Materials/tools: $500
- Payment/admin: $1,000
- Total cash: ~$34,800/month
- Net revenue: $65,200/month
Is It Worth It?
ROI Calculation
Affiliate channel ROI:
ROI = (Revenue - Total Costs) / Total Costs × 100
Scenario 1 example:
- Revenue: $5,000
- Costs: $1,400
- ROI = ($5,000 - $1,400) / $1,400 × 100 = 257%
Compare to other channels:
| Channel | Typical CAC | Notes |
|---|---|---|
| Affiliate | $200-400 | Pay for results |
| Google Ads | $100-500+ | Pay regardless of conversion |
| Content marketing | Variable | Long time to results |
| Sales team | $500-2,000 | Salaries + commission |
When It's Worth It
Good economics:
- LTV > 3x commission costs
- Affiliate CAC < other channel CAC
- Net profit from affiliate revenue is positive
Additional value:
- Content created for you (SEO benefit)
- Brand exposure you can't buy
- Diversified acquisition channels
When to Reconsider
Warning signs:
- Commission costs > 40% of revenue
- Affiliate customers have significantly lower LTV
- Program requires more management than value produced
- Better ROI available in other channels
Budgeting Recommendations
Before Launch
One-time costs:
- Legal review of terms: $500-2,000
- Initial asset creation: $500-2,000
- Software setup/training: Included or $0-500
First month budget: $2,000-5,000 (mostly one-time)
Monthly Operating Budget
Year 1 formula:
Monthly budget = Software + (Projected affiliate revenue × 0.30) + Time value
Example:
- Software: $100
- Projected revenue: $3,000
- Commission reserve: $900
- Your time (10 hours × $50): $500
- Budget: $1,500/month
Scaling Budget
As program grows:
- Commission costs scale with revenue (built into unit economics)
- Software may need upgrades
- Management time increases
- Consider dedicated staff at $20,000+/month affiliate revenue
Cash Flow Consideration
Commission timing:
- Revenue arrives: Day 0
- Commission qualifies: Day 30-60
- Payout: Day 45-75
You receive customer payments before paying commissions, creating positive cash flow timing.
Cost Optimization Tips
Software
- Start with basic tier, upgrade as needed
- Avoid percentage-of-payout fees if scaling
- Use annual billing for discounts
Commissions
- Set rates you can sustain long-term
- Use tiered structures to reward performance without overpaying
- Monitor affiliate customer LTV vs. commission costs
Operations
- Automate everything possible (payouts, approvals, reporting)
- Create thorough documentation to reduce support
- Build templates for common tasks
Quality Over Quantity
- Fewer, better affiliates cost less to manage
- High-quality referrals justify commission costs
- Fraud prevention saves money
Key Takeaways
- Software costs: $50-200/month
- Commission costs: 15-30% of affiliate-generated revenue
- Operational costs: Varies with program size; budget time or money
- Hidden costs: Add 10-15% buffer
The bottom line: A well-run affiliate program typically costs 25-40% of the revenue it generates. The remaining 60-75% is profitable revenue you wouldn't have otherwise.
When affiliate CAC is lower than alternatives and LTV is healthy, the program pays for itself many times over.