proactive management to reduce cost of delivery including more it, highly skilled paraprofessionals and outsourcing.<\/li>\n<\/ul>\nthese market conditions create a new normal for the characteristics firms need to look for as they attract and evaluate future equity partners. more than ever, firms will require a new breed of equity partners \u2013 partners with elevated qualities that will help grow and perpetuate the firm.<\/p>\n
the operative question that needs to be addressed is \u201cdoes the enterprise value of your next equity partner significantly<\/strong> contribute to perpetuating and growing the firm\u2019s business, maintaining and enhancing technical excellence and driving client and staff retention and has this value been demonstrated by a track record of steady and increasingly improved performance?\u201d<\/p>\nat the same time, attracting this new breed of equity partner will require that firms step up their commitment by offering enhanced rights, obligations and deferred compensation\/retirement benefits. presented below are a sample of these enhancements:<\/p>\n
\nequity partner rights include participation at the annual partners meeting to discuss general firm business and to vote on partnership agreement amendments. it\u2019s not unusual for firms to identify a certain total number of votes that need to be allocated among equity partners. as an example, one firm has a total of 1,000 votes available to all equity partners.<\/li>\n individual equity partners have the right to cast their allocation of votes determined as the product of:\n\n1,000 multiplied by<\/li>\n a fraction determined by adding:<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\nthe product of three times a compensation factor<\/strong> (the numerator equal to the equity partner\u2019s compensation for the two preceding years; the denominator equal to total equity partners compensation for the two preceding years) and<\/li>\nthe product of a cash capital factor<\/strong> (the numerator equal to the equity partner\u2019s cash capital at the end of the two preceding years; the denominator equal to total equity partners\u2019 cash capital at the end of two preceding years) and by dividing the sum of (a) and (b) for each equity partner by the sum of (a) and (b) for all equity partners.<\/li>\n<\/ol>\n\nhere is an illustration of how this would work. say there are two equity partners:<\/li>\n<\/ul>\n\nequity partner #1 has 10% of the compensation factor<\/strong> and 10% of the cash capital factor<\/strong>. equity partner #1 has 10% total compensation and cash capital.<\/li>\nequity partner #2 has 90% of the compensation factor<\/strong> and 90% of the cash capital factor<\/strong>. equity partner #2 has 90% of the total compensation and cash capital.<\/li>\nequity partner #1 would get 10% of the 1,000 votes or 100 votes; equity partner #2 would get 90% of the 1,000 votes or 900 votes.<\/li>\n<\/ol>\n\nownership in an accounting firm is essentially the same as ownership in any commercial enterprise. ownership has both potential upside and potential risk and an investment is required to fund operations. upon admission into the partnership, individual equity partners have an obligation to remit cash capital of a predetermined amount (same amount for every equity partner; usually $50,000 to $300,000 per partner at the top 100 firms \u2013 depending on the philosophy of debt vs. partner capital to fund operations and investments). the initial contribution is usually between 40% to 50% of the predetermined amount.<\/strong> annually a certain percentage (typically 10%) of year-end bonuses for all equity partners will be held back as additional cash capital until the total predetermined amount is remitted. cash capital is entitled to an annual interest payment. the firm\u2019s executive committee will annually determine the interest rate that is attributed to cash capital. cash capital is returned upon retirement or withdrawal.<\/li>\nthe new breed equity partner is entitled to a deferred compensation\/retirement benefit. to be competitive in the marketplace, this benefit is generally between 200% and 300% of average annual compensation during the three highest out of the last five preceding years payable over 10 years. vesting occurs over a 10-year period pro ratably. payments generally are made during 10 years following retirement or withdrawal.<\/li>\n if the firm is sold, acquired or merged up, the new breed of equity partner is entitled to an allocation of the proceeds. allocation methodologies are usually outlined in the firm\u2019s partnership agreement. it is not unusual for the allocation methodologies to mirror the compensation factor<\/strong> and the cash capital factor<\/strong> referred to above.<\/li>\n<\/ul>\nover the years, many accounting firms have gotten complacent as to who they have admitted into their firms as equity partners. many lowered the bar because \u201csomeone has to do the work.\u201d as a result, many accounting firms do not have a sufficient number of equity partners who have the potential to perpetuate and grow these practices.<\/p>\n
if a firm has its principal strategy as going it alone and remaining independent, there needs to be a paradigm shift. these\u00a0firms need to recognize that there is a new normal that requires a new breed of equity partner \u2013 and firms have to be willing to enhance ownership benefits.<\/p>\n","protected":false},"excerpt":{"rendered":"
7 tactics to address the “new normal.”<\/strong> \nby domenick j. esposito<\/em> \n8 steps to great<\/a><\/em><\/p>\n","protected":false},"author":1596,"featured_media":49054,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":""},"categories":[3120,9],"tags":[1052,1124],"class_list":["post-51574","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-pro-member-exclusive","category-strategy","tag-partners","tag-partnership"],"acf":[],"yoast_head":"\nare you attracting the new breed of equity partners? - 卡塔尔世界杯常规比赛时间<\/title>\n \n \n \n \n \n \n \n \n \n \n \n \n \n\t \n\t \n\t \n \n \n \n \n \n\t \n\t \n\t \n