The 5-line calculation that kills most "lifetime commission" hype

The 5-line calculation that kills most "lifetime commission" hype

Everyone says "lifetime commissions" and pictures a yacht. Do the arithmetic instead.

— Get monthly churn (real, not the "best customers" number). Say 5%.
— Average customer life = 1 / 0.05 = 20 months.
— Multiply by your monthly commission. $15 × 20 = $300 per referral, total.
— Now subtract refunds: knock off another 8-12%.
— Now subtract the ones that never activate and churn in week one. Another chunk.

That "lifetime" referral is worth maybe $250, paid out over nearly two years, not a perpetual annuity.

The word "lifetime" is doing heavy lifting for a 20-month average.

Verdict: lifetime value is just 1/churn wearing a nicer suit.