How To
How to calculate agency commission
Agency commission is a service fee applied to net media costs before billing the client. There are two common methods — and which one is used depends on market convention and agency practice.
Method 1: Markup on net
Gross (Client Cost)
Net × (1 + commission%)
Commission is added on top of the net cost. At 15%, the agency multiplies the net cost by 1.15. This is straightforward and widely used in markets where commission is treated as a surcharge.
| Variable | Value |
|---|---|
| Net media cost | $10,000 |
| Commission rate | 15% |
| Calculation | $10,000 × 1.15 |
| Client cost (gross) | $11,500.00 |
| Commission amount | $1,500.00 |
The commission is 15% of net ($10,000), not 15% of the gross invoice.
Method 2: Gross-up (commission as % of invoice)
Gross (Client Cost)
Net ÷ (1 − commission%)
Commission is treated as a share of the total invoice — i.e. the agency earns 15 cents of every dollar billed. This is common in markets following traditional media agency practice (e.g. the UK, Australia), and produces a higher gross figure than the markup method for the same stated rate.
| Variable | Value |
|---|---|
| Net media cost | $10,000 |
| Commission rate | 15% |
| Calculation | $10,000 ÷ (1 − 0.15) |
| Client cost (gross) | $11,764.71 |
| Commission amount | $1,764.71 |
Here, $1,764.71 ÷ $11,764.71 = exactly 15% of the gross invoice — not 15% of net.
Side-by-side comparison at common rates
| Rate | Markup (Net × multiplier) | Gross-up (Net ÷ multiplier) |
|---|---|---|
| 10% | $11,000.00 × 1.10 | $11,111.11 ÷ 0.90 |
| 15% | $11,500.00 × 1.15 | $11,764.71 ÷ 0.85 |
| 20% | $12,000.00 × 1.20 | $12,500.00 ÷ 0.80 |
Starting net: $10,000. The gross-up always produces a higher invoice than the markup for the same stated rate.
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