One statistic really jumped out at me from the annual CPA Career Satisfaction survey co-authored by my friend
From my podcasts and speaking engagements, I'd have to agree that many talented and highly motivated professionals are wondering whether the traditional partner track is still worth it considering the time, stress and strain on personal relationships (and health) it requires. Fortunately, more alternatives are emerging that can offer CPAs a great lifestyle and substantial financial upside.
Take
Enter the principal role.
Instead of sacrificing relationships with family, friends and spouses to garner one of your firm's coveted partner slots, you can become a principal at firms like Dark Horse through the Accelerator Program. This can be especially intriguing to managers or senior managers at a traditional firm who are deciding whether to stick it out and try for becoming a partner.
The Dark Horse Principal Accelerator Program was created for entrepreneurially minded CPAs who want to build a scalable book of business without the personal and financial sacrifices required of starting a firm from scratch. Accelerators go through a training program that acclimates them to the firm's tech stack, followed by sales training and one-on-one coaching. After completing the training, principals begin building their book of business by fielding inquiries from potential Dark Horse clients. To facilitate their growth, Accelerators have full-time and fractional professional personnel support at their disposal. After successful completion of the program, participants can become equity principals of the firm.
It's an investment on Dark Horse's part as well, "requiring four to nine months of intensive 'X's and O's' training and coaching," said Birky.
At the end of the training program, Birky said participants typically have a book of business worth $200,000 and they're eligible to become principals. "It's similar to being a partner at a traditional firm," said Birky. But, since Dark Horse is a C corp, its principals are W-2 employees who also have equity in the form of stock options, plus bonus potential based on the profitability of their book of business.
Not your typical one-third/one-third/one-third
Like Birky, I believe this approach is very different from the one-third/one-third/one-third model of a traditional firm. That's when one-third of revenue goes out as partner compensation, one-third goes out for staffing, and one-third goes out in overhead. By contrast, Dark Horse runs specific P&Ls every day for each book of business so it can calculate how much of each principal's profit goes into the profit split with the firm. That way, it always knows how much in direct expenses is being allocated to each principal. As a result of its leaner and more horizontal structure, Birky said Dark Horse principals are typically bringing home 40% to 50% of their revenue as compensation vs. 33% that's more common in the industry. In essence, Dark Horse is accelerating each principal's earning potential and eliminating the frustration of having to share staff. Likewise, team members don't get frustrated by having eight different bosses making demands of them at the same time.
I can relate to that situation. When I was in the client accounting services practice of a large firm, I was a manager overseeing a team of a dozen people. I felt like I had nine or 10 bosses making requests of me at the same time, and my team was getting pulled in every direction. This kind of stress definitely took a toll on my team and I know it affected many of their marriages and relationships.
While I don't have scientific research to back this up, I can tell you anecdotally there are a lot more second, third and fourth marriages at accounting firms than in the general population. I've also noticed a higher percentage of never-married employees in their 40s and 50s at larger firms than in the general U.S. population.
Fortunately, more firms are creating alternative paths for employees who want to excel, but who don't want to "sell their soul to the firm" in order to make partner. Dark Horse's Accelerator Program is one way for talented managers in our profession to retain some work-life balance. They want to make more money now; they don't want to wait another five or ten years to make partner at a traditional firm.
CPA firm as C corp
Next, you may be wondering if there are any issues running a CPA firm as a C corp, the way Dark Horse does. In California, where Dark Horse was formed, it's considered an accountancy corp, so it can be either a C corp or an S corp. Birky said Dark Horse originally went with the S corp to make things simpler, but it eventually converted to an C corp, so it can someday take outside investment. Birky said outside investors tend not to like S corps. Also, Dark Horse is a play for volume and scale, so it won't be that far in the future when it will exceed the 100-shareholder limit for S corps.
Birky said Dark Horse offers stock options to staff members once they become principals, and then annual grants thereafter. But the firm also has ways for equity to get down to the staff level. When Dark Horse gives a grant to a principal, the firm might tell him or her: "Hey, you earned 20,000 shares. Would you like any of this share grant allocated to your team?"
If they say, "Yes, $5,000 should go to my accounting manager," then they can allocate those shares as a restricted stock award. The employee gets taxed on the award, but they don't have to pay to exercise it, Birky explained. Further, Dark Horse allows employees to sell up to 20% of their vested shares back to the firm, and the firm will buy those shares at the attractive 409(a) price because it is also issuing options at the same price. (Note: I cover partner model alternatives in more detail in my new book "
Clearly the accounting industry is evolving beyond the traditional partnership model. Firms like Dark Horse CPAs are offering lucrative alternatives that provide better work-life balance, increased earning potential and equity opportunities. These new models intentionally address burnout, retain talent and create more flexible career paths in the accounting profession. What's not to like?
