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One metric we believe that is often overlooked is daily sales. Every other business knows exactly what the daily sales are, why not an accounting office? It’s too late at the end of the month or quarter to do something about missing the monthly/quarterly sales target.

We’ll be talking more about key performance metrics at our Best Practices Conference for Sustained Growth & Profitability, but what do you think about monitoring daily sales?

We also highly recommend participating in the Rosenberg Survey. Not only will they benchmark your firm, but you’ll get a ton of great insight into what the best firms are doing and how you can improve your firm’s performance. Sometimes the initial benchmarking process is a bit scary, but the good news is that it’s onwards an upwards from there. Once we have a starting point, we can work on work on what you want to achieve. You can find out more about the survey at www.rosenbergsurvey.com.

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There are, however, firms that are enjoying double digit growth. These high performing firms have fundamentally changed how they do business. And this 2-day conference will show you exactly how you can propel your firm into double digit growth. You will need to change and try new things. The good news is that what we show is proven and we’ll cite numerous firms around the world who have successfully implemented these initiatives.

The early bird discount of 25% closes on Friday May 18. The program is 100% satisfaction guaranteed and eligible for 8 hours of CPE per day. if you can’t make both days, there is a single day registration available. I hope to see you there.

CONFERENCE WEBSITE.

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This week in the lead up to his Q&A on iShade.com he gives us his 5 Secrets of a Great Partner Compensation System.

First, partner compensation is the single most sensitive subject to partners. It’s depressing and disturbing when a partner feels the income allocation is unfair, performance is unrecognized or he/she doesn’t have a clue how the system really works.

Second, to quote Andy Grove, former Chairman of Intel: “If people are concerned about their absolute level of compensation, then they can be satisfied. But if their focus is on relative standing, then they can never be satisfied.”

Third, partners are forever in search of the Holy Grail of partner compensation. The better mousetrap. The one best system that’s lying out there, somewhere, waiting to be discovered.

It’s downright hilarious that CPA firms think their profession is unique to the business world when it comes to firm management and compensating key people (the partners). Here are some observations based on my experiences consulting with hundreds of CPA firms on partner compensation (firms with annual fees over $20M are much more effective at these practices than those under $15M):

Compensation systems must be performance-based. What can be more sensible? One should be able to earn more money by accomplishing more and conversely, one’s pay should suffer if performance is lacking. When performance doesn’t impact compensation, it demotivates the better performers and encourages others to coast. Sooner or later, mediocrity prevails. However, a fair amount of firms continue to allocate part or all of their income based on a pay-equal split, ownership percentage or other method that fails to align pay with performance. Money isn’t the best motivator and it certainly isn’t the only motivator, but it does matter.

Helping staff grow must be an important factor in allocating income. It’s indisputable that CPA firms need highly trained staff with leadership skills. Firms often cite the adage that their people are just as important as their clients. The partners are the only ones who can develop and mentor the staff. Yet rare is the firm compensation system that gives even token recognition to the impact made by partners in retaining, training and mentoring staff and helping them grow.

Strategic planning should play a critical role. Partners’ contributions to the firm in achieving its strategic plan, vision and goals should be an important factor in allocating income. But we rarely see these efforts acknowledged. It’s no wonder that CPA firms struggle with strategic planning: there is very little incentive for partners to do what their firm needs them to do.

Compensation levels of partners should reflect both historical and current performance. It’s common for partners to build up impressive personal production statistics, especially the sacrosanct “book of business,” and then essentially rest on those laurels, contributing relatively little to the firm’s growth and improvement in subsequent years. The best way to address this is by splitting compensation into two parts: a base, recognizing historical or cumulative achievements, and a bonus that rewards current performance, the latter essentially serving as a “what have you done for us lately?” factor. For this to work, the bonus must be meaningful. In other words, a partner should definitely “feel” the impact of a small or zero bonus. What is meaningful varies with a firm’s profitability. At firms with average profitability, the bonus should be at least 20% of total compensation. At highly profitable firms, the bonus should be 25-40% of the total.

Individual production shouldn’t be weighted so excessively as to render all other accomplishments unimportant. At many firms, when it comes to allocating partner income, Finding (client origination), Minding (size of client list managed) and Grinding (billable hours) trump other important aspects of partner performance. Intangibles such as firm management, helping staff advance and grow, teamwork, loyalty, creating specialties, delegating work, technical skills and being a good corporate citizen are frequently overlooked. One of the main reasons for this is CPA firms’ steadfast adherence, either consciously or subconsciously, to the principle that it’s more important how a partner performs individually than as a key member of the firm. Firms are legendary for handsomely rewarding partners for posting strong production statistics while tolerating egregious weaknesses such as being a poor team player, abusing staff, refusal to be held accountable and failure to follow the firm’s policies and procedures. While few would argue the significance of partner production, firms make a big mistake when they fail to give meaningful recognition to intangible aspects of performance.

So there you have it. In a few paragraphs, I’ve summarized several critical partner compensation issues that could easily take an entire book to properly address.

Marc’s comments are spot on. Here at 2020 we work with small-medium sized firms and I agree that in larger firms it is easier to adhere to these guidelines than in smaller firms. One reason I believe is that many firms are too top heavy and partners are still very much responsible for production that they don’t have time to give to the other considerations of growing and managing a successful firm. These firms and many others are stuck in the ‘eat what you kill’ mentality. Unfortunately if they aren’t able to break from this, they’ll keep on this same path and work themselves into the ground.

I sat in on a webinar by an Australian consultant Rob Nixon recently and he made a great point which I have long supported. He said the time for running a practice is over, we’ve been practicing for too long, it’s time now to run a business. I think this change in mentality is something we all need to think about. Outside of accounting, no one would run their business like we run our practice. And how we address owner/executive compensation is no different.

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I was looking online for the recommended retail price and noticed the Amazon product reviews. 119 reviews with an overall rating of 4.7 out of 5. Not bad at all!

Don’t miss the Best Practices Conference happening in 18 cities across America. Over the 2 days we’ll show you how your CPA firm can achieve sustainable growth and profitability for the long term. We’ll show you proven strategies to grow your practice as well as the tools you need to drive efficiency and profitability.

FULL AGENDA & REGISTRATION INFORMATION

Plus you’ll have a chance to walk away with the ScanSnap S1100 valued at $199.

Register by May 18 and use the code EB2020 to save 25%.

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Why is this a must attend event?

According to IBIS World Study 2011, the projected growth rate for tax and accounting services over the next five years is only 1.8 percent per year! That’s not going to work for high-growth focused firms! Best practices are critical!

Attending this conference will provide you with the tools you need to achieve sustainable growth and profitability in your CPA firm. We’ll show you how to accelerate revenue from Type 1 Services – such as traditional compliance work, and Type 2 Services – or those services that are are value added and future oriented such as Wealth Management and Business Advisory.

These are the services that clients are increasingly expecting. We’ll also look at ways to “go deep” in your areas of specialty, whether that’s industry-oriented, product-oriented or both.

A deliberate and continuous marketing program is a “must have” for firms that want to grow in a competitive market place. This conference will help you build an effective marketing machine, using the latest technologies including CRM and Social Media. During the past five years, we’ve seen enormous advances in technology. Attending will make sure that you are totally up-to-date with the technology currently being used by successful firms, including the latest on:

• Document Management

• Portals

• iPhones and iPads

• Software as a Service (SaaS)

• The Cloud

• Mobile technology

In summary, we will explore the key issues that firms are dealing with and provide appropriate options and solutions to streamline your practice.

Register by May 18 and save 25% on your registration. Use code EB2020

More information.

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Once upon a time there was a rancher standing at the entrance to one of his pastures, full of sheep. Suddenly, a brand new SUV screeches to a halt next to him. The driver, a young man dressed in a Brioni suit, Cerruti shoes, Ray-Ban glasses, and an YSL tie gets out and asks the rancher, “If I guess how many sheep you have, can I have one of them?”

The rancher looks at the young man, then looks at his sheep, and says: – “OK, it’s a deal.”

The young man parks his SUV, connects his notebook and his mobile, enters a NASA site, scans the ground using his GPS, opens a database and 60 excel tables filled with algorithms, then prints a 150-pages report on his high-tech mini printer. He then turns to the rancher and says: – “You have exactly 1586 sheep here.”

The rancher says, “That’s absolutely amazing. You’re right!” The young man picks up an animal and puts it in the back of his SUV. The rancher continues, “Before you go, if I can guess your profession, can I have my animal back?”

This sounds reasonable to the young man and he says, “Sure!”

The rancher says: – “You are an Arthur Andersen consultant!”

“How did you know?” asks the young man.

“Very simple,” answers the rancher, “First you came here uninvited. Second, you gave me information I already knew. Third, you know nothing about my business. Now, can I have my dog back?”

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So the chairman asks each the simple question “what is two and two?

“The economist replies, “Four.”

The mathematician replies, ” Statistically, it’s somewhere between 3.999 and 4.0001.”

The accountant replies, “What would you like it to be?”

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