Terms That Shouldn’t Be Used Interchangeably

I’ve long been intrigued by the CPA profession’s tendency to consider certain terms interchangeably.  They are:

Management vs. administration.  Both important.  But their meaning is quite different.  Most admin work can be done by people earning $50K-$150K annually, depending on the size of the firm and the skill level of the administrator.  Average partner income in the U.S. is in the $300K range.  You shouldn’t pay a partner to do administrative work.  Management is leading the firm, someone who manages partner behavior and performance, holds partner accountable, is the visionary and drives profitability.  Administration focuses on day to day activities, monitoring and reporting, operating systems, interpreting policy and supporting client service personnel.  It’s my strong belief that partners should be staying away from administration and leaving it to administrative professionals, thus freeing up partners to do…partner things.

Marketing vs. selling. Partners tend to use the term “marketing” to refer to what is really practice development or selling.  Marketing refers to activities done by a firm to create name recognition and presence in the market place.  Selling is the process of generating leads, identifying opportunities and closing the sale.

Non-compete vs. non-solicitation agreements.  Non-compete agreements are geographical restrictions on partners who leave a firm, preventing them from performing accounting services within a certain number of miles from their former firm’s location.  The intention is for these restrictions to apply regardless if they take clients or not.   Non-solicitation agreements require a departed partner to pay for clients and staff taken upon leaving a firm, regardless if the departed partner solicited the clients and staff or not.  The payment for clients usually is in the 100% to 150% of fees range and the staff are in the 30% to 100% of compensation range.  The enforceability of non-solicitations agreements varies by state; some states such as Illinois will uphold properly written non-solicitation agreements involving partners.  In other states such as California, non-solicitation agreements don’t get much support from the courts.