accounting firms worldwide are dealing with an enormously difficult challenge today\u2014one that has topped every firm\u2019s list of critical issues since the turn of the century and will continue to be a high priority for years to come. the vast majority of firms struggle with “it.”<\/p>\n
failure to solve “it” causes hundreds of firms to merge out of existence every year.<\/p><\/blockquote>\n
the \u201cit,” of course, is succession planning<\/strong><\/span>, with difficulties rooted in a perfect storm of causes:<\/p>\n\nthe huge number of baby boomer partners nearing or reaching retirement age, coupled with\u2026<\/li>\n an acute shortage of younger people with the desire and the skills to succeed them, accompanied by\u2026<\/li>\n cpa firms\u2019 historical weakness at retaining staff and developing them into leaders and future partners. evidence of this is the fact that 80% of first-generation firms never make it to the second.<\/li>\n<\/ul>\nwho needs this handbook:<\/strong><\/span><\/h2>\n1 \u2013 cpa firms<\/strong><\/span> seeking guidance on how to develop staff into partner candidates who eventually are promoted to partner. this is from two perspectives:<\/p>\n\n\n\nstructuring the financial and operating aspects of making someone a partner. we address the buy-in, ownership percentage, capital, voting, new partner compensation, duties of the new partner, equity vs. non-equity partners, partner buyout, and partnership agreement issues.<\/li>\n what firms should be doing to interest their staff in becoming partners and to develop them into partner candidates.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n2 \u2013 staff at cpa firms<\/strong><\/span> who are interested in a career in public accounting and therefore want to know what they need to do to become partners. this includes the skills they need to master in order to qualify for partner and how the process of buying into equity ownership at a firm should work.<\/p>\nyour questions answered<\/strong><\/span><\/h3>\n\n\nwhat is a partner these days?<\/span><\/h4>\n<\/li>\n\nshould we have non-equity partners?<\/span><\/h4>\n<\/li>\n\nhow do firms develop staff into partners?<\/span><\/h4>\n<\/li>\n\nwhat do you get for the buy-in?<\/span><\/h4>\n<\/li>\n\nwhen are they ready?<\/span><\/h4>\n<\/li>\n\nhow do new partners get compensated?<\/span><\/h4>\n<\/li>\n\nwhat should their buy-in be?<\/span><\/h4>\n<\/li>\n\nwhat are the 22 main provisions of a partner buyout plan?<\/span><\/h4>\n<\/li>\n\nwhat should their ownership percentage be?<\/span><\/h4>\n<\/li>\n\nhow should voting work?<\/span><\/h4>\n<\/li>\n\nhow does capital get determined?<\/span><\/h4>\n<\/li>\n\nwhat about non-solicitation agreements?<\/span><\/h4>\n \n<\/li>\n<\/ul>\nkristen rampe, cpa<\/strong><\/figcaption><\/figure>\nthere’s no delaying<\/span><\/em> the inevitable. \nbe prepared<\/span>.<\/span><\/em><\/strong><\/span><\/h2>\nby kristen rampe, cpa \n<\/em><\/strong>rampe consulting<\/em><\/span><\/h3>\nfrom the foreword<\/em><\/p>\nsuccession planning<\/strong> <\/span>eventually rises to the top of every partner\u2019s to-do list. for some, the process starts early. for others, it\u2019s the last thing they want to think about. so it\u2019s put off until there\u2019s almost no time left. in both cases, the need to bring new talent into the ownership ranks is critical for a cpa firm to remain independent.<\/p>\nsole practitioners bringing in a partner<\/strong><\/span> often have no idea where to start. multipartner firms that haven\u2019t admitted a new partner in a decade or more probably know that the way they did it last time won\u2019t work this time.<\/p>\nin 2009, marc wrote his first book about bringing in new partners at public accounting firms. the result was a short 58-page guide that assisted over 1,500 firms in their quest to admit owners in a way that worked for the practice and the individuals.<\/p>\n
today, marc uses his latest insights to comprehensively address every issue in adding owners to your firm in this newly expanded book, how to bring in new partners: a guide for firms and future partners<\/em><\/span>.<\/p><\/blockquote>\nin my work with marc, i have seen firsthand his ability to guide firms to making decisions that have a positive impact on their long-term success.<\/p>\n
this book will guide you as if marc were by your side.<\/p>\n
\nstop<\/span><\/em> grasping at straws. \n<\/strong>and start<\/span> re-engineering your firm.<\/strong><\/span><\/em><\/span><\/h2>\nby marc rosenberg, cpa<\/em><\/strong><\/span><\/h3>\nadapted from “how to bring in new partners”<\/em><\/p>\nsuccession planning challenges are causing firms to scrutinize more than ever before their methodology for bringing in new partners. from developing staff into leaders and partners to revising financial models for new partner buy-ins and buyouts for retiring partners to transitioning clients to successor partners, these long-neglected and somewhat dysfunctional issues are increasingly being brought to the front burner.<\/p>\n
compounding the challenge of bringing in new partners is the simple fact that few firms have recent<\/em> experience in gtaking on a new partner.<\/p><\/blockquote>\nindeed, there are thousands of firms that have never made anyone<\/em> a new partner. they are grasping at straws trying to figure out a coherent plan for bringing in new partners that’s a win-win for both the existing partners and the new ones.<\/p>\nundoing firms\u2019 archaic practices<\/strong><\/span><\/h4>\nif any of the characterizations below sound familiar, you need to re-engineer your approach to bringing in new partners:<\/p>\n
1 \u2013 no handholding<\/strong>.<\/span><\/h4>\n\u201colder\u201d partners often feel they earned their partnerships the old-fashioned way, through hard work and perseverance, without anyone \u201cholding their hand.\u201d they expect nothing less from today\u2019s young people.<\/p>\n
partners\u2019 attitudes all too often seem like this: \u201cwe want to wait until the staff show us that they have the right stuff.\u00a0 staff must come to us first<\/em> and tell<\/em> us they want to be a partner. then and only then will we step in and show them the way.\u201d<\/p>\nmany of today\u2019s older partners have a tough time accepting that this attitude has shifted in the past 10 to 20 years. hard work, ambition, and perseverance are still important. but today, it\u2019s also important to show young people the way by mentoring them and proactively<\/em> helping them develop, all of which must begin years before a staff member is ready to be a partner.<\/p>\n2 \u2013 lack of formalized criteria for making partners.<\/strong><\/span><\/h4>\none practice that greatly hinders leadership development is firms\u2019 reluctance to formalize and communicate to their staff written criteria for making partners.<\/p>\n
\nhow can staff be expected to aspire to become partners if they don\u2019t know what it takes<\/em> to become a partner and what it means<\/em> to be a partner?<\/p>\n<\/blockquote>\n3 \u2013 widely varying criteria for making partners.<\/span> <\/strong><\/h4>\nsomewhat related to the point above, firms today have a vast range of criteria for making partners, especially in the area of bringing in business. for example, some firms believe that in order to be a partner, a person has to be an accomplished business-getter; these firms will rarely promote anyone to partner without this attribute. on the other hand, some firms have little or no requirements to bring in business to qualify for a partnership. there is no consensus on this in the cpa firm industry, especially at firms under $15m in revenue.<\/p>\n
4 \u2013 inconsistencies in the system.<\/strong><\/span><\/h4>\nmany firms make new partners so infrequently that every time they bring in a new owner they change the system for buying into the firm. this makes for inconsistent and often incomprehensible methods for bringing in new partners.<\/p>\n
5 \u2013 prohibitive new partner buy-ins.<\/strong><\/span><\/h4>\nyears ago, buy-ins were huge: several hundred thousand dollars. today\u2019s new partners have neither the financial resources nor the willingness to pay these astronomical sums.<\/p>\n
\ntoday, well over 90% of firms\u2014of all sizes\u2014establish a new partner buy-in that is smaller and more affordable than in the past.<\/p>\n<\/blockquote>\n
6 \u2013 reluctance to use the non-equity partner position.<\/span> <\/strong><\/h4>\nin years past, for the most part, there was only one class of partner: an equity partner. many firms made the mistake of promoting directly to equity partner staff who lacked important talents and experience, primarily in business development and leadership skills, to function as business owners.<\/p>\n
\ntoday, cpa firms are making increasing use of a second tier of partner, the non-equity<\/em> partner.<\/p>\n<\/blockquote>\nas a result, they have raised the bar for what it takes to become an equity partner.<\/p>\n
\ncontents<\/strong><\/span><\/h2>\n\n\nwith key performance indicators and critical success factors<\/strong><\/span><\/em><\/h4>\n<\/li>\n<\/ul>\ninside “how to bring in new partners:”<\/strong> dozens of tables, charts, exhibits, illustrations, benchmarks, and forms.<\/figcaption><\/figure>\n1 \u2013 introduction<\/strong><\/span><\/h4>\n\nhow to bring in new partners: one of the hottest issues at cpa firms today<\/li>\n undoing firms\u2019 archaic practices<\/li>\n where leadership development starts<\/li>\n psst! cpas are keeping the wrong secrets<\/strong><\/em><\/span><\/li>\nwho this handbook is for<\/li>\n<\/ul>\n2 \u2013 why people are promoted to partner<\/strong><\/span><\/h4>\n\nwhy firms would want to make someone a partner<\/li>\n why staff should<\/em><\/span> want to become partners<\/li>\nwhy some don’t<\/span><\/em>\u00a0want to be a partner<\/li>\n