Dominic Cingoranelli

Identifying Potential New Owners for Your Firm

Top strategies revealed.

June 15, 2009
by Dominic Cingoranelli, CPA/CMC

CPAs and financial executives are often asked about when someone should be admitted to ownership in a practice. Before figuring out who you should admit, you should ponder on who you should not make an owner. Here’s a quick checklist of those who you don’t want as an owner:

  • Someone who doesn’t embrace your firm’s core values;
  • Is an unproven quantity in terms of core values, technical ability, client-service ability and
  • Hasn’t clearly demonstrated the ability to work consistently within your standard operating procedures.

Then you shouldn’t be making them a partner — especially not just for the sake of keeping them around.

On the other hand, no matter what size your firm, you need to be looking at your staff and asking yourself if they show the initiative and desire for achievement that will allow them to become successful owners. Do they take it on themselves to find solutions to problems? Do they go out of their way to create successes? Do they “keep score?” In other words, do they monitor their performance and that of others against predetermined metrics?

You may be looking at your people about now as you read this, pining for the good old days when everyone in public accounting was willing to work 60-hour weeks routinely. Pine no more! Those days are gone. Just because someone wants a little work-life balance, doesn’t make them a bad candidate for election to ownership status. In fact, if you continue with a work environment that requires people to work more than 50 hours per week continuously, you may find that the question of whom and when to admit to ownership becomes academic as no one will want to sign up for it anyway.

With proper management and development of your people though, you’ll most likely be able to turn them into known quantities and determine whether and when they should become partners.

What are small to midsize firms doing about this presently? The Succession Institute LLC (Succession Institute) conducted the 2008 PCPS Succession Survey for the Institute asked CPAs about current practices relating to admission to ownership. Here’s what they found:

Identified and Formalized Requirements for Ownership


Do not have formal written requirements, but rather informal ones that change based on the perspectives of the current owners


Identified crucial competencies that must be met in order to be considered for ownership


Identified minimum and documented subjective qualities and characteristics that must be met in order to be considered for ownership


Created a non-equity partner track to make sure new partners fit culturally with the firm before becoming equity owners


Identified and documented minimum “client book” size for potential owners to meet in order to be considered for ownership


Identified a net revenue per partner requirement, so partner slots open up as the firm reaches revenue thresholds


Identified and documented minimum “new business development” amount for potential owners to meet in order to be considered for ownership


Identified and formalized the requirements to move from non-equity partner to equity partner




As you can see, nearly three out of four (70%) of the responding firms didn’t have formal, written requirements for admission. However, the preceding table will give you some idea about what some firms are looking at in making these decisions.

Prospective partners should:

  • Be capable of being groomed to manage larger books of business than they’ve probably been accustomed to seeing in the past;

  • Have the desire to work on developing the people within the firm; and

  • Be able to function effectively within the firm’s institutionalized SOPs and its approach to marketing/business development.

Prospective owners don’t need to be rainmakers, but they do need to be people-developers who want to understand their clients’ needs, concerns, opportunities and challenges. And they need to be of high moral character. You shouldn’t do business with people you can’t or don’t trust either inside the firm or outside of it.

Career Paths for Prospective Owners

Once you’ve identified people with high potential for future ownership opportunities, what should you do about putting them on a developmental path to get them ready for ownership? First, identify the skills and competencies that your firm needs and will need in the future from its partners.

CPAs already have the competencies to be in leadership positions in public accounting. Succession Institute has codified them into a 360-degree assessment. The assessment creates a baseline measurement for identifying gaps that need to be closed those areas in which someone can benefit from additional learning opportunities. After determining what someone needs to learn, you need to identify formal and informal training and education, coaching and mentoring, experientially-driven job assignments and leadership opportunities to bring out the best in them. There’s already a variety of training options available that focus on the people and project sides of management, and we predict a growing number of these offerings in the future.

Development of Existing Partners

As the infomercials on television say, “Wait … there’s more!!!” There really is a need for existing owners of firms to ratchet up their management skills if not before, at least at the same time that they are developing their junior partners or partners-in-training. Over the years, many CPAs learned how to manage by watching others who may not have been the best role models for managing people and managing a firm in times of change. If you send your potential owners, or shareholders-in-training to learn how to be better leaders and they have to come back and work in an environment that doesn’t allow them to apply what they’ve learned, you’re just wasting your money and their time. We can all learn a few new skills to be better managers, have more fun and perhaps improve our profitability.

Maintaining a Viable Firm for High Potentials

When we refer to “High Potentials,” we’re obviously talking about those people working for you or who will come to work for you in the future, who represent desirable additions to the owners’ roster at your firm. One of the economic facts of life we have to face is that, without adequate, profitable growth at your firm, you won’t be making a lot of room for new owners to step in, and you’ll be limited to adding new owners when older owners sell their equity interests. So it’s also important to understand what it will take in terms of practice economics to add any more owners, no matter how qualified they are. When you look at what most junior owners in small to midsize firms are being paid in total compensation and benefits, it’s hard, in most cases, to think about adding a new partner unless you have identified a book of client relationships in the $500,000 to $600,000 (or greater) range for them.


If you want to attract and keep the kind of people with whom you’d like to be partners some day, you really need to take a look at how well your firm is operating. Do you have an overall strategy or direction? What are you doing to hold people accountable for achieving the strategy? What have you done to create viable policies and procedures to support the firm? How are you actively developing your people to fill the skill gaps at your firm? What kind of environment and culture have you created for the development and deployment of new leaders?

This is all very manageable it just takes a commitment, some time and effort, to make it work. Start now it will pay off in the future for you.

Rate this article 5 (excellent) to 1 (poor). Send your responses here.

Dominic Cingoranelli, CPA, CMC, is executive vice-president — consulting services, at Succession Institute, LLC, a firm specializing in succession and practice management for CPA firms. He works with professionals who want to make their business better, faster and stronger. You can reach Cingoranelli at 512-338-1006 or visit www.successioninstitute.com.