Compensation Insights for Small Firm Partners
As a 10% partner in a firm projected to generate around $2 million this year, I find myself reflecting on what a fair compensation package for partners would look like as we near the end of the busy season. The only other partner in our firm is the founder, who retains the remaining 90% of the equity.
For some context, our firm has a total of 13 employees, which includes both professional staff and excludes my partner and myself. Throughout the busy season, we’re clocking in under 60 hours per week, with my hours averaging closer to 50. Our total compensation for non-partner staff amounts to about $750,000.
This is a significant improvement compared to my previous experience at a large firm, where I regularly worked 65-70 hours a week, peaking at over 80 hours in the weeks leading up to deadlines.
My personal book of business is around $250,000, and my role extends beyond that, as I handle more than half of the partner review tasks. This includes work for clients that have come to us via word-of-mouth referrals, as well as some projects from my partner.
Currently, my base compensation stands at $100,000 per year, complemented by $25,000 in fringe benefits, which cover my car payment and a few out-of-state continuing professional education (CPE) conferences. In contrast, my partner’s salary fluctuates widely, ranging from $40,000 to $150,000, and also includes similar fringe benefits.
Post-busy season, we typically award substantial bonuses. Historically, my bonuses have been around $50,000, while my partner’s can reach into the hundreds of thousands. This year, however, I anticipate receiving something larger. By the end of the year, my total package is usually between $175,000 and $185,000, while my partner’s package falls between $225,000 and $300,000.
Overall, I can’t shake the feeling that I’m significantly undercompensated, given that I contribute heavily to our revenue and maintain a notable book of business. Yet, some mentors have suggested that managing partners should focus on firm growth and development rather than get caught up in day-to-day tax and Accounting tasks.
I’m left wondering if my perception of being underpaid is a common sentiment shared by many or if there are valid reasons behind it. I lack clarity on what partners at similar-sized firms earn, or what constitutes a reasonable compensation structure.
I’d appreciate any insights or advice on this matter. Thank you!
One response
It sounds like you’re in a bit of a challenging position, and it’s completely understandable to feel underpaid, especially given your contributions to the firm. Here are some points to consider as you navigate this situation:
Benchmarking Compensation: Research compensation benchmarks for partners at similar-sized firms in your region. This will give you a clearer idea of what constitutes a fair compensation package based on your responsibilities, revenue contributions, and the firm’s performance.
Value Assessment: Reflect on the revenue you generate vs. your partner’s. You mentioned your book of business is about $250k, and you’re doing significant partner review work. If you can quantify your contributions in terms of revenue growth and client retention, make a case for why your compensation should reflect that value.
Role Clarity: If your role extends beyond traditional expectations (i.e., you’re doing significant work rather than solely focusing on business development), that’s a point to emphasize. It’s important for partners to have defined roles and for compensation to reflect both business development and operational contributions.
Open Dialogue with Your Partner: Have a candid conversation with your partner about your role, contributions, and compensation. Approach it from a perspective of wanting to ensure the firm’s success rather than from a confrontation stance. Frame it around how you can add more value to firm development moving forward.
Future Growth and Expectations: Since you’re in a firm that’s fluctuating between partner salaries, it might help to discuss a more stable compensation structure for both you and your partner. Propose a clear progression in compensation based on performance metrics and contributions annually.
Consider Long-Term Goals: Think about your long-term goals within the firm. If you would like more equity or control in the future, that’s something worth discussing as well.
Self-Reflection: Assess your own motivations; if you’re feeling underpaid, consider whether it might be impacting your job satisfaction. Sometimes it’s about the role and value you see in your work rather than just the numbers.
Explore Your Options: Lastly, keep an eye on other opportunities. If you consistently feel undervalued, it may be worth exploring how your skills and experience could translate into a more fulfilling role elsewhere, even if it’s a difficult step to take.
It’s important to recognize that you’re not alone in feeling underpaid; this is a common sentiment. Balancing ego with fair compensation expectations is tough, but with informed discussions and assessments, you can work toward achieving a more equitable situation. Good luck!