The traditional certified public accounting (CPA) firm partnership model isn’t dead, but the way firms have historically operated it must evolve. Although the model has served the profession well for more than a century, the pressures of private equity (PE), artificial intelligence (AI), talent shortages, rising client expectations, and increasing investment requirements are exposing its limitations. The partnership structure itself isn’t necessarily the problem. The challenge is that many firms are still managed primarily as collections of individual partners rather than as unified enterprises.
Let’s revisit the traditional model: Partners built their own books of business, served their clients, developed their people, and distributed most of the firm’s earnings annually. Leadership responsibilities were often added to the workload of highly successful client service partners. Important decisions were made through broad consensus. Retirement obligations were funded by the next generation.
It’s a model that produced many successful firms and rewarding careers, but it’s not going to get firms where they need to go next.
The economics required to build a sustainable $50 million firm are different from those that built a $25 million firm. The same is true of firms that move from $10 million to $25 million or from $50 million to $100 million and beyond. Each stage requires more capital, stronger governance, deeper leadership, greater specialization, and a more intentional growth engine.
The question is no longer simply whether a firm is profitable. The more important question is whether it’s investable.
The term “enterprise value” entered many CPA firm conversations once PE made its entrance into the profession. As a result, some firm leaders hear the phrase and assume it means preparing the firm for sale—I see it differently.
To me, building enterprise value is about creating choices. It gives firms the ability to remain independent, invest in technology and talent, fund partner transitions, pursue acquisitions, and create meaningful ownership opportunities for future leaders. It also gives firms the ability to say no to outside capital because they have the financial and organizational discipline to fund their own futures.
If sophisticated investors see CPA firms as attractive businesses capable of creating long-term value, independent firm leaders should be willing to look at their firms through that same lens.
I believe we can apply similar PE strategies and discipline within our firms while keeping the subsequent value creation among our own partners, people, and future generations—but doing so will require these five shifts.
Many partnerships are held together by relationships, goodwill, reputation, and years of shared history. These are meaningful strengths, but history alone can’t tell a firm where it’s going.
A North Star defines what the firm is trying to become, which clients and markets it intends to serve, how it’ll differentiate itself, and what the partners are committed to building together.
Without clear direction, firms attempt to preserve everything they’ve historically been while simultaneously funding everything they hope to become. Realistically, they can’t do both. Nearly every major decision—technology investments, acquisitions, leadership structure, compensation, capital retention, and service expansion—requires trade-offs. A shared North Star gives the firm a consistent framework for making those decisions.
The traditional partnership model has largely been designed to maximize annual partner income: earnings are distributed, reinvestment is negotiated each year, and long-term obligations are often pushed into the future.
However, an enterprise value model changes the order of operations. First, the firm determines its true earnings. Then, it funds existing obligations, capital requirements, technology, talent, growth initiatives, and partner transitions. It’s not until after those needs are addressed that the firm determines what ownership return is available for distribution.
This also requires separating compensation for the work a partner performs from the return they receive as an owner. Base compensation and performance incentives should reward a partner’s role, production, leadership, client impact, and contribution to the firm. Ownership returns should reflect the performance of the enterprise after it’s funded its future.
This isn’t necessarily about reducing a partner’s total economic opportunity. It’s about converting a portion of current income into an investment in a stronger and more valuable firm.
Consensus can feel inclusive, but it can also become a way to delay or avoid difficult decisions.
As firms grow, they need clearly defined decision rights. Shareholders should retain authority over true ownership matters. A board or executive committee should oversee strategy, capital allocation, leadership, and accountability. The managing partner and leadership team should have the authority to operate the business without seeking a partnership-wide vote on every major initiative.
That clarity is especially important for the managing partner role. Too many firms are still asking a successful client service partner to carry a substantial book of business while also leading strategy, talent, operations, technology, growth, and partner alignment. At a certain size and level of complexity, that model becomes unsustainable.
Firm leadership can’t remain a second full-time job added to an already full client workload. The role must shift from partner-with- additional-responsibilities to enterprise leader.
Good governance doesn’t remove power from partners. Instead, it clarifies where that power resides and how it’s exercised.
A smaller firm can grow through reputation, referrals, individual relationships, and partner heroics. However, a larger firm needs a repeatable growth system that includes industry specialization, deeper client relationships, cross-serving, advisory expansion, value-based pricing, disciplined mergers and acquisitions, marketing and business development capabilities, and technology-enabled capacity.
Growth, technology, AI, and talent shouldn’t be treated as four unrelated initiatives competing for limited budget dollars. They’re interconnected parts of one system: Technology creates capacity. Capacity supports advisory growth. Advisory work creates new career opportunities. Better career opportunities attract and retain stronger talent. Stronger talent deepens client relationships and drives further growth.
The questions every firm leader should be asking are: Where will our next stage of growth come from, and what capabilities must we begin building now?
Succession isn’t simply replacing one managing partner with another or asking younger partners to fund the retirement of those who came before them.
Firm leaders frequently say younger professionals don’t want ownership. In many cases, however, nobody has actually asked them. Many emerging leaders still value ownership. What they want is greater transparency, a clearer understanding of the economics, real authority, and confidence that their investment will build long-term value.
They may not want to buy into an opaque partnership model, assume unfunded obligations, and inherit responsibility for a firm they had little influence in shaping.
If the leaders we want aren’t willing to own the firms we’ve built, that may not be a generational problem—it may be a model problem.
Ultimately, we can preserve the strengths of the traditional CPA firm partnership model while modernizing how we invest, govern, grow, and transition. But doing so will require discipline and a willingness to lead differently. That means every partnership should be asking these three questions:
After all, the goal isn’t simply to build a more profitable firm. The goal is to build a CPA firm worth owning.
