The old formulas don’t work anymore.
By Marc Rosenberg
Author of How to Bring in New Partners
At one time, calculating and structuring the buy-in for a new CPA firm partner was fairly simple and uniform across the profession. But things have changed. Until recently, you’d start with the total value of the firm, defined as accrual basis capital, and then add goodwill, commonly expressed as a percentage of fees.
So, let’s run the numbers and see why firms are looking for alternatives and what they’re finding. We’ll look at trends in personal risk profiles, ownership percentages, how the buy-in is paid, guarantees to banks, the number of years to pay the buy-in, who the buy-in is paid to, and last, but not least, sweat equity.
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