Panalitix is working closely with accountants looking to strengthen their partnerships. Some assignments involve brand new firms where there is a lot of excitement as accountants embark on their entrepreneurial adventure. In other cases, well-established partnerships need to re-calibrate (or re-set) their foundations. This is not surprising since partnerships are comprised of people whose goals will change, while the business and the world around them changes too.
Working on the partnership should be a positive exercise… but sometimes there are signs of “wear and tear” and, if neglected, the business, clients, employees and partners will be at risk. Every partnership is different… but here are some important themes on which partners should be aligned to create resilience and enable success.
Getting aligned on… Financial Considerations
One part of this is income. There is an amount everyone NEEDS to maintain a certain standard of living. Then there is an amount people WANT to make, an aspirational income goal. A partnership which does not enable achievement of income goals will be at risk.
Separately, there is the idea of wealth creation which may occur when a partner transfers their equity in the business to another party (and gets paid for it). This is important for some people and not for others. Let’s say, for example:
- You ‘need’ to earn $100,000 / year to pay your bills
- Your aspirational income goal is $200,000 (to fund your hobbies and interests), which the business can pay
- The business could be sold three years from now for $3 million if it grows at 15% per annum but it needs more cash in order to grow
- You are a 50% shareholder implying potential wealth creation of $1.5 million
Accountant A (with a low risk appetite) might say that selling the business is completely uncertain and they are better off taking out the maximum salary each year, even if this stifles growth. Accountant B (with a high risk appetite) might be willing to accept a low salary now, deploy that capital into business growth and then monetize their shares in the event of a transaction.
There is no ‘right’ answer… but business partners should talk about their approach to financial matters and align strategy accordingly.
Getting aligned on… Exit Planning
Every business will go through an ‘exit’ event – it’s just a matter of time. What does each partner want to accomplish through an exit? Other than the financial goals, do they want to stop working completely? Or remain involved? In what capacity? To whom do they want to transfer the business? Many people look forward to retirement but find this a difficult and unsatisfying transition to make.
Getting aligned on… Legacy
It’s useful to consider (and agree with your partners) how you, your partners and the business will be thought about after any exit or transition. Will it retain the name? What about the employees, clients and reputation? This can be extremely important for some… and entirely meaningless for others.
Getting aligned on… Preferred Roles / Work Style in the Business
There are phases in building a business when we simply ‘do what we have to do, whatever it takes’. For some accountants, that may mean taking a role in sales or management in order to support the business. Over time, doing work we don’t like will take its toll and people gravitate to work they want to do, sometimes at the expense of the business… and the partnership.
Getting aligned on… Partnership Development
You may want to build a firm to rival the Big Four when you set out. Later, you may want to specialize in one particular area. Then you may want to work only for clients in one particular industry. That’s fine so long as the partnership structures evolve to support these changes.
Getting aligned on… Risks
Every business activity involves risk. For accountants, we need to ensure we offer a competitive service in light of increased competition, technology innovation and other factors. There are also risks around finding people to hire, retaining staff and finding new clients. Alignment on risks confronting the business and how you overcome them is important in the partnership.
Getting aligned on… Lifestyle
For some people, work is the most important part of their life. For others, it is a necessary (and unwanted) activity that enables their non-work activities. Again, there is no ‘right’ answer but the approach to the business (and the partnership) will be fundamentally different depending on the perspective. The most successful partnerships will accommodate partner interests OUTSIDE the business.
Getting aligned on… Business Priorities and Plans
In addition to everything else, successful partnerships are broadly aligned on how to achieve the goals they’ve set. That doesn’t mean you need to agree on everything, in fact, healthy debate is a positive thing. But the areas of focus should be agreed at least.
Getting aligned on… Timeframes
A partner in the early stages of their career and a soon-to-retire partner will probably have different views on timing as regards financial, lifestyle and related issues. And these views will change over time, sometimes without warning. Life events (marriage, childbirth, illness, etc.) can fundamentally change the outlook so we need to be sensitive to these changes.
How does your partnership stack up? Getting and keeping things on track can take time and energy. Some will ignore it hoping the challenges will just ‘go away’. A better approach is to have a frequent dialogue on these topics and you’ll probably find most of them are easily dealt with.
Outside facilitation can help with the development of your partnership, so please get in touch to discuss the opportunities and challenges.