how do you feel about evaluations … and tying compensation to them?
by marc rosenberg
cpa firm retreats
before formally beginning the discussion part of a retreat session, it’s always a good idea to begin by asking the participants what they want to be sure to cover. as issues are suggested, the retreat facilitator should write them down on a flipchart.
plus: 6 major factors impacting bonuses. and 4 notes from a master.
by marc rosenberg
partner comp: art & science
most cpa firm partner compensation systems consist of three tiers, each of which compensates the partners in a different way.
more on partner compensation: partner compensation 101| what partners earn and how they earn it | partner compensation: an art, not a science | how partners view compensation: it’s not all about the money | why most partner comp systems are performance-based
what is base compensation (or salary)?
it’s common to define partners’ base compensation as their historical or street value to the firm. what they bring to the firm every day. a managing partner once told me: “it’s what we would have to pay a partner at another firm to come work with us.”
practice debunked: many firms have equal bases for all partners. their thinking is that the base is merely a level of compensation that (1) is above what managers are paid and (2) is enough for the partners to live comfortably on. firms like this are operating a modified pay-equal system, which is widely viewed in the cpa industry as ineffective and unfair. not only do partners not perform equally, there is almost always a wide variation from highest to lowest performer. the case for equal bases is a weak one at best.
practice debunked: i’ve seen some firms impute partner bases as follows: first, compute hourly pay rate by dividing the standard billing rate by the firm’s billing rate multiple. then, multiply the hourly pay rate by 2,000 hours to arrive at imputed base pay. billing rate multiple is a staff person’s billing rate divided by the hourly pay rate. eighty to ninety percent of all firms are in the 3.5 to 4.0 range.
what the smaller firm needs to determine. they get a say, you know.
by marc rosenberg
when a small firm considers merging upward, they listen to the terms offered by the larger firm and decide whether they can accept them. through a combination of face-to-face meetings, negotiation sessions, telephone calls and review of materials, the seller should be comfortable with each of the following:
more on mergers: what to expect when merging up | 13 questions to assess an upward merger | mergers: assessing compatibility | 14 provisions to include in a letter of intent | want to merge? ask for data | merger prep: getting to know you | plant seeds to turn up merger candidates | 13 ways to screw up a merger
1. hopefully, you have identified the problems and the goals you have for the merger (retirement, access to staff, technical expertise, management capabilities, etc.). do you see each of these problems and goals actually being addressed and resolved with the merger?
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bonus checklist: what smaller firms need to know.
by marc rosenberg
the degree to which merger terms are negotiable is often determined by the relative size of the two firms.
more on mergers: mergers: assessing compatibility | what to discuss at the first merger negotiation meeting | case studies reveal potential loi issues | merger prep: getting to know you | one times fees is a steal! | 13 ways to screw up a merger
generally, the larger the gap in firm size between buyer and seller, the fewer the items are open to negotiation. this can be illustrated by the following chart:
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bonus checklists: 26 intangible performance attributes and 9 teamwork rules.
by marc rosenberg
a performance-based system links partners’ compensation with their performance.
more on partner compensation: what partners earn and how they earn it | partner compensation: an art, not a science | how partners view compensation: it’s not all about the money | why most partner comp systems are performance-based
if partners have a “good year,” however “good” is measured, they will most likely earn more. partners experiencing a “bad” year or an “off ” year should expect to earn less.
13 things to hold partners accountable for, 10 ways to do it and 12 questions to ask. bonus: example of a personal accountability plan.
by marc rosenberg
cpa firm retreats
partner accountability means different things to different people. some quotations:
“if there are no consequences to failing to achieve a goal, then it is less likely that the goal will be accomplished.” – marc rosenberg
“if people are not prepared to be held accountable for what they do, it is unlikely they will achieve much.” – david maister
more on retreats: 30 marketing and growth questions to cover at a retreat | how marketing for cpa firms is different | why create a marketing plan? | thinking of merging? discuss it at a retreat | how to take action after a retreat | 12 simple rules for a retreat | leave your retreat with a to do list | every retreat needs a leader, but who? | retreats are no place for clowns | who should participate in a retreat? | retreat logistics: how long, what kind? | what should cpa firms discuss at retreats? | why do cpa firms conduct retreats?
“i’m a partner in this firm. that gives me the right to do whatever i darn well please, whenever i want to do it.” – firm partner to whom “accountability” is a dirty word
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bonus checklists: smaller firm to larger, 25 questions to ask and 17 data points to request.
by marc rosenberg
cpa firm mergers: your complete guide
there are always three intangible factors that greatly influence the extent to which merger terms and issues are negotiable:
more on mergers: what to discuss at the first merger negotiation meeting | 14 provisions to include in a letter of intent | want to merge? ask for data | one times fees is a steal! | looking to grow your firm? how to find a seller in four steps | 15 can’t-skip merger terms to decide | 14 keys to a successful merger
1. negotiation ability of each firm. some people are “tough” negotiators, continuously trying to impose their will on the merger partner, while others are more malleable and tend to go along with whatever the other side wants.
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responsibilities of the mp and other positions.
by marc rosenberg
cpa firm retreats
before formally beginning the discussion part of a retreat session, it’s always a good idea to begin by asking the participants what they want to be sure to cover.
more on retreats: 30 marketing and growth questions to cover at a retreat | how marketing for cpa firms is different | why create a marketing plan? | thinking of merging? discuss it at a retreat | how to take action after a retreat | 12 simple rules for a retreat | leave your retreat with a to do list | every retreat needs a leader, but who? | retreats are no place for clowns | who should participate in a retreat? | retreat logistics: how long, what kind? | what should cpa firms discuss at retreats? | why do cpa firms conduct retreats?
as issues are suggested, the facilitator should write them down on a flipchart, starting with: read more →
bonus checklist: 13 ways to make your firm an attractive candidate.
by marc rosenberg
cpa firm mergers: your complete guide
the smaller firm in a proposed merger should make an objective, realistic assessment as to whether or not merging upward is a good business decision.
more on mergers: mergers: assessing compatibility | what to discuss at the first merger negotiation meeting | 14 provisions to include in a letter of intent | case studies reveal potential loi issues | want to merge? ask for data | merger prep: getting to know you | the merger process in 21 steps | looking to grow your firm? how to find a seller in four steps | 13 reasons accounting firms merge | mergers 101: when negotiations aren’t really negotiations | 5 steps to take before merging
every small firm evaluating the feasibility of merging should consider these questions in as much depth as possible:
bonus charts: 15 habits that make a partner. plus: equity vs. non-equity partners, and a voting decision grid.
by marc rosenberg
cpa firm retreats
“i can’t manage this firm if i have to take a vote every time i want to make a decision.” – tony kendall, ceo of top 200 firm mitchell & titus, shortly after taking over from the firm’s founder.
more on retreats: 30 marketing and growth questions to cover at a retreat | how marketing for cpa firms is different | why create a marketing plan? | thinking of merging? discuss it at a retreat | how to take action after a retreat | 12 simple rules for a retreat | leave your retreat with a to do list | every retreat needs a leader, but who? | retreats are no place for clowns | who should participate in a retreat? | retreat logistics: how long, what kind? | what should cpa firms discuss at retreats? | why do cpa firms conduct retreats?
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there are decisions that managing partners should make without a partner vote.
bonus checklist: 12 benefits.
by marc rosenberg
cpa firm mergers: your complete guide
while selling to a larger firm may ultimately be the most viable succession plan available to a small firm, the prospect of the merger creates a great deal of anxiety among small firms nonetheless. the larger firm’s sensitivity to these concerns is critical for a successful meeting of the minds during the negotiation phase.
more on mergers: mergers: assessing compatibility | what to discuss at the first merger negotiation meeting | what to ponder before issuing a letter of intent | want to merge? ask for data | merger prep: getting to know you | looking to grow your firm? how to find a seller in four steps | 13 ways to screw up a merger
why small firms are so anxious about merging up
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bonus checklist: 25 best practices for managing partners.
by marc rosenberg
cpa firm retreats
in firm management and governance, we find two distinct management styles: partnership vs. corporate.
partnership style. democracy heavily impacts the way partnerships are governed. in a democracy, every partner has a vote and there is a “majority rules” mentality. a system of checks and balances prevents leaders from becoming dictators. the “citizens” want a reasonable amount of input into decisions.
more on retreats: 30 marketing and growth questions to cover at a retreat | how marketing for cpa firms is different | why create a marketing plan? | thinking of merging? discuss it at a retreat | how to take action after a retreat | 12 simple rules for a retreat | leave your retreat with a to do list | every retreat needs a leader, but who? | retreats are no place for clowns | who should participate in a retreat? | retreat logistics: how long, what kind? | what should cpa firms discuss at retreats? | why do cpa firms conduct retreats?
in a partnership style, partners have “certain inalienable rights” like:
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bonus: the 18 factors that drive partner pay.
by marc rosenberg
what do cpa firm partners actually earn?
more on partner compensation: how partners view compensation: it’s not all about the money | why most partner comp systems are performance-based
the statistics below usually vary by the size of the population market, though our experience working on numerous client projects with firms in small markets has shown that it is quite possible for firms in small markets to earn “large market” income.