By Daren Moore, TaxAssist Accountants
Reaching partner status is the ultimate goal for many practice accountants – but what does it actually mean, and is it right for you?
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.
I was fortunate enough to spend 15 years as a partner with two great firms, Baker Tilly and Price Bailey, 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 up skills, which means that external candidates are often prioritised over home grown talent.
Try to understand likely timeframes 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 partnership appeal, but the reality is often different. Most accountancy firms still opt for the traditional structure of a partnership or LLP, 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 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.
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. 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, family and 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? Is it a constant battle to introduce change or new software, 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 firm, discouraging innovation amongst staff too.
Making Tax Digital and the broader move to digitalisation is perhaps the test your firm needs to pass 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, while 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.
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 who 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 is buoyant; a recent survey suggested 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 offering generally a higher 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, tried-and-tested systems and software, technical support, training and a business development team to rely on. Franchising offers a framework, while allowing you the all-important flexibility to run your own business.
Daren Moore is the group commercial director at TaxAssist Accountants, the largest accountancy franchise in the UK with more than 350 shops and offices across the country, servicing more than 76,000 clients. The franchise specialises in servicing the needs of small businesses and self-employed individuals. See www.taxassistfranchise.co.uk or email franchiseenquiries@taxassist.co.uk to find out more.