How Top 100 Firm Whitley Penn Became the Fastest Gun in Texas

Every year my Chicago MP roundtable group brings in a renowned leader of a major regional CPA firm. Our most recent guest was Larry Autrey, 52, MP of Ft. Worth-based Whitley Penn, which Accounting Today reports as the nation’s 57th largest firm, with annual revenues of $59M and 38 partners. Take it from me when I tell you their profitability is in the stratosphere. Here is WP’s “secret sauce.”

Growth culture. Perhaps the most important factor in WP’s spectacular success. Most of their growth has been organic, but mergers have added roughly $15M. Larry takes away business from rainmakers to free them up to get more. “There is peer pressure in our firm to have plenty of business opportunities on your plate.

“Though we have ambitious growth plans, we have long recognized the need for both great technicians as well as great business-getters. So, we try to achieve a good balance. While technicians may not be expected to bring in many new clients, we do expect them to grow their practice from existing clients.

“We believe that staff turnover and revenue growth operate in sync. If we are growing the way we want to grow – say 20% a year – that may result in the firm outgrowing some of our staff each year. That aggressive growth can cause some turnover.”

Staff bringing in business.  Consistent with WP’s growth culture, business development is expected of our staff as part of their job and career path.

Management philosophies. “We describe ourselves as entrepreneurs who just so happen to be CPAs. We don’t tell our partners how to manage their business unless they are off-track, but we provide structure to those who need it. A major reason people like being partners at WP is they don’t feel like employees.

“We are big believers in building our firm with a strong emphasis on audit and tax. We do plenty of consulting (primarily valuations and litigation support), but usually only if it’s recurring business. Our wealth management division has been highly successful and we believe one of the main reasons is that the practice is run by a tax guy.”

WP is very metrics-driven in managing their firm.  “Partner income percentages around the national norms of 27-35% are unacceptable to us. We want to be closer to 50%.”

Partner compensation. A comp committee allocates WP’s income and their system is closed. Two things are never tolerated: abusiveness to staff and low quality client work. Partners have “balance sheets” – things they are good at and things they need to improve. Every partner has a different balance sheet.

Strategic planning. Like a Texas gunslinger, the charismatic Autrey will tell you that the firm has a strategic plan. But it’s not in writing…it’s in his head. “We believe we are at our best operating in major markets. So, our vision is to eventually become a national firm, located in major cities outside of Texas.”

Mergers: How does WP successfully merge in firms and put its “stamp” on firms with different personalities and histories? “We give their partners goals.”

Larry sits down with serious merger candidates and shows them what he thinks will be their major “pain points,” especially people who may leave or don’t want to change.

What’s the advantage of being bigger? There are many, but a big one is “providing our people with more opportunities.”

Autrey the MP. Larry now devotes 100% of his time to firm management and has no client duties. “I absolutely love working with our partners to help them be successful.”

Whenever Autrey hears that a star staff person wants to leave the firm, says Autrey: “I call them up, take them and their spouse out to dinner and convince them they are making a big mistake. I have a 100% record of keeping them with the firm.”

Partner buyout. They use the AAV method to determine each partners’ buyout. They value their goodwill at a robust 125% of fees. Since they include interest on the payments, this increases the effective valuation to an astounding 148% of fees. “We can do this because we’re so profitable.”

Staff morale. Every two years, WP flies every employee and a guest to a long weekend at a resort. “The only business thing on our agenda is I speak on Friday night and most of what I say is directed at the spouses.” Cost to the firm: $600,000!  Wow, what a way for WP to differentiate themselves from other firms!

Mentoring. At WP, staff find their own mentors. There is no imposed selection process. Staff are only mentored if they want to be.

Recruiting. Many firms delegate a lot of campus recruiting to HR personnel, but not WP. They believe it’s important for partners to be active in campus recruiting because their  personalities make a strong impression on students, enabling them to sign up the stars.

For tips and case studies from the nation’s best-managed firms, as well as insight into some practices you’d be well-advised to avoid, consult our monograph CPA Firm Management & Governance.