Compensation structure: clients brought in from old firm

Software. Marketing. Training. Running your business.
#1
MIKEB  
Posts:
106
Joined:
17-Jul-2014 10:52am
Location:
Co
What are some of the common compensation structures when a CPA brings in some of their existing clients from their old firm to a new firm? (ie share of gross revenue?) What would be equitable?
 

#2
ATSMAN  
Posts:
2094
Joined:
31-May-2014 8:34pm
Location:
MA
It is all over the lot. Depends on what your position is with the new firm (ownership or employee)?
 

#3
MIKEB  
Posts:
106
Joined:
17-Jul-2014 10:52am
Location:
Co
This is an employee bringing clients to a new firm as an employee.Any thoughts?
 

#4
sjrcpa  
Posts:
6475
Joined:
23-Apr-2014 5:27pm
Location:
Maryland
What do you give to current employees who bring in new business?
Last edited by sjrcpa on 27-Jun-2022 5:42pm, edited 1 time in total.
 

#5
Posts:
524
Joined:
24-Jun-2016 4:01pm
Location:
Working Remotely
So the thing is, if they can bring clients in, they can take them out. I guess it depends on how how big the clients are. If they are just $600-$6,000 run of the mill clients, let them work on the clients and give them 60-80% of the gross receipts every year they work on the client. Now, if the client is bigger, and actually needs the firm resources, give them whatever you give someone who brings in new clients.

Also… at the big 4 firms, they have “rain makers,” who usually ended up as partners. These guys were better at bringing in clients than preparing returns (that’s what managers were for). If you have someone like that, pay them a one time fee. They won’t be working on the return.
 

#6
Posts:
8153
Joined:
4-Mar-2018 9:03pm
Location:
The Office
An employee bringing clients to a new firm as an employee.. Does the new employee have a non-solicitation agreement in place with their former employer?

Treetopclimes wrote:So the thing is, if they can bring clients in, they can take them out. I guess it depends on how how big the clients are. If they are just $600-$6,000 run of the mill clients, let them work on the clients and give them 60-80% of the gross receipts every year they work on the client. Now, if the client is bigger, and actually needs the firm resources, give them whatever you give someone who brings in new clients.


60-80% of gross receipts in addition to their compensation as an employee? That's very generous. A prior firm I worked for gave 10% of billings as a revenue share if an employee brought in a client.
 

#7
Posts:
6043
Joined:
22-Apr-2014 3:06pm
Location:
WA State
ManVsTax wrote:A prior firm I worked for gave 10% of billings as a revenue share if an employee brought in a client.


Same...when I brought clients into my prior firm, I was paid 10% of first year billings.
~Captcook
 

#8
ATSMAN  
Posts:
2094
Joined:
31-May-2014 8:34pm
Location:
MA
I agree. An employee bringing in former client is generally allowed and additional 10% of the gross first year billing. I am assuming there were no non compete agreements with the prior employer. You have to remember once that client is onboarded it is your firm's responsibility going forward. Your new employee is just a tax preparer assigned to that client. There is no ownership of that client relationship legally speaking.
 

#9
MIKEB  
Posts:
106
Joined:
17-Jul-2014 10:52am
Location:
Co
There is no non-compete. I agree that a % of revenues over the firm's costs like the 60-80% mentioned would be fair for existing clients brought from another firm.
A percentage of first year billing for other clients brought in. These are new clients to the firm and employee.
 


Return to Business Operations and Development



Who is online

Users browsing this forum: No registered users and 34 guests