New Business Development: Optional or Required for Equity Partners?
Kristen Rampe, CPA
It used to be a pretty standard requirement, that for someone to be invited to become an equity owner at a CPA firm, they had to show achievement in, or strong potential for, new business development. How else could the firm continue to grow, or even remain stable with typical annual customer attrition?
Rarely would a small to mid-size firm make someone a partner who lacked this skill set. There were exceptions, the number of which grew as the firm did. For example, at some point, a larger firm needs a dedicated quality control partner, with no business development experience required (to the relief of all parties).
For most smaller firms, the need for new business is constant, so this has remained one of the gating factors in making equity partner.
Our book How to Bring in New Partners is written for firms fortunate enough to have staff with the right stuff to be a partner. This book addresses all of these areas and more, including: ►how do firms develop staff into partners and when are they ready ► should we have non-equity partners ► what is the process for bringing in a new partner ► how do new partners get compensated ► what should the buy-in amount be.
However, lately we’ve noticed a shift occurring, in that many firms are not requiring a meaningful amount of new business development to be brought in by newer partners. Why? Firms have more work than they can handle already. What they need right now is strong client service partners. Not that the firm as a whole doesn’t need rainmaking, but it’s not as high a priority today as it was even five years ago.
In our next post on this topic, we’ll share the results of the poll and dive into these related questions: Is not requiring new business development a good move? A dangerous one? A necessary one?
Comment below with your thoughts.
4 Comments
How to Bring in New Partners: A Guide for Firms and Future Partners
As partners approach retirement age, they naturally focus on who can take their place and eventually write their retirement checks. Prospective new partners often have a lot of questions about what becoming a partner entails. Many firms either aren't sure how to bring in new partners or have outdated approaches for doing so.
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non rainmaking partners are essential for quality service. the problems occur when the non rainmaking partners start telling the rainmakers what to do and how to do it, especially in the compensation arena. like everything, proper balance needs to be achieved.
We have never required new partners to bring in new business. We felt that “client keepers” were very important and deserved a partnership role.
This has not been a problem so far but we see one looming. The client getting partners have aged and if the two oldest retire that would leave only one real powerhouse business getter. Complicating this is that hiring and retention in the last two years has become more difficult as fewer good candidates are bid up by more firms seeking them. Complicating this is all of our work is more complex and becomes more compressed. The result is that the partners that were designated as “client keepers” are being pulled away from what little marketing and sales they did to get the work we have done.
As I look back, it probably was foolish to not require new partners to spend a portion of their time developing relationships that would create more sales opportunities as well as an ongoing ethos for new business growth.
Thanks for the thoughtful comment, Tony. It’s hard to know what’s the “right” decision for the near term and long term sometimes. Has your firm used a non-equity role in recent years for the more client-service oriented partners?
In our firm some level of business development is required for advancement past a manager level. In order to create equity partner opportunities the firm has to grow and for those that want that they need to contribute towards growing the firm.
In my opinion if someone has the skills to manage client relationships they can be taught business development skills. In the market today business development doesn’t require a lot more than networking skills. Developing relationships with attorneys and investment advisors is all you really need to do. We make it a point of emphasis to connect the younger generations within our firm to the younger generations at our referral source firms.