To increase profits per partner you have 4 key strategies only:
1) Reduce costs whilst maintaining revenue
2) Increase revenue whilst maintaining low costs
3) Reduce the partner headcount whilst maintaining revenue and low costs
4) Maintain partner headcount whilst growing revenue and lowering costs
Many “high profit percentage firms” have low leverage of people per partner. That means they have too many partners for the headcount and the revenue. As a result of this they may have high profit in percentage terms but in absolute terms they will have relatively low profit per partner.
Think very carefully about the next person you want to bring on as a partner. Do you have too many partners now? Can a better management structure suffice? Are you looking to bring on the next partner to retain them as a team member or are you doing it for good business reasons.
If you like the current partners you have and they are working well together bringing in lots of new business – then don’t get rid of them. Grow the headcount and the revenue into the partner base.
For great profits per partner (more than $1M per partner) you need to be thinking of leverage of more than 13:1. That’s at least 13 full time equivalent people per partner.
Enjoy the final video in the series.
I have written an extensive report on Accounting firm performance. You can download it here.