Should you be a business valuation firm partner?

Guest editorial by Rick Warner, Principal, Great Lakes Valuations

Yesterday’s Wall Street Journal included an article about law firms and their efforts at parting ways with certain partners that weren’t meeting the firms’ standards for business development and hourly billings.  And I got to thinking about that holy grail of professional services firms, “partnership”, and what it takes to get to be a partner and now apparently remain a partner.  Taking this thought one step further, the obvious question was if you had the choice, would you make yourself a partner in your own firm, or the firm where you currently work?

Whether you are already a partner in your firm, or an associate wanting to become a partner, I think the question is equally relevant to both situations.

For those of you who are already partners, or founders, or whatever term is used in your firm, whatever you did to achieve partnership, are you still operating and producing at that level, and is the same standard in place today as when you made your partnership, or has the bar been raised?

Before we get too far down this path, let me make it clear that in my own case, I’ve never been a partner, never even been considered for partner, so most of what I write here could best be described as perhaps a “pleasant fiction”.

With that confession of my own venial sin out of the way I’m guessing that the “normal” path to partnership runs through the top line of the firm’s income statement, i.e., if you’re a “producer” then you’ve at least increased your chances of being elected to partner status.  I suppose in some firms that another path to partnership starts with some form of technical leadership and expertise.  If you’re a hot shot tax guy, then maybe, depending on your firm’s mix of clients, you can expect to achieve and/or remain a partner.

So if one of the imperatives to becoming a partner is producing revenue is all revenue created equal?

I don’t think so.

It’s one thing to have a “book of business” of long-standing clients of the firm that grows from year to year through expansion of services, inflation of hourly billing, etc.  But it’s a whole ‘nother “kettle of fish” to grow revenues through the addition of new clients.  When I was a sales guy in the computer industry we had two classes of sales guys – farmers and hunter-killers.  Farmers were guys assigned to existing customers, to keep them happy and to keep the orders flowing from this important group or “installed base”.  Hunter-killers were the Marines.  They were the shock troops.  They “ate what they killed”.  They were “coin operated”.  They were focused on new accounts, new customers, and possibly new products.  Both sales groups were essential to the continued survival and success of the firm, and these groups included individuals that really could not exist as part of the other group (at least for very long).  Farmers generally weren’t wired the same way that hunters were.  They didn’t have the same tolerance for risk, or the same drive for compensation for that matter.

So you might think that my opinion is that individuals who can produce revenue from new accounts are “a lock” to achieve partnership in a professional services firm.  Not necessarily.  You see, some hunters never make the leap from being the best hunter in the tribe, to being a chief.

See “chiefs” have the ability to see beyond their own achievements and understand that the “firm” is more like an organism of interconnected, interdependent cells.

My guess is that folks who achieve partnership and who remain partners possess at least three critical skills including;

  • The ability to “produce” revenue (profitable revenue) for the firm (be a producer)
  • The ability to “grow” the firm through new client development (be a hunter)
  • The ability to “leverage” their own skills through by developing other members of the firm (be a chief)
What if you’re not already a partner?  Well, I think you need to think about of couple of things, but first of all you need to decide if you really will be happy being a “partner”.  Maybe you’re the kind of a person, who really just wants to be the best appraiser, tax person, excel-guru that you can be.  Nothing wrong with that.  We shouldn’t ever think that the only guys who are happy are the ones in the corner offices.  But if you’ve made the commitment to becoming a partner in a firm, my opinion is that you need to find a mentor that can help you progress from producer, to hunter, to chief.  Maybe that person is already a chief, maybe that person is another person already on the path to partnership, and maybe that person is someone who will never be a chief, but knows what it takes to get there.

In my own case I answered the question long ago about whether I would make myself a partner with a resounding “eh..”.  For the rest of you…well, now you get to ask and answer that question.