THE PARTNERSHIP

Plus the impact of ownership percentage on partner issues.

By Marc Rosenberg
How to Bring in New Partners

Let’s go over structuring a new partner buy-in step by step.

MORE: What Buying In Actually Means | Why Buying Into a Firm Is Such a Great Investment | The Business Side of CPA Firms | It Shouldn’t Take So Long to Make Partner | Three Types of Skills You Need to Become a Partner | Seventeen Basic Expectations of Partners | Nine Ways to Woo a Prospective Partner
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1. Calculate the value of a CPA firm as accrual basis capital PLUS goodwill. Goodwill is commonly expressed as a percentage of the firm’s annual revenue. This total value should not be given away to anyone without being paid for. Bringing someone in as an owner in a profitable, viable business for little or no buy-in makes no sense.
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Make sure the firm isn’t part of the problem.

By August J. Aquila
What Makes a Great Partnership

I’ve been dealing with underperforming or dysfunctional partners for a quarter of a century. While the underperformers and dysfunctional ones haven’t changed much in that time, the way firms are dealing with them certainly has.

MORE: When ‘Quiet Quitting’ Hits the Partner Ranks | Nine Ways to Handle Partners with Strong Views | Rate Managing Partners in Six Areas | Five Ways to Keep Your Edge as a Leader | Managing Partner: The Toughest Job in the World | Why Partners Need Written Goals
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The so-called white gloves in the accounting profession came off many years ago when dealing with competitors. They are now off when dealing with these two types of partners. In addition, modern technology of time and billing software can and does generate every conceivable productivity report. Partners are ranked from top to bottom in terms of billable hours, dollars collected, new business developed, collections, etc. There is no place for these partners to hide.
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And 11 steps to take in response.

By August J. Aquila
What Makes a Great Partnership

Over the years I have been called in to firms to help address an underperforming partner. I have learned that underperforming can mean a lot of different things and the underperformer can have many different problems.

MORE: Nine Ways to Handle Partners with Strong Views | Nine Standards for Partner Compensation | Five Ways to Keep Your Edge as a Leader | Why Partners Need Written Goals | Eight Criteria for Partnership
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I have also learned that many managing partners waste a lot time and energy either trying to “fix” the underperformer or just ignoring the 5-ton elephant in the room.
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Take a moment to focus on learning, not winning.

By August J. Aquila
What Makes a Great Partnership

Question: Since recently becoming our firm’s managing director, I’ve been engaging a number of my colleagues in discussions on how we should be concerned with delivering more value to our clients. I think this is an important issue for us going forward and find that most of my partners are on board conceptually and willing to explore the issue.

MORE: Nine Standards for Partner Compensation | 12 Points of a Good Compensation Plan | Ten Steps to a New Managing Partner | What Managing Partners Must Be Doing | Do Your Partners Pay Their Own Way? | How to Create Firm Accountability | Five Questions to Ask Your Partners about Accountability | How You Can Get Partners to Change
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However, there are a few who are have responded uncompromisingly, with rather curt, dismissive statements whenever the topic comes up. Any tips for me on how you might handle the partner who holds strong beliefs on high-stake topics and demonstrates little willingness to either listen or consider alternative views?
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You’re probably not an owner.

By Marc Rosenberg
How to Bring in New Partners

There are two components to the value of a CPA firm: capital and goodwill, the latter of which is often stated as a percentage of the firm’s annual revenue. Capital is on the balance sheet; goodwill is not.

MORE: Why Buying Into a Firm Is Such a Great Investment | Four Philosophies for Managing a CPA Firm | Public Accounting as a Business, 101 | 16 Steps to Creating a Partnership Path | Six Ways New Partners Differ from Managers | The Four Essentials for Every New Partner | Tell Potential Partners What It Takes
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Here’s a crash course in CPA firm business valuations. Assume a firm with annual revenue of $10 million. Most firms have accrual basis capital of roughly 20 percent of their revenues, consisting mostly of WIP and A/R. If we value the goodwill at 100 percent of revenue (this used to be so common it was automatic; today it is still common but much less so), the total value of the firm is $12 million: $2 million of capital and $10 million of goodwill.
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CAUTION: Don’t get hung up on ownership percentage.

By Marc Rosenberg
How to Bring in New Partners

Accepting a partnership invitation offers two terrific, lifetime benefits to new partners that for most people cannot possibly be matched in any other career pursuit.

MORE: Four Philosophies for Managing a CPA Firm | How Partner and Staff Actions Impact Profits | Nuts and Bolts of Mentoring Staff | Nine Ways to Measure Staff Performance on the Path to Partner | Sixteen Duties of a Partner
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If they don’t see this and agree with it, then perhaps it would be unwise for them to accept the partnership offer.
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