plus counterarguments for those who say they don’t.
by marc rosenberg
how to bring in new partners
partners have it great. if a staff person really gets a proper, thorough understanding of why it’s fantastic to become a partner in a cpa firm, there are almost no reasons for not wanting to be a partner. well, there are a few, but we’ll discuss them later in the post.
more: nine reasons to make someone a partner | tell potential partners what it takes
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- the money. sorry, i probably shouldn’t have led with this one. i struggled with where to put it. if i put it first, you might think i’m saying that money is everything, but i certainly don’t feel that way. if i put it last, some might think it’s the least important, but that is not the case either. if i bury it in the middle, it might not get your attention.
in 2020, the income of equity partners in cpa firms under $20 million in revenue (99 percent of all multipartner firms) averaged $300,000 to $500,000, depending on their size and location. this number is substantially higher for firms larger than $20 million. this is more money than 95 percent or more of all people in north america earn and is almost always substantially higher than their parents earned. no question: the money is wonderful.
as parents, we try to counsel our children on a career to pursue. some parents advise their kids to pursue their passion, regardless of the hurdles. others advise their children to pursue a noble career that will enable them to earn a nice living. i always have advised young people, including my own children, that it is quite possible to have both: a career that you are passionate about and that pays well. that’s the overarching reason why staff should want to be a partner. if you are not passionate about the profession of public accounting, that might be a good reason not to pursue a partnership.
- ownership, from two points of view. first, as a partner, you will be an owner in a business (for 99 percent of you, it will be a small business) that is almost guaranteed to increase in value over time. for new partners, this increase may be three to 10 times its original value. second, as an owner of a small business, you will be an entrepreneur. as such, you will have virtually unlimited freedom and flexibility to run your part of the firm and decide how you spend your time.
- challenging, interesting work. the work performed by partners is much more sophisticated and challenging than staff-level work. the focus of partner work shifts to solving people’s problems, planning and relationships, as opposed to the more technical work of staff. summary: partner work is cool!
- relationships with your clients. it’s been well-documented in numerous psychological studies that the happiest people are those who have healthy relationships with other people. relationships improve the quality of their lives and bring them joy. when you are a partner, the major relationships in your life, besides your family and friends, are the clients you work with. partners love their clients and clients love them back. life doesn’t get much better than that.
- responsibility. virtually all partners manage a sizable client base. this could range from several hundred thousand dollars to several million dollars. most partners find this high level of responsibility very satisfying. it’s frustrating at times. stressful at times. but it’s enormously satisfying to be an owner in a cpa firm with the responsibility for acquiring, retaining and growing a client base.
- prestige. i’ve got to tread carefully on this one because it touches a little on ego and vanity. but who can blame someone for feeling great about the prestige that comes with becoming a partner in a highly reputable, successful cpa firm in one’s community? prestige will never be #1 on this list, but most newly promoted partners would admit (at least to themselves) how good the ego boost feels when they become a partner.
many partners have told me that it became easier to bring in business when they were able to tell people they were a partner in such and such a firm. it’s the classic chicken or the egg argument. were they more successful at business development because of their maturity and self-confidence, and the partner promotion was merely the icing on the cake? or was the development of these traits possible only once the person was promoted to partner? this is one of those questions that have no answer.
- staff to delegate to. certainly, people who are promoted to partner were delegating work to staff before their promotion. but when someone becomes a partner, the amount of work delegated to staff increases considerably. evidence of this are these metrics from a recent rosenberg map survey: managers average about 1,400 billable hours a year, while equity partners are around 1,100, lower at bigger firms. that’s a 300-hour gap, a 21 percent difference. it’s kind of nice to have an army of people at your beck and call.
- tenure. this one is a bit tongue-in-cheek. nowhere is it written in firms’ partner agreements that partners can never be fired. but as a practical matter, unless someone commits egregious acts, there is very little chance of being terminated. cpa firms are very lax at holding partners accountable for their performance or behavior.
- lack of accountability. pardon the sarcasm, but it would be an understatement to say that there is very little partner accountability at the vast majority of cpa firms. in #2 i wrote that partners have tremendous flexibility in how they work. probably too much. if you are a manager asking yourself, “what’s so good about being a partner?” does a low amount of accountability appeal to you?
why someone might not want to be a partner
there are two sides to every discussion. the previous section might have made it seem as if you’d have to be a fool not to want to be a partner. but being a partner isn’t for everybody. the reasons listed below exclude issues not germane to this discussion, such as a desire to change careers, opportunities to join one’s family business or boredom with accounting.
- long hours. at most firms, when the staff leave, the partners are still working. some feel it sends a negative message to the staff because it implies that there is an expectation for partners to work long hours and therefore make it difficult to enjoy a healthy work-life balance. rosenberg map survey metrics corroborate this: partners average around 2,410 total work hours but the staff average is 2,280, a difference of 130 overtime hours.
counter to this: i defy anyone to find a highly successful executive in any organization, regardless of the compensation, who doesn’t put in extra time. if your goal is to be a 9-to-5er, then you shouldn’t be a cpa firm partner.
- liability exposure. when you are an owner of a business, you are liable for legal issues. for cpa firms, this is mainly malpractice.
counter to this: as a practical matter, in my 20 years of experience, i’ve seen an extremely small percentage of firms have significant legal problems. when they do, it’s rarely catastrophic.
- partner buyouts. almost all cpa firms have a substantial unrecorded liability for future partner buyouts. younger partners often have concern about the affordability of those payments, especially if there is legitimate concern about the firm staying in business when key partners retire.
counter to this: the vast majority of cpa firms have partner buyout plans that work very successfully, without putting undue financial stress on the partners. in fact, buying out older partners will most likely be the best investment a partner ever makes.
another counter: if the buyout plan looks unaffordable, the partners can always pursue an upward merger to resolve this problem.
- stress. no question. when you are a hard-driving senior officer of a dynamic, profitable company, there is stress. meeting deadlines. handling clients’ unreasonable demands. hiring and training staff who turn over at a high rate. for an owner, stress is undeniable.
counter to this: can you show me anyone who is a highly successful professional, especially a business owner, who is free of stress? here’s a lesson in psychology, taught to me by my psychologist wife, dr. ellen rosenberg. there are two kinds of stress: good stress and bad stress. good stress, though it doesn’t always feel good, drives you to achieve better things, makes you creative and stronger. bad stress is not good for your health. examples are a tragic death of a family member or a natural disaster. most of the stresses of being a partner in a cpa firm are good stresses.
- it takes a long time to make partner. accounting today reported that it takes 10 or more years to make partner at two-thirds of all firms. my anecdotal experience is that most new partners are 32 to 40 years of age. that means they will work 11 to 18 years before making partner.
counter to this: there is none, other than the old saying that patience is a virtue. i personally think firms take too long to promote staff to partner, so i see why some staff are unwilling to wait.
so staff, if you like your firm, you like your work and you want to have a successful, lucrative professional career, these obstacles should not stop you from pursuing a partnership.
partners: sell your staff on what a great job you have!
talk to your young staff about why being a cpa firm partner is an awesome career. but don’t stop there. describe the benefits of being a staff person at your firm: the interesting, challenging work they’ll be assigned, the excellent compensation potential and advancement opportunities, their own personal baptism to the world of business. then watch what happens.
a star will be born.
give your stars access to cutting-edge technology. provide constant training and feedback and flexible work options, especially for people who want to combine careers with raising a family. build team spirit and go beyond it to a team orientation to servicing clients. make your staff understand how their work contributes to the overall success of the firm, and more than that, why they should care.