Like other processes and procedures in sales, approaching hierarchies of parent child accounts contains a lot of blurred lines and situational dependencies. Fortunately, we’ve got some experience to clear this up.
Before we explore various scenarios and share our recommendations, let’s start by answering this question:
You might see this happen when selling into franchises, distributors, and affiliates, too.
To avoid confusion, sales leaders should define rules and hierarchies around parent child accounts.
How to approach parent child accounts in sales
First, you have to approach parent child accounts in sales by establishing rules. Then you can create an appeals process for the sales rep because, as we all know, exceptions to the rules will happen.
Below, we list a few rules to consider when defining parent child accounts:
Externally:
- Who signs and pays the final agreement?
- Are you selling to different decision makers?
- Is there a different domain name or website?
- Is the headquarters on the child account different from the parent?
- How are they listed on Dun & Bradsheet?
These will help you determine what to set the opportunity as. In our university example, if the Journalism School has sole purchasing power, that may suggest that despite it being a child account, it could classify as new business for the rep.
Once you have that, then you can begin to answer internal questions.
Internally:
- Who sells to the account, the AM (renewal/upsell rep) or AE (new business rep)?
- Who gets quota or credit on child accounts?
- Does it count as new or an upsell if parent is a customer?
No matter what, you’ll have to decide if all companies are unique, no companies are unique, or some companies are unique.
For instance, a “some companies” scenario might involve a child account with purchasing power, like the Journalism School example. On the contrary, purchase orders from a franchise that are signed off on by the decision-makers at the parent account (and from the parent account’s address) would likely categorize as an upsell opportunity instead of a new business one.
Most importantly, as you’re creating rules around parent child accounts, remember that situations change often. You should remain open to changing rep credit in situations where it makes sense.
As an example, if account executives typically don’t earn commissions on upsell opportunities, but AMs do not have time to “prospect” child accounts within parent accounts, that’s a strong case toward crediting and rewarding the AE.
When should you establish child/parent account hierarchy in your CRM?
The sooner the better.
“The worst time to settle these hierarchy disputes is after the contract is signed,” our Chief of Staff Graham Collins said.
RevOps and SalesOps should have the classifications of parent child accounts established well before anything is signed, along with whether it’s new business or an upsell.
Ideally, this happens when a new account is created. But, let’s be honest, that’s incredibly challenging to maintain. So, when a new opportunity enters into your CRM, if it hasn’t been set yet, that’s when you should define it as new business or an upsell.
How to comp on account hierarchies
To compensate on parent child accounts, consider treating every child and parent account as new business, each one as an upsell, or treating some as new business and some as upsells.
When thinking of rules on how to set parameters around sales compensation for account hierarchies, consider the questions we mentioned above:
- Are you selling to a different decision-maker?
- Is there a different domain name or website?
- Is the headquarters on the child account different from the parent?
- How are they listed on Dun & Bradsheet?
This will help determine if a child account is its own unique entity.
Generally, you should aim to reward full credit — both commission and quota progress — when it’s a unique entity.
But you could also consider compensating on new child accounts as new business without retiring quota. A third option that we’ve seen is splitting the commission between an AM and AE on upsells within the account hierarchy.
Another factor to look at when deciphering between new biz or upsells is the origin of the opportunity.
- Was it a referral from the parent account? That could be an upsell.
- Did the child account independently find you or did a rep reach out? We’d consider that a new account.
That’s a lot of words to say, classifying parent child accounts and crediting appropriately to your team is a complicated beast. It’s not impossible though, you just need to set up guidelines at the onset and be willing to adjust when it makes sense for your reps and your customers.
Remember, 20% of your customers generate 80% of your revenue. Give your reps and AMs a reason to go after that 80%.
For more help with compensation plan modeling and design, visit QuotaPath’s free modeler, Compensation Hub. And, to automate your sales compensation process, including commission tracking, schedule a chat with a member of QuotaPath’s team.
