1. Joint Selling at Ascension
Producer and Operating Unit
Attribution Considerations

2. Joint Sales Issues
How is credit apportioned to producers with regard to achieving new-business goals and any financial incentives related thereto?
How are revenues apportioned to producers for purposes of measuring producer book size (i.e., how do we account for “splits”)?
For sales involving producers from different operating units:
What is the basis for determining which operating unit gets revenue credit for the new customer?
How are the customer-acquisition costs shared between the operating units?
Should all affected operating units enjoy some “margin” from a joint sale?
How do the finance departments determine and exchange information for reporting new business written each month?
How do human resources exchange information with regard to splits so that producer book sizes can be accurately and timely calculated?

3. Issues at Producer Level

4. Joint Sales: Producer Credit
Producers should negotiate between/amongst themselves how to split the account when they first begin to work on the opportunity:
Determine each producer’s relative percentage
Determine if the apportionment applies only to the initial sale or if books-of-business are affected (e.g., is this a “referral-only” situation or will producers have a continuing role in maintaining the customer relationship)
Determine how often they wish to revisit the apportionment percentages (annually? never?)
Producers should advise the finance departments of the arrangement via so that proper credit can be awarded for
new-business achievement, and
variable compensation calculations based on book-of-business
Remember that only one producer can own the opportunity in Salesforce, so communication from producers is critical.

5. Producer Arrangement Communication Stream
At the outset, producers:
Determine if this is a referral-only situation or continuing joint ownership.
Determine the relative percentages attributable to each producer.
Advise the finance departments of the arrangement.
[Finance departments will not adjudicate post-sales disagreements about the arrangement with producers,so this should be addressed at the outset.]
Finance departments:
Adjust Salesforce closed sales to give proportional credit to each producer.
Notify personnel who calculate producers’ books of business of the arrangement.
If more than one operating unit is involved, the units exchange earned-revenue data with regard to the accounts.

6. Illustration

7. Issues at Operating Unit Level

8. Multiple Operating Unit Considerations Issue #1: Revenue Credit
Who cares?
Total company results are the same irrespective of how this is handled – corporate is indifferent.
Producers’ personal economics have been provided for – producers are indifferent.
Management teams in individual operating units are held accountable for EBITDA and EBITDA margins – THEY CARE!
Which operating unit gets credit for the account?
For purposes of meeting operating unit new-business goals, the Salesforce results will be adjusted to reflect producers’ relative contributions
For purposes of revenue credit in income statements, the unit that will handle ongoing servicing of the account will “own” it and collect and report revenues
This makes preparation of NCF rollforward less complicated
Any revenue-sharing between/amongst operating units can be handled in a single, agreed-upon line in the NCF so that it eliminates.
Financial reporting anomalies at operating unit level:
Earned new business in the NCF rollforward (related to 2 above) may not box against written new business for the operating unit (related to item 1 above)

9. Results Without Shared Economics Why Operating Units Should Care

10. Multiple Operating Unit Considerations Issue #2: How to Share Economics
Two Possible Approaches:
#1) Commission sharing: treat shared-selling situations like a sub-broker arrangement wherein the sub-broker gets a constant % of the collected revenues. Example: for Customer A, 75% of revenues are retained by AISI-NC and 25% are paid to PAIA.
#2) Acquisition cost charge-back: operating unit not getting revenue credit for the customer account is charged for the acquisition costs incurred by a sister company in a shared-sale situation.

11. Operating Unit Shared Economics Commission Sharing Pro’s/Con’s
Agency-management systems can easily make these computations.
This approach is well understood in the industry.
Allows for varying cost structures in the units and differing resultant margins.
Cons:
Assumes that the sale has constant shared economics (i.e., not just a “referral” situation or one where ongoing split is subject to change).
The revenue sharing % for this purpose can’t be the same as the producers’ arrangement because one operating unit is bearing all the servicing costs.

12. Shared Economics Illustration Commission-sharing Approach
Likely Objection: Why should Agency A, which does all the servicing work, have the same margin % as Agency B?

13. Operating Unit Shared Economics Cost Reimbursement Pro’s/Con’s
Makes operating units “whole” from an expense perspective
Contemplates a variety of joint-sales sharing arrangements (one-time referral, changing sharing %, etc.)
Cons:
More tracking required for finance units
Only addresses cost relief, not whether all operating units should have a piece of margin in new accounts – a point of great importance in an earn-out situation

14. Shared Economics Illustration Cost Reimbursement Approach
Likely Objections:
Why should Agency A get all the margin on this effort?
Who is going to track these costs each month/quarter?

15. Recommendation Fairness & Simplicity
For joint sales with an ongoing sharing of economics between two entities, provide 25% margin to the agency not owning the customer.
For joint sales where a producer is paid a one-time referral fee only, bill back the exact amount of the referral fee without adding margin.

16. Illustration of Recommendation