Rosenberg Associates Blog
Marc Rosenberg, CPASome partner compensation systems provide for both a base and bonus that are mutually exclusive. At other firms partners receive a salary or draw during the year and a year-end distribution that adjusts the salary or draw to one final income number, based on each partner’s performance for the year. What’s better, a one-tier or…
Question from a Reader: What should our Managing Partner earn? Our 3.4M revenue firm is comprised of 4 equity partners with income averaging $231,000. Ownership percentage is the sole determinant of income. The MP spends a substantial amount of time managing the firm and maintains a $775-800K book of business. The MP’s ownership percentage is…
Most multi-partner CPA firms structure their partner comp systems to pay at least two tiers of income, most commonly the base and a bonus. Many firms have a third tier for interest on capital, but we won’t address this in today’s blog. Base and bonus defined: Base: Compensation for a partner’s historical value to the…
Any discussion of partner compensation must start with a fundamental concept: Should a partner group’s income allocation system be performance-based? Compensation motivates performance. To be successful year after year, CPA firms need to service their clients well on a continuous basis. CPA firms typically lose 10-20% of their revenue sources every year because clients merge…
The CPA industry’s most active consultants formed The New Horizons Group 15 years ago to share ideas and experiences. The following nuggets from a recent meeting are intended to help managing partners address issues facing their firms. Mergers. Tips for merging two sizable firms together: (1) You really need a process; make sure each meeting…
This question has been posed to me by several partners over the years. As you might guess, the partners raising the question all had a hand in identifying firms that were either merged in or came close. Note: This question applies only to line, client service partners, not to partners whose specific job it is…
I love my job. CPA firm partners are wonderful to work with. The projects are interesting and challenging. CPA firms pay well and on time. Almost all of my consultations have a medium-to-high level of difficulty. Nothing is ever easy. This is mostly a good thing. But sometimes, I wish I had a job that…
The correlation between size of firm and use of a compensation committee to allocate partner income is no surprise to CPA industry observers – the trend seems to gather steam every year, according to The Rosenberg Survey. Now 61% of firms with 8 partners or more report the CC as their method of choice, and…
CPA firms across the country are gearing up for the tax/busy season, and with the year rapidly coming to an end, the Compensation Committee (CC) season is kicking into gear as well. Now is the time which marks the beginning of the CC’s deliberations. The comp committee system is by far the most common partner…
The heart and soul of the Compensation Committee (CC) method for allocating partner income is this:
The system can only work if the people being judged are
willing to trust the judges. Period. If the partners aren’t
comfortable with this, then they should not use the CC.
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