Is partnership right for you?

Daren Moore, group commercial director for TaxAssist Accountants and former equity partner at Baker Tilly and Price Bailey, discusses issues that senior accountants and managers in practice need to consider when looking at career progression and some of the challenges inherent in the traditional partnership model.

When we’re working our way up the ranks, I’m sure we’ve all looked at the partners at some point and thought “I’d like to be in their shoes one day”. But as we near the top, it becomes apparent that the route to partner is not without obstacles and that being sat in that chair is perhaps not all it’s cracked up to be.

My own experience in practice was fairly typical and mirrors many others I have spoken to. After qualifying, I was absolutely determined to get to partnership as quickly as possible, as I was certain practice was the right career choice for me. My initial focus was on promotion through the various levels of seniority without much consideration of exactly what partnership would mean. However, as I got closer to my goal I started to think about some of the practicalities. Would there be space around the partner table? What were the existing partners retirement plans? What was the earning potential? What did life as a partner really involve? Would I actually enjoy the role?

What I realised was that it’s often difficult to answer these questions.

I was fortunate enough to spend 15 years as a partner with two great firms, but my time in practice highlighted some of the questions that those looking at future partnership should consider.

Opportunity

Ideally partnership would be offered based on merit, but unfortunately it can be a case of right place and right time.

Many practices have limited ability to add to their partnership group and opportunities are often linked to retirements. There will also be a constant need to maintain and build on skills within practices, which means that external candidates are often prioritised over home grown talent.

So, try to understand likely time-frames for partnership opportunities. Are they going to fit with your own plans?

Risk and reward

The promise of significantly increased earnings is part of the appeal of partnership, but the reality is often very different. Most accountancy firms still opt for the traditional structure of a partnership or a limited liability partnership with equity and fixed share or salaried partners. Junior partners generally start on lower levels, with the promise of promotion and offers of equity in the future. But when will that happen? Equity tends to be fiercely guarded. That’s for good reason, it’s valuable, but when will you be able to share in this?

Also consider risk – irrespective of earnings and ‘grading’ in the partnership structure, risk is generally shared equally.

Capital

If the offer of equity does come, it almost certainly won’t be for free. Through no fault of their own, many millennials (in and outside of the accountancy industry) simply don’t have the capital behind them to fund offers of equity. As a result, they’ll often have to refinance in order to join the business.

This is becoming an issue for many practices as the cost of ‘buying in’ increases. More and more prospective equity partners are turning down the opportunity as they feel the cost of equity is prohibitive.

Ownership and value

Many within practice who aspire to partnership would equate it with ownership, but is that really the case?

Partnership is really about maintaining for future generations. If you compare it to other business models, it’s more about stewardship than ownership. Practices can be very profitable and can generate significant income levels for equity partners, but where’s the opportunity to actually realise the value of the business?

Is the role right for you?

Partnership has to work at a personal level, so you will need to think about whether the role will be right for you. Does the business share your moral compass? Is it moving in the direction you believe to be right? The younger generation are much more aware about their impact on the environment and their social impact; having stronger ideals about work-life balance and family and views on the right cultural fit.

The technology test

I think we’ve all just about accepted that technology is going to affect the future of our industry, but is your firm moving at the pace they should be? Do you find that it’s a constant battle to introduce change or new software, and do you find yourself thinking “there must be an easier way”? Stagnation at the top is often endemic and will bleed into the culture of the whole firm, discouraging innovation amongst staff too.

Making Tax Digital is obviously looming, and perhaps this is the test your firm needs to take for you to decide if they’re a good fit for your future. You want a firm that is fearlessly and proactively embracing change and new technology; where phrases like “big data”, “machine-based learning” and “artificial intelligence” aren’t swear words.

The future of the industry

All businesses should be constantly evolving and thinking about how they can provide the best service to their clients; whilst maintaining efficiencies. But how does this work in a world of digitalisation, automation, Making Tax Digital, etc?  Many commentators are suggesting a fundamental change in our sector over the coming years.

When considering partnership you need to consider how your practice will cope in this environment. As always change will bring opportunities for those who are prepared, but huge challenges for those that are not. The expectation is that many practices simply won’t survive and that there will be significant consolidation in the sector.

Your options

Is partnership right for you? For many it will be the realisation of their ambitions and it can be a great place to be. But it’s not for everyone and it’s important to make sure it will give you the role, rewards and opportunities you are looking for.

If you have concerns it may be time to consider your options. Despite concerns about the future of the sector, the job market at the moment is buoyant. A recent survey suggested that salary levels in practice have increased by almost 9% on average over the past year. Industry also remains an option, with significant numbers of positions being marketed and, at £68,004, a larger average salary than practice.

You should also consider the merits of starting your own business. Why not put those hours, risk and debt in to creating something of your own? Something you can be proud of and can sell in the future. Many accountants have set up independent practices over the years as they recognise the potential to build both income and capital value.

And if you’re nervous about going solo, particularly in an ever more complex world, franchising can provide a safe middle-ground between being in employment and self-employed. You have the strength of an established brand to boost client acquisition, tried-and-tested systems and software, technical support, training and a business development team to rely on. Franchising will offer a framework, but you will have the all-important flexibility to run your own business.

Darren Moore is the group commercial director at TaxAssist Accountants.

TaxAssist Accountants is the largest accountancy network in the UK with more than 300 shops and offices across the country, servicing more than 69,000 clients. The franchise specialises in servicing the needs of small businesses and self-employed individuals, that have traditionally been over-charged by the larger companies and under-serviced by the smaller ones.

If you’d like to find out more, visit our website www.taxassistfranchise.co.uk, call us on 0800 0188297 or email [email protected]. We host frequent Discovery Days at our Support Centre in Norwich, which give interested parties a chance to meet with myself, my fellow Directors and senior support staff. They offer a comprehensive overview of the systems we use to help franchisees run successful practices and give a feel for what TaxAssist Accountants represents.